Speculative crypto art market takes off
Move over, GameStop. The newest speculative game in town is NFTs — digital files that can be owned and traded on a plethora of new online platforms.
Why it matters: Most NFTs include some kind of still or moving image, which makes them similar to many physical art objects. Some of them, including a gif of Nyan Cat flying through the sky with a pop-tart body and rainbow trail, can be worth more than your house.
How it works: Most crypto assets are like dollars, or stocks: They're fungible, which means that one bitcoin, or share of IBM, is worth exactly the same as any other bitcoin, or share of IBM. NFTs, by contrast, are non-fungible tokens: They're unique objects that live on a blockchain and are valued as collectors' items.
- By the numbers: Nyan Cat sold for 300 ETH (the Ethereum cryptocurrency), or about $580,000 at the time the bid was entered on Feb. 19. An artist going by the moniker "Beeple" sold 20 artworks for $3.5 million in December, and has consigned a major digital work to auction house Christie's in an online auction that will end on March 11.
- One fake Banksy, by an artist calling themselves Pest Supply, sold for more than 60 ETH, or about $100,000. The artwork featured a stencil saying "I can't believe you morons actually buy this NFT shit." It's not clear where or how the buyer could resell the work, given that the Opensea platform has now disabled all future sales by that artist.
- A short clip of a LeBron James dunk from 2019 sold for $208,000, on a day when more than 20,000 buyers spent more than $45 million in total buying NBA TopShot clips.
The catch: Most NFTs (but not TopShots) live on the Ethereum blockchain, which has a massive carbon footprint. Artist Joanie Lemercier calculated that one release of his art on NiftyGateway was responsible for more carbon emissions than his entire physical studio emitted in 18 months.
- Another artist, Memo Atken, analyzed a separate platform, SuperRare, and calculated that a single NFT is on average responsible for 211kg of CO2 emissions — the equivalent of driving a gasoline-powered car for 1,000km.
The big picture: Our digital lives are surrounded by countless digital objects. NFTs are a way to imbue such objects with financial value. When that happens they take on a new level of significance and importance.
- They also become vehicles for speculation, whose financial value is generally entirely unrelated to their artistic value.