NFTs, these cryptocurrencies that turn the art world upside down (but not only)

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An NFT materializes the ownership of a work or a virtual object

An NFT is the digital equivalent of a deed. As in the case of cryptocurrencies, these digital tokens are based on a blockchain*. They are therefore tamper-proof, as the registry is shared between thousands of users worldwide.

But unlike cryptocurrencies, these are “non-fungible” assets. One Bitcoin has the same value as another Bitcoin: These two tokens can be exchanged without distinction. Conversely, an NFT is unique. Like a painting or a sculpture, it has its own identity. It can be freely bought or sold and the price depends on supply and demand. Also known as “cryptocollectibles” or “cryptogoods”, NFTs make it possible to acquire all kinds of “unique” digital objects, including virtual works of art.

One of the NFT’s interests in the art world is their ability to serve as a certificate of authenticity thanks to this unique and tamper-proof digital identity. There can be no doubt that a work is “false”. The registration of its entire history in a blockchain enables this supposedly infallible traceability.

>> READ: 10 Alternative Cryptocurrencies for Bitcoin to Follow in 2021

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NFTs are sold at gold prices

With NFTs, the art market is taking a somewhat confusing turn: what is the point of buying a digital work that is by definition infinitely reproducible? The answer may lie in philosophy. Yet, valued by digital art collectors, these digital assets have nurtured the emergence of crypto artists who were virtually unknown until now.

galleon figure, work of art The first 5,000 days, a virtual collage by American artist Beeple, brought in a record $ 69.3 million at an auction at Christie’s in March. The starting price had only been … $ 100. The sale of this jpeg file brought Beeple to the 3rd rank of the most expensive living artists in the world while opening ” a new chapter in art history “, in his words.

Other crypto-artists have seen the price of their works skyrocket thanks to NFTs. This is for example the case with Krista Kim, founder of the Techism Art Movement, if digital house was sold for about $ 500,000. The lucky owner must receive the 3D file of this virtual house with its NFT. Chris Torres, inventor of internet meme imagining a flying cat on a rainbow, has sold his Nyan cat at the beginning of the year for 300 Ethers (ie about 420,000 euros).

In March, Twitter co-founder Jack Dorsey sold the first message he posted on the platform on March 21, 2006. The message, ” just set up my twttr Reported the incredible sum of $ 2.9 million.

But perhaps the most unusual story is this one. Kevin Roose, journalist at New York Times, decided to sell NFT … from an article he wrote about NFTs. The experience surpassed his imagination: When he thought of raising a few hundred dollars for this “paper” that was freely available on the Internet, the bidding exploded. NFT was eventually sold for $ 560,000 to a digital art collector.

>> READ: John Hamon launches his own currency, in an artistic and cryptocurrency project

The creation of NFT as a commercial activity … in a video game

Art is not the only sector that uses NFTs. The creation of NFT seems to have only 2 limits: the imagination necessary for the creation of digital objects and … the existence of buyers. In fact, this concept of deed became materialized in a blockchain* and based on cryptocurrencies opens up many perspectives, especially in video games.

If it was already possible to raise, sell or buy virtual cats (via the game CryptoKitty), the game Sand box creates a parallel universe where it is possible to have … a very concrete commercial activity. This virtual world allows its players to purchase one of the 166,464 grounds (or “lands”) that make it up. They can start by building a house there or something else. By 2020, the pre-sale of 10% of these virtual lands had been completed in just 5 hours for an amount of approximately $ 450,000.

The special thing about the game is that Internet users can also create virtual objects (or “assets”), which are then registered via NFTs on the Ethereum blockchain. They are free to sell them to other players for Ethers. Of course, these cryptocurrencies can then be converted into an official currency.

>> READ: Banksy: a work sold for almost 20 million euros for the benefit of the hospital

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The world is succumbing to the NFT trend

The euphoria around NFTs has finally spread to the media world. In late April, rapper Eminem put a number of NFTs up for sale on the platform Nice gateway, similar to comics, baseball cards and a signed vinyl record of one of his albums. American host star Ellen DeGeneres has auctioned off one of her selfies, which she poses in the middle of the show with a drawing of a cat: the piece brought in more than $ 33,000.

The world of sports is also starting to surf on this new trend. A few days ago, PSG announced that it was selling its first artistic NFTs. It’s about 11 lucky friend, a digital figure created by artist Ludo. They are available in 5 variants in the historical colors of the football club. More than half of the profits from the sale go to charity.

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An increasingly unclear legal and fiscal policy framework

NFTs are purchased using cryptocurrencies on specialized exchange platforms. Open sea and Rare Bits is known, for example, for being specialists in the secondary market. All transactions are immediately stored there on a blockchain. Tokens can also be acquired directly from issuers, but this type of purchase requires extreme caution. Especially since investing in NFTs is inherently very risky: as with buying works of art, it is better not to invest with a single perspective of added value.

In the event that taxpayers record gains, the taxation associated with these tokens remains unclear. So much so that Oise Senator Jérôme Bascher (Les Républicains) asked the Ministry of Economy and Finance on 15 April.

If the Pact Act of 2019 made it possible to manage digital assets, NFTs fall outside this framework. Their characteristics could bring them closer to cryptocurrencies, which are taxed as financial products, but this definition seems too simplistic. ” Therefore, the current taxation will consist of assimilating NFTs with “Initial Coin Offering” (ICO) tokens.*. But what about tool tokens*which is used to use the service? asks the senator.

Should they be equated with works of art for tax purposes? ” Hard to include them because NFTs are clearly in a different category than works [de l’esprit telles que définies par la loi]. But also difficult to exclude them because the law evolves and the definition of a work remains very subjective », States Jérôme Bascher. If the market continues to rise, the debate must be settled quickly.

About the author
Caroline Courvoisier worked for 10 years financing and managing major real estate projects before devoting herself to economic and financial journalism. She attended a university course in economics and holds a master’s degree in Wealth Management, a course she completed with specialized financial education at New York University (Real Estate Finance) and INSEAD (specialization “blockchain revolution in financial services”).
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Better understand the article

Words marked with * or underlined in the article are briefly defined here.

Blockchain is an information storage and transmission technology that operates without a central control body. It is a shared database that contains the history of all transactions made between its users since its inception. It is considered safe because its large division makes it tamper-proof.

“Crypto-assets” are virtual assets that are only accessible from an Internet platform. These include, for example, cryptocurrencies such as Bitcoin. They currently have no legal existence in France, although they are used to speculation.

A cryptocurrency is a virtual currency. The most famous is currently Bitcoin. It is not issued by a central bank and has no cash correspondence. Cryptocurrencies can only be exchanged using the blockchain protocol. No one is currently a legal tender.

ICO (Initial Coin Offering):
An ICO (Initial Coin Offering) is a fundraiser that operates on the principle of issuing digital assets (tokens) that can only be exchanged for cryptocurrencies.

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