“In art, NFTs are destined to pass”

When it comes to art and investing, a trend is emerging with great appeal for NFTs. Can you remind us what it is?

Adriano Picinati di Torcello. – “It is really important to put the elements into their context. NFT stands for non-fungible token. It is a digital certificate, registered at the level of a blockchain, which makes it especially possible to establish who is the owner of an object. An NFT can be linked to a work of art, digital or physical, or any other asset. It can be a building or a property in the metaverse. We speak of a “non-fungible token” in that each NFT represents an object that is not divisible.

It is mainly in the art market that the concept seems to have been talked about…

“It is true that a few months ago in the art market we saw real excitement for these NFTs. This can be explained by a speculative frenzy that has since subsided considerably. According to NonFungible.com, we saw a significant drop in volume of dollars traded in Q3 (-75%). The average price of NFTs has been divided by four. However, this does not detract from the existing interest in NFTs, as the community of holders has remained stable. The validity of this technology to support especially the art market will continue.

The proof of ownership attached to a work, NFT, is registered in the blockchain. The technology guarantees its authenticity. The integrity of the certificate cannot actually be changed.

Adriano Picinati di Torcello, art and finance coordinator, Deloitte

What is the interest in this technology?

“The art market as it currently operates appears to be inefficient. First, it lacks transparency. On the other hand, establishing the authenticity of a work, reconstructing its journey and identifying its subsequent owners can require a great deal of effort. An NFT , and more specifically the underlying technology, must make it possible to improve the functioning of the market in order to reduce certain frictions. The proof of ownership attached to a work, NFT, is recorded in the blockchain. The technology guarantees its authenticity. The integrity of the certificate cannot actually be changed. From blockchain allows ownership rights to be easily transferred from one person to another, ensuring optimal traceability. The technology provides greater transparency and makes the market more fluid. In wealth management, it also allows for easier incorporation of assets that are currently considered “not -banking” in a cultural heritage investment approach. It is then no longer a question of NFT, but of sik love token. The token, regardless of its underlying, is then considered a financial asset and regulated as such. It should be noted that according to estimates, investments in art and other collectibles amount to $1.5 trillion by ultra-high net worth individuals.

Art represents 7% of the NFT market.  (Visual: Modern house)

Art represents 7% of the NFT market. (Visual: Modern house)

Is there an NFT effect at the art market level?

“The blockchain contributes in particular to facilitating relations between artists and gallerists, for example around the handling of royalties linked to a work. On the other hand, NFTs create scarcity, especially around digital works, which contributes to the emergence of a new market. According to a survey we conducted in the US of 400 creators, 50% say they see an interest in NFTs for their future, especially as a means of generating income. However, only 17% use them as a source of income. Beyond that, and in general, the art world evolves with technologies. This is not limited to blockchain. AI or metaverse also opens up new possibilities for artists who can consider other forms of art, explore other media, offer original experiences or even maintain a community around their approaches.

So does tokenization have a bright future in the arts?

“Absolutely. We are at the beginning of a lasting transformation. The challenge for the various stakeholders in the art market is to become aware of the interest that lies in the use of this technology. It is a matter of identifying what it can bring in order to use it wisely and gradually gain maturity.”

This article is written for Asset management supplement of the edition of Paper jam of the month January 2023 published on 14 December 2022. The magazine’s content is produced exclusively for the magazine. It is posted on the site to contribute to the complete Paperjam archive.

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