What will the value of an NFT be in 5 years from now?
Key takeaways:
- In the first quarter of 2021, nonfungible.com estimated around $2 billion were spent on NFTs.
- The most expensive NFT artwork traded for $69M and belongs to Beeple’s Everydays: The First 5000 Days.
- A 12 year-old boy created a collection of 3350 “Weird Whales” NFTs, based on a previously well-known whale meme artwork employed lawyers to audit copyrights.
- NFTs are digital assets registered in a ledger on a blockchain network, but it doesn’t guarantee the buyer the artwork’s authenticity and doesnt give the actual artwork or its copyright.
- With NFTs, artwork can be “tokenised”, but it doesn’t provide digital certificate of ownership that can be bought and sold.
Overall NFT Statistics
Over the past year, several NFTs have sold for exorbitant prices. Many people now accept NFTs as a legitimate form of art collection; therefore, many NFT projects are released every day on different platforms. A Non-fungible Token (NFT) is supposed to be an unique digital artwork sold online, that can’t be copied or replaced if lost. It’s a new trend for collectors to bid on digital art in the form of NFTs. This method has opened a completely new era for the masses trading non fungible artworks! [1]
So, are NFTs here to last?
Is it trustworthy to invest in NFT assets today or is it all a gamble? Who decides what is the value of an NFT artwork? Is there a real proof of authorship’s authenticity to validate the uniqueness of non fungible artworks traded on decentralised marketplaces?
For example, how does a regular consumer tell which file is the original happy_frog. gif or happy_frog.gif (2)? Is there a process behind it? Who verifies how many copies of similar files were created and establishes the one that is the original versus the ones that are not? What is a generally acceptable level of re-design or remix of one’s specific artwork? Is the process accessible and transparent to the masses trading on today’s marketplaces? These are just a few questions that lie within the grey areas of the web transactions which are difficult to find answers for.
Does blockchain technology guarantee the digital artwork’s authenticity and its claimed value?
Despite the blockchain technology’s native built-in ability to store electronic data about the NFTs to prove their uniqueness, NFTs today can’t be verified whether they have been created by the original artist. The intrinsic value of NFTs lie not in the 1s and 0s that make up the digital asset, but how they authenticate where these 1s and 0s come from? In other words, the value of an NFT is derived from the same way that the ‘Mona Lisa’ is valuable because it is authenticated by the Louvre in Paris as the original painting created by Leonardo da Vinci in the 16th century. The value of an art piece is fundamentally tied to the verification of its authenticity and provenance.
One way of understanding how NFTs derive value is to see that both NFTs and traditional forms of art derive their value from verifiable provenance.
Can anyone upload, mint and trade FTs & NFTs?
Yes, the beauty of decentralised networks lies in the fact that anyone can mint and sell NFTs. Some of the most popular artworks come from and are harvested within multiplayers’ games, while others are standalone artworks belonging to artists, coming from various industries. Recently we have seen copyright lawsuits rising since NFT’s assets “derive their value from the success or failure of a given project”. Assuming that there are 2 similar copies of an artwork uploaded and traded online, how can anyone prove which one is the authentic piece? When it comes to verifying this information, the situation becomes even trickier. Is it based on which one was created first on thr blockchain ledger? Does it matter whether the NFT is based off of a pre-existent art form; be that traditional or digital? Is it based on the “Hype” created around one versus another artist? What stops anyone from impersonating or piggyback riding on a famous artwork, personal brand, meme, or skin used in a game by slightly changing it? Today, anyone can upload NFTs to blockchain, mint it and claim it to be original. So it looks like both creators (or sellers) and buyers (or also the collectors) are dealing with at least one question — is the artwork that is being traded really an original and unique NFT? Therefore, where can one get Proof of Author’s Ownership?
On one hand, creators’ submitted artwork is not protected in the digital space, as anyone can replicate it, claim it their own and is subject to speculation.
On the other hand, the buyer can’t be guaranteed the authenticity and, hence the value of the digital artwork they’re investing into or trading.
Is it all a speculation?
The word “speculative” is thrown around a lot when it comes to the value of blockchain assets such as Bitcoin or NFTs; implicating that the value of these assets are primarily based on the people’s expectations, or “hype” that they will increase in value. [5]
Therefore an NFT’s value is derived from how much people think it is worth. But technically, this is no different than traditional works of fine art. In real world, auction houses like Sotheby’s charge ~ 20% fee off the final cost of the famous artwork to perform its detailed screening for a reason. They are responsible for verifying it and only after the uniqueness has been proved the value has been established.
No NFT marketplace today offer that service, at least not as easy as the trading itself.
Until such solutions will be available, we need to raise awareness for online privacy, safety, collective knowledge and a better use of copyrights laws in virtual trading of digital artworks.
Is the concept of NFT new?
It looks like an early version of NFT trading comes from projects like “The Million Dollar Project” and its copycats originated around 2005. The website was concieved by a student in England selling nothing more than image-based links forming one big digital canvas, priced at $1 per pixel in 10 × 10 blocks. The purchasers of these pixel blocks were provided tiny images to be displayed on them, a URL to which the images were linked, and a slogan to be displayed when hovering a cursor over the link. The website generated over $1M in pixel size images sales, while the purchasers were sold under a big slogan “Own A piece of Internet History”.
A 2017 study by Harvard University found that the links on the still-live main page of the site demonstrated a considerable degree of link rot. Of the 2,816 original links, 547 (342,000 pixels, sold for $342,000) were dead, and 489 (145,000 pixels, sold for $145,000) redirected to a different domain. The report stated that, of the remaining links, that “the majority do not seem to reflect their original purpose”.[6] By April 2019, according to the BBC, approximately 40% of the site’s links were suffering from link rot.[7]
So, technically speaking if all ledgers and all copies are wiped out from one specific blockchain network the entire chain is gone. These are additional risks to consider when investing in NFT. How many networks can still recover and reframe after such hypothetical events?
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