Antiques to antics: How good is NFT as an investment instrument?

NFT stands for ‘non-fungible token’, which is a unique digital asset that has proof of ownership and verification of authenticity stored on the blockchain. Bitcoin, the quintessential cryptocurrency, is fungible because it is also meant to be a medium for settling transactions, but every NFT is unique, as every piece of art is unique, making its irreplaceable character absolutely essential.

NFTs can be digital art, real estate, collectibles, event tickets, website domains, or even tweets. Perhaps it is not too simplistic to compare NFTs with dematerialized (demat) shares that exist, but in digital form, beyond the reach of counterfeiters and incapable of being mutilated.

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Demat stocks have changed the way people invest. They speed up buying and selling on the stock market and prevent the loss of shares due to theft, damage, etc. For people investing in art, real estate, and so on, can NFTs offer similar benefits?


Art, not art

On March 11, 2021, the BBC reported that auction house Christie’s sold a digital artwork alone for $69 million. Far from the usual sculpture or painting, the new owner of the artwork received a unique digital token, an NFT whose underlying asset is of course the artwork.

While this is an example of art collectors diligently taking care of the security of their collections to keep fraudsters and charlatans at bay, the trivialization of NFTs in the hands of megalomaniacs and narcissists began almost immediately.

Just uploading my tvttr” — Twitter founder Jack Dorsey’s first tweet went public as an NFT and fetched him a whopping $2.9 million. However, it hit a low of $132. Selling his baby to Elon Musk may have accelerated the downhill slide of his first tweet. More importantly, the wisdom may have dawned on crazed NFT fans that putting such a high rating on a nonsensical tweet was a big mistake.

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Former POTUS Donald Trump has joined the NFT bandwagon in guises such as superhero, astronaut and Nascar driver. He promoted the ‘limited edition cards’, saying they would “make a great Christmas present”. There were 45,000 cards, which were available for $99 each. Even Republicans weren’t amused by Trump’s antics.

Closer to home, our Amitabh Bachchan, a superstar of yesteryear and a celebrity forever, has transformed the work of his father Harivansh Rai Bachchan Madhushala in NFT by recording songs with his voice which reportedly earned him a whopping $420,000 in November 2021.

Sudden wealth

Cryptocurrency fortunes plummeted after initial euphoria. So is the wealth of crypto NFTs. It is up to legal experts to examine whether NFT-enabled blockchain technology can grant indisputable title and ownership of the underlying artwork to coin owners. In other words, there is currently no guarantee that NFT buyers will not be overcharged by copyright law challengers.

There was a time when antiques, paintings, sculptures and other artifacts commanded astonishing and astonishing values ​​in the art market. Cynics have always questioned such estimates and wondered whether at the end of the day ill-gotten gains are being laundered.

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TMC leader Mamata Banerjee was the subject of such cynicism when she was paid ₹9 crore for 300 of her pictures. Likewise, ripples were created when Yes Bank founder Rana Kapoor revealed that he was hand-twisted to buy MF Hussain’s then oil minister Murli Deora’s painting for ₹2 billion and the amount was used for Sonia Gandhi’s treatment in the US. Even Bitcoin at the height of its overvaluation was derided as the handmaiden of thieves to launder their ill-gotten wealth.

Vulnerable to attacks

The NFT, while undoubtedly making ownership of art secure and tamper-proof and creating a vibrant market for their basic assets—namely, paintings, sculptures, and even nonsense—left its flanks vulnerable to attack. The dematerialization of stocks has worked wonders in the market, but the dematerialization of antiques has unfortunately caused antics in the rarefied world of NFTs.

In light of this, an NFT investor must go into it with eyes wide open and risks well hedged.

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