The most expensive Nft ever sold is beeple's Everydays: the first 5000 days | Source: Pinterest

Is an Investment in NFTs a Fortune or a Flop?

Contrary to how it may seem, non-fungible tokens or NFTs aren’t a new concept. In fact, they’ve been around since 2014 when Kevin McCoy made what is considered to be the first NFT, Quantum. But it wasn’t until 2021 that they truly burst onto the mainstream art scene.

According to crypto analytics platform, Nansen and their State of Crypto Industry Report 2021, by the end of 2021, total sales in the NFT space surpassed a whopping 4.6 million ETH, or an estimated US$17 billion, with two major spikes occurring in May and August.

While it’s hard to pinpoint exactly what caused this surge in popularity, one prominent trend was Bored Apes Yacht Club scoring a legion of celebrity buyers including Jimmy Fallon, Snoop Dogg and even Madonna.

So with all of this, are NFTs really all they’re cracked up to be and should you take the plunge investing? We spoke to Australian contemporary art expert, Kerry-Anne Blanket, about whether NFTs make for a good investment.

In my mind, NFTs are simply another art medium you’re able to own and invest in – like an oil painting, photograph or sculpture,

That being said, while the arrival of NFTs has the ability to change the way we invest and enjoy art, there are, like any form of investment, risks involved.

What exactly is an NFT?

When you purchase an NFT you aren’t purchasing the digital artwork itself, rather a certificate of ownership of a digital artwork that is completely unique and whose authenticity can be traced and verified through blockchain technology.

Only you have the right to sell your NFT, but it doesn’t mean the image can’t be downloaded and printed from the internet by others. Similarly to how anyone can own a print of a Picasso artwork, there is a difference between buying a numbered edition print as opposed to a poster replica.

Blockchain is an encrypted, shared database that is decentralised, which means no one person or group owns it, and the transactions are permanently recorded and viewable to anyone

Only you, as the owner, have the right to sell your NFT, but anyone can keep or print a copy of it

What makes an NFT art?

Art is subjective, and NFTs are no different. An NFT can be anything from a digital photograph, a picture made with digital media on a computer, a video, a piece of music, or even a physical artwork converted into digital form. We’ve even seen tweets and GIFs be turned into NFTs.

In the traditional art world, there are ‘gatekeepers’ like galleries, auction houses and trained experts who will ascribe value to an artwork based on its sales history, provenance, the medium and technique used and the market demand for the work, but when it comes to NFTs, there are no such gatekeepers

With this in mind, how can you be sure what you’re purchasing is actually valuable? Well, according to Kerry-Anne, that is part of the risk.

Having a third party to “vet” the value of a work is something we’re starting to see as traditional auction houses like Christies and Sotheby’s get involved in the space. But predominately, you’re seeing the buyer purchasing direct off an NFT marketplace without expert guidance, so that adds to the risk of purchasing one if you’re new to the game

Is an NFT right for me?

If you’re considering purchasing an NFT, Kerry-Anne believes it’s first important to ask yourself what is your main objective. Are you buying purely for investment purposes, or for the emotional and aesthetic pleasure of viewing the work?

What often attracts people to art ownership and investment is scarcity and uniqueness, so if you don’t like the idea of other people being able to access your piece of art, you might be better off investing in a physical work that only you have access to

Kerry-Anne’s advice is not to buy an NFT with the expectation that you are going to get rich quick. However if you really love it, remain hopeful that its value will increase over time.

Of course, like any new form of art, what happens over the next few years is hard to predict, so you need to understand the risks in what is arguably a still-developing and fickle market, and don’t invest more than you are willing to lose.

Where to start

If an NFT sounds like the right purchase for you but you’re unsure where to start, Kerry-Anne’s advice is to connect with others who have already dabbled in the space and take stock of what you’re willing to spend. It’s also essential to do your research and explore which NFT marketplaces are the most reputable, to ensure you don’t get ripped off.

At the end of the day, you don’t want to be spending your money, regardless of the sum, on something that is effectively worthless if it’s discovered as counterfeit

For more on investing in art take a look at The Art of Investing in Art.

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