The NFT Craze Actually Does Make Sense
(Bloomberg Opinion) -- Is it crazy to pay $69.3 million for a digital artwork that is itself a composite of the artist’s other major artworks? More specifically, is it crazy to pay that much merely for the right to claim you own the original copy of a collection of pixels that can be reproduced by anyone?
The more I think about it, the more I think the answer is no — an emphatic no. This purchase is not only sane but also bold and brilliant.
NFTs stand a reasonable chance of being an entirely new art form, and this may be the beginning of their long, noble and (yes) controversial history. The buyer of “Everydays,” an investor who goes by the name Metakovan, may well be remembered as the first patron of digital artists. That is a legacy you cannot buy for any sum in most other walks of life. You can become a kind of Medici of the blockchain.
Such a role is not for everybody. But this $69.3 million will probably not meaningfully detract from the private consumption of Metakovan, founder of a cryptocurrency fund called Metapurse, which invests in NFTs. No doubt he will still be able to buy a yacht and the world’s finest sushi.
Maybe NFTs will not endure, which is a risk for anyone playing a pioneering role in a new genre. That is why the price was not $200 million or more. In any case, this is a world in which Marcel Duchamp’s urinal sculpture still is exhibited in major museums, regarded by many critics as a masterpiece of the 20th century, and it sold at auction for $1.6 million in 2002. Canvases painted a single color, and other forms of abstract and conceptual art, remain a major part of recent art history and can sell for tens of millions.
The point is not to argue over what qualifies as “art.” It is simply that it is a mistake to assume that NFTs will fail in the art world.
Keep in mind that as the value of bitcoin and other crypto assets rises, more of the world’s billionaires will trace their wealth to crypto. It is unlikely that they are all looking to buy Rembrandts and Picassos.
Does it seem absurd that the original copy is so valuable? Well, this is hardly new. A first edition of Jane Austen is worth much more than a third edition. Meanwhile, a forged copy of a major artist, no matter how skillful or indistinguishable from the original (ever see a forged Malevich?), is almost entirely worthless.
Or consider the purchase of NFTs as a purely financial investment. In many nations works of art can be donated to a museum for a significant tax break. Such donations often bundle prized works with lesser-valued works — but appraised at relatively high values and thus involving significant tax benefits. Another common element behind major purchases of artwork is that buying art can be a way of moving assets from one place to another, if only for reasons of privacy or portfolio management.
With his purchase, Metakovan has now generated significant publicity for NFT artworks and boosted their value. His portfolio of NFTs is now probably worth much more, and in net terms he may well be wealthier than the day before he bought “Everydays.” He is also now known as an especially important collector of NFT art. Other artists and sellers may offer him their best works, hoping to be affiliated with a prestigious collection. He will be at the center of an information network about valuable NFTs. How is that for clever?
The second buyer in line for “Everydays,” the cryptocurrency creator Justin Sun, was offering $60 million. Maybe both he and Metakovan are crazy. Alternatively, if the internet really is changing everything, why should the art world be immune? Maybe the crazy ones are those who expect the future to look just like the past.
Or how about the very first post of a long-running blog? My coauthor and I are selling the first post on Marginal Revolution as an NFT through an auction.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include "Big Business: A Love Letter to an American Anti-Hero."
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