To NFT or not NFT

29/06/2021
In ancient Greece and Rome there was no word for “artist,” but there were nine muses who oversaw a different field of human creation related to music and poetry, with no muse for visual arts. During the Middle Ages , the word “artista” referred to something resembling “craftsman.” The first division into major and minor arts dates back to the 1400s with the work of Leon Battista Alberti. The European Academies of the 16th century formally solidified the gap between the fine and the applied arts which exists in varying degrees to this day. Currently an artist can be defined as anyone who calls him/herself an artists. The art world is changing rapidly and so does the art world. Today we witness a digital transformation in the art world. Digital art appeals to a new category of collectors, one that does not necessarily value the physicality of art works in the same way that more traditional collectors do.
 
More artists create digital art having the benefit of NFT’s ensuring authenticity and the payment of royalties. More than $2 billion was spent on NFTs in the beginning of this year, representing an increase of more than 2000% from Q4 2020. Indeed, the world is obsessed with NFTs, and the tech has set the stage for the fair compensation of artists who influence our culture.
 
We are at the heart of a new digital creator economy, only this time, it’s an innovative overhaul of the early 2000s revolution. The turn of the 21st century and the advance of Web 2.0 welcomed the first creator platforms like Youtube and Patreon.  We are currently witnessing the next evolution of the creator economy, powered by the latest tech Web 3.0 and blockchain, which together have pioneered NFTs. Thanks to blockchain development, it has become easier than ever before to share your work with a much wider audience, and NFTs are thriving on blockchain because of its very nature: it is inclusive, transparent, and fully decentralized.
 
This means creators have the freedom to release content to supporters and fans without the need for a middleman and with complete control over artistic vision.
In addition blockchain transactions are tamper-proof, which means original works can’t be misinterpreted.
 
2020 was probably one of the most devastating years for many of us, especially the cultural workforce. So many were suddenly out of work, but the silver lining is that creativity became the mother of invention in the greater scheme of things. Blockchain adoption, in general, took flight; "DeFi" and "NFTs" became household names; and the future of art and digital asset trading has never looked more promising.
 
Historically the art market is often described as illiquid, opaque, unregulated and unpredictable. The glamour around auction sales and some interesting ideas in art investment services, like for example the fractionalization of big-ticket artworks through blockchain make art still a passion asset. As far as how wealth managers view art, it’s still very much a passion asset. There are a few kinds of art collectors, some of them are focused on ROI, but the majority buy the art they love for emotional reasons. On the other hand art value is seen as “subjective”.  For ex. let’s look at pricing data, indices like the Mei Moses, https://www.sothebys.com/en/the-sothebys-mei-moses-indices,  but essentially art valuation is usually up to the tastes of experts. What makes the art market so special is that artworks are not fungible, and there is a lot of price and quality variation even between works by the same artist. A Monet is not just a Monet. You need to ask, when did Monet paint this, how does it compare to other works he made, what is its historical significance, its provenance? Artworks are historical documents. Following that, you have to think, how many Monet’s are transacting per year? If you compare fine art to other markets, you will see less transactional volume, and a lot of it is private. So in many ways, the “assetisation” of art was also limited by the kinds of data we have been able to collect. Juxtaposing art next to real estate or other alternative assets, the issue is that banks and asset managers have difficulty assessing art risk. Around 75% of artworks in private hands are kept in storage. What is important for the collector ( and his / her banker) of today and tomorrow is being equipped with collection management tools and good advice to help streamline the collecting strategy. Many countries tax art capital gains, ownership and inheritance, in addition to storage costs. Mostly, either you sell your art or continue to maintain it, maybe one of your children has an interest, or you open a museum or private foundation. Whatever your choices are treating art like a stable asset class in addition to the joy it brings you, it will increase your options, for ex. releasing liquidity through art-backed lending, succession planning with more nuance to sell or keep or even cover taxes and management costs.
 
Most of all collect what you love and look at art to refine your taste both on physical and digital formats.



 
This article is part of Rosemont Art Advisory's monthly newsletter. To receive our newsletter, or for more information, please contact Karolina Blasiak, Art Advisor at k.blasiak@rosemont-mc.com