The Daily Telegraph - Saturday - Money
Digital art dealers chase the gold rush
Investors try to cash in on a virtual Mona Lisa. By Sam Benstead and Harry Brennan
Anew breed of investors is buying up highly prized digital artworks that are soaring in value at an astonishing rate. They are snapping up virtual paintings and other rare digital collectibles using a new technology that guarantees provenance and ensures pieces cannot be forged. Non-fungible tokens, or NFTs for short, are challenging the traditions of the art world.
NFTs are proof of ownership of a range of digital assets. They act as a sort of virtual share certificate. When NFTs are bought or sold, transactions are listed on a digital register known as a blockchain. These tokens cannot be replicated, making them unique and in some cases highly valuable.
According to NonFungible, an NFT market data firm, the estimated value of all such tokens rose from $ 50m (£36m) in 2018 to $338m last year, with art accounting for $12.9m in sales.
Christie’s, the auction house, made headlines when it sold a virtual collage via the technology for $69m. The piece was the work of a digital art pioneer who goes by the name Beeple.
Andy Bowe, 49, from Lincolnshire, bought two Beeple artworks as NFTs in December for £ 25,000. His purchase was registered on a blockchain, the same technology behind digital currency Bitcoin. His tokens today are worth around £500,000, he said.
“People look at the actual artwork and might not think much of it looking at it on a screen, but what you're buying is a piece of art history. I am a record collector too. I rarely listen to them, but most people understand a first pressing has great value,” he said.
“Some ridiculed the internet before it became a part of our lives. This technology will keep growing. These tokens are now part of my retirement fund. It’s all ‘monopoly money’ until you actually cash it in, but I am hoping it will double in value to £1m.
“It was a massive risk. The money I put in was meant for our kitchen extension. But it has paid off so far,” he added. Mr Bowe spoke under a pseudonym to protect himself from hackers.
Canadian singer-songwriter Grimes is another to have profited from the emerging technology. She made $5.8m in 20 minutes selling a collection of her own artworks as NFTs. But the new market is not just limited to art. They can encompass any manner of digital assets deemed to have an inherent value. Social media star Logan Paul made $882,000 selling highlight reels of the video blogs he posts on YouTube, a site that is free to use.
Gaurang Torvekar, of blockchain consultancy Indorse, said the biggest opportunity for collectors was in rare items, particularly first- of- their kind tokens. For example, Jack Dorsey, the founder of Twitter, is selling his first tweet as an NFT.
“They are only worth what people will pay for them, and if sentiment swings, then they could be worthless,” he said. “In the short term, a lot of investors are looking to ‘flip’ the NFTs and sell them for a higher price later down the line. But a lot of them really believe in the fundamentals and want to be a part of something that is really unique.”
Robert Norton, of Verisart, a company that verifies NFTs for artists, said investing in NFTs was not too different from investing in artwork. “You have to buy what you like, it’s not a very liquid market, and you want to own some
thing that will become more valuable in the future,” he said.
“NFTs is more about the ownership of art, rather than sole access. The owner has the same experience as anyone else but the satisfaction, and monetary benefit, of it being theirs. If you get involved, do so with extreme caution. There are amazing opportunities. But treat these as lottery tickets rather than solid investments.”
One 21-year- old digital artist and collector from Pennsylvania, known in the online world as Ovsky, has spent around £70 apiece for a number of limited- edition collectibles called cryptocrawlerz, which are essentially holograms of small, fluorescent bugs in packaging. He explained it was similar to buying and trading limitededition baseball cards, just online.
“It’s a developing space and I think there are a lot of great opportunities to pick up some affordable art, given the opportunities these artists will have in the future due to the possibilities NFTs allow,” he said. He is now saving up for a bigger purchase.
The largest exchanges for digital assets include Nifty Gateway, OpenSea, Rarible and MakersPlace. They also offer tools to become an artist or creator yourself and mint your own NFTs to sell on the open market.