Keys to Digital Art NFT Values
In March 2021, Christie’s became the first major auction house to sell a fully digital, NFT-based artwork, a collage by US artist Beeple, for over $69 million to crypto investor Vignesh Sundaresan based in Singapore, setting the third-highest price for a living artist at auction, shaking the art world to its core.
What are NFTs and why the digital art NFT mania? What are the benefits for the NFT buyer?
- A non-fungible token (NFT) is a unit of data stored on a blockchain, that certifies a digital asset to be unique and therefore not interchangeable.
- NFTs can be used to represent items such as photos, videos, audio, and other types of digital files.
- Access to any copy of the original file, however, is not restricted to the buyer of the NFT. While copies of these digital items are available for anyone to obtain, NFTs are tracked on blockchains to provide the owner with proof of ownership that is separate from copyright.
- So if the buyer of the NFT doesn’t own the copyright, why do buyers buy NFTs if anyone can copy the art and that the artist can also create more NFTs of the same work?
- The solution is that the best outcome has already been built into the design of NFTs, in that the issuer will naturally perform in the best interests of the NFT so as to continue issuing NFTs that are valuable.
- As we know, values go up if the use case or utility becomes greater. So on the topic of digital art such as images, what determines the value for these NFTs? Here is what is offered:
- Aesthetic appeal: first and foremost, buyers buy art because it appeals to their visual senses and passion. They treat art as collectibles and pay to support the artists. But beauty is in the eye of the beholder, hence this creates subjective value among the group of buyers.
- Convenience & enhancements: with digital art, unlike physical art, the buyer has a choice to appreciate the art on digital devices such as large flat screens on the wall or on your phone. Furthermore, the artist will provide improvements to the artwork as more technology becomes available, thus enhancing features, functions, quality, and value. This is programmable art.
- Artistic vision: it is important that a large number of people and potential buyers are able to connect with the perspective of the artist which will determine its mass appeal and hence, value.
- Rarity and scarcity: the fact is that the art piece must be of an uncommon form that is difficult to replicate and takes a certain level of skill to create.
- Curation: whether the artwork depicts an important point or time in human history or symbolizes an aspect of human emotion that moves the human spirit.
- Demand & Supply: the supply of similar works must be limited by design and the demand of the work must be proven in consensus.
- Speculative value: it is a big plus if the artwork is linked to a certain designated cryptocurrency which offers potential value beyond the NFT value. Therefore using a cryptocurrency that may depreciate to purchase the NFT will ‘lock in’ values in the expectation that the NFT will appreciate.
- Tax reliefs: the purchase of digital art NFTs is a form of capital investment which in many jurisdictions is tax-deductible.
- Infinite lifespan: digital art NFTs offer no expiry and can be passed on to the next generations.
- Fractionalization: fractionalizing is an increasingly popular way to buy art in recent years, as it allows owners to buy shares in the same piece. Finamatrix can make arrangements for more than one buyer to purchase our digital art NFTs.
We welcome all feedback at email@example.com and please visit our art NFTs at FiX.Digital.Art in Facebook. All our artworks can only be purchased with Finamatrix (FiX) and Fi.X (FIXX), our in-house cryptocurrencies.
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