Can You Make Money From NFTs? - YouTube

How much would you pay for this artwork? In March 2021, this art

piece created by digital artists Beeple sold for over $69

million, becoming one of the most expensive works of art ever

sold at an auction. The catch? Well, it doesn't exist yet. Not

physically at least. It's all thanks to a trend known as NFTs

or non-fungible tokens. And in recent years, it's taken the art

scene by storm.

In 2018, I went to Christie's and was essentially credited

with bringing NFTs to the art world and what happened was I

gave away 300 free NFTs. Now, fast forward three years, each

of those 300 NFTs that we gave out as like a physical card that

you could cash in are worth about a million dollars.

This piece is called 'Knockout'. It was actually the first piece

that I painted during 2021. So now this is the most expensive

NFT that I've sold to date. I paired it with this physical

piece, I sold it for the equivalent of about $17,000 USD.

The market has seen explosive growth in 2021. During its third

quarter, NFT trading volume hit $10.7 billion — a 723% gain from

the previous quarter and a staggering gain of over 38,000%

year-over-year.

It's become something that was a bit of a novelty to something

that's become a lot more mainstream very, very rapidly.

And this is partially due to the fact that a lot of celebrities

and people who are well known have kind of jumped on the NFT

bandwagon and given it a kind of credibility. I think it's also

being pushed very strongly by people who are into

cryptocurrencies as another way of basically earning money and

gaining value from cryptocurrencies. But

NFTs astonishing growth has also led to deep skepticism over its

market. I think

the technology underlining NFTs is useful and has practical

applications. How it's currently being used at the moment is just

one rolling series of mad Tulip Mania style bubbles. That's all

it really is, together with some very ugly artwork.

So just how do non-fungible tokens work and is it an asset

worth investing in? NFTs refer to unique one-of-a-kind digital

assets that are verified and stored using Blockchain

technology. They're mostly traded using cryptocurrency in

NFT-specific marketplaces, such as Opensea are SuperRare.

Early days we didn't even call them NFTs. We would call it 'art

on the blockchain', or before that we were calling it 'dank

rares'.

The simplest way to describe a non-fungible token is really a

digital representation of ownership in a individual

aspect. So taking any sort of item, property, contract and

essentially digitizing it and the non-fungible token itself

represents your ownership stake in that asset.

And NFTs can be pretty much anything from music to video

clips, domain names, and even tweets. But the current craze is

really around collectibles and digital art. Since its

inception, NFT collectibles has generated over $5.6 billion in

sales, while digital art has generated over 1.8 billion.

Things like artworks and collectibles have become the big

commodity of NFTs because they naturally fit into what NFTs

are. They're sort of certificates of authenticity. So

when you're collecting something, you know, you can

have a physical copy of something and if that physical

copy is unique, there's only one of that thing, it's easy to show

the authenticity. But because of your digital being copyable,

having this extra sort of like certificate of authenticity is

really important to sort of show ownership of that particular

thing.

And the market is only about to get bigger. In October 2021,

cryptocurrency exchange Coinbase and auction house Sotheby's both

announced their intentions in launching their own NFT

marketplaces.

I think it's really exciting to see big companies. Budweiser,

Arizona iced tea, those type of brands coming in and buying NFTs

and saying we want to play in this space as well as like

investment companies saying we're going to add crypto,

whether it's cryptocurrencies or NFTs to our portfolio options or

services that we can assist with.

There's only a couple 100,000 users on even the largest NFT

platforms today. And you know, when you have big players like

FTX, or Coinbase or even larger entities organizations come into

this market, it just expands the userbase.

There are many reasons why NFTs have caught the attention of

investors, but its most alluring quality lies in its potential

for profitability. Take this cryptopunk art for instance. In

2017, Cryptopunk #753 was sold for just eight ether worth

$1,464 at the time. In 2021, the same artwork made headlines

after selling for more than $11.7 million in a Sotheby's

auction.

I do believe that a lot of new participants are doing it

because they believe there's an opportunity to make money. And

it's not false. {eople have made substantial amounts of money in

the market flipping and trading these assets online so it's not

like you can't do it.

There aren't many other good investment options, particularly

for younger people. Because you can't afford to buy a house. You

can barely afford to pay your rent. Your job probably pays

your peanuts and the stock market is perceived as an

insider's game. So why not put all your money into a digital

lottery and see if you can't make a million dollars

overnight? Who knows you could be the lucky one.

Meanwhile, the underlying blockchain technology allows

collectors to have a more accurate proof of authenticity

and originality while giving artists more control over their

work.

The blockchain is ultimately a database and it's a list of

transactions. And those transactions are spread out

across many computers, which makes it hard if not impossible

to go in and change them. So you can actually trust the records

that are on the blockchain.

Because of that, like I said, you have verifiable authenticity

and verifiable scarcity. And when that happens, it's great

for something like the art market or any collectible market

because you aren't as concerned with things like forgeries, or

not knowing like the production of a particular art piece, like

how many prints exist in the world is really hard to verify

in the physical world, but on the blockchain makes it

possible.

Artists also point out that NFTs have boosted the art scene,

providing new revenue streams for independent artists around

the world.

NFTs allow us a new stream of income, which is fantastic that

you could be anywhere in the world and you could sell an NFT

to anywhere else in the world.

Most artists aren't selling $70 million NFTs, you know, that's

sort of the the outlier, I guess, for lack of a better

description. But there are so many stories about artists,

particularly during Covid, often who lived in economies, you

know, countries with economies that really weren't that strong

who lost their jobs during Covid. But were able to make

enough money selling NFTs that they could you know, feed their

family or buy a house or have that extra income to stay

motivated while they're making NFTs.

It opens you up to new audiences. There is a huge

collector base of artists now that strictly collect NFTs and

digital art and they don't want physical paintings. And I've

offered people you know they might buy an NFT and I offer

them the physical to go with it, and they say 'no, no, no, we

just collect the digital stuff'. The provable scarcity and

authenticity of NFTs really allow artists to control their

body of work and follow it through its whole lifecycle

because not only is the artist paid on the initial sale, but

because everything is tracked on the blockchain, when a secondary

sale happens. So if I sell an art to someone, and then they

sell to somebody else, I'm actually getting a royalty paid

back as the original creator. That's something that doesn't

really happen in the physical art market.

Despite its many unique advantages, many experts remain

hesitant about entering the NFT market at its current price

point. The fear is that the market has grown too big, too

fast under immense hype and speculation.

What's driving the price of NFTs at the moment, I think is

probably a lot to do with just the hype around

cryptocurrencies.

I think what we see right now is the latest iteration of a

rolling series of everything bubbles. But this may well be

the apotheosis, the paradigm that the peak in the paradigm of

everything bubbles, and it worries me intensely. Even if I

fully understand the dynamic that drives younger people in

particular.

Volatility is another issue.

Volatility is pretty inherent to cryptocurrency and the majority

of collectors of NFTs come from that cryptocurrency background.

So as cryptocurrency goes, so goes NFTs at this point in time.

So as long as we have that volatility, we'll see a series

of bubbles.

Do you really want your pension tied up in an asset which can be

worth $1,000 on Monday, a million dollars on Tuesday and

$1,000 on Wednesday? Good luck retiring on that kind of

presumed income flow. You can gain everything, you can lose

everything.

Concerns over security have also surfaced after numerous reports

of thefts and scams made headlines in recent months.

It's not that they're fundamentally insecure. I think

a lot of the issues. It's like any kind of technology, it's

very hard to find a technology that anyone will guarantee to be

100% secure. So the question is really about trust and I think

people are right to be wary

of them. The NFT market is decentralized, which means that

the onus of keeping your assets secure is ultimately on you, the

investor. And so I think that they certainly can be very

secure. If you as an investor, take the right precautions to

make sure that when you purchase them you are backing up your

private key, you are storing them in a safe wallet. You are

using secure passwords and uncompromised devices and

computers to purchase them.

There's also the question of ownership. At its current state,

while only a few can purchase a token, almost anyone can make

unlimited copies of the original artwork. So what exactly are

investors buying when they're paying for a token?

It's this kind of really interesting conundrum I guess

about what ownership really means when it's something that's

digital and can be copied perfectly. Paintings, for

instance, there's only one Mona Lisa, right? So if you want to

go and see the Mona Lisa, you have to go to the Louvre in

France, and you can look at it. But any copies that you make of

that are not considered to be as valuable as the original.

Whereas with digital work, because it's just numbers on a

computer, you can make a perfect copy. And that makes it quite

tricky to understand what the concept of originality is or

authenticity in the sense of which is the authentic copy of

this work, because all the copies are the same.

When it comes to investing in NFTs, experts share the advice:

buy the work that you truly love and wish to own.

Don't buy it because it's an NFT, buy it because you like the

art or buy it because you think the collectible is cool, or the

community is cool. And you want to participate for the asset,

not the underlying technology that powers it.

Now what we're seeing is sort of mass speculation, where people

are trying to figure out how can I buy this and flip it in three

days and try to make you know, 10x the money, right? And those

people are going to get burned. So I really do think it's

critical that people only buy things that if the whole thing

caved in tomorrow, you'd be like, 'Oh, I love these. I love

my collection. I love what I have. I love that I supported

these artists, right? I love that I'm part of this community.

I love that I'm part of this history.' So I think that's the

way you have to collect. If there's

something that both the supporters and the skeptics can

agree on. It's that this is just the beginning of the NFT

movement.

I think it's pretty clear that we're in sort of a price

discovery mode, right? Where, you know, we don't really know

how much these things are worth, you know, they're worth what

people will pay them but the people that are excited about

NFTs, that group is expanding.

In the near term, yes, they will be volatile. I believe in the

long run, I'm absolutely bullish and I think that there's a lot

of opportunity.

We're just the tip of the iceberg. I know that a lot of

people see NFTs in the news or read about it, and they think

that they might be too late, especially as an artist.

Certainly not the case. I still think we have a long way to go

but I also think that we've shown enough traction and it's

changed enough lives that I don't think it's going anywhere.