As of this month, cryptocurrency exchange Coinbase and the auction house Sotheby’s, which has been around since 1744, have both announced they are launching NFTs marketplaces.
According to Kenny Schachter, an art dealer, columnist for Artnet, and self-proclaimed NFTs evangelist, the digital art market could eclipse the traditional one within five years.
As of this month, cryptocurrency exchange Coinbase and the auction house Sotheby’s, which has been around since 1744, have both announced they are launching NFTs marketplaces.
Using blockchain technology, nonfungible tokens, or NFTs, are unique assets that cannot be replaced with anything else. From music to website domains, they can be anything you want, but the current trend is digital art.
Also read – A Post-Pandemic World of Art: What’s changed? Gaurav Bhatia explains.
Where can people buy NFTs?
The digital artworks can be purchased on online marketplaces such as Opensea.io, Niftygateway.com and Superrare.com.
Traditional auction houses have also stepped into the space: a digital artwork sold for $69 million at a recent Christie’s auction. Additionally, Sotheby’s announced this month it is launching its own NFT marketplace.
“Sotheby’s is uniquely positioned to apply its expertise and curatorial expertise to the fast-evolving world of digital art,” said Sebastian Fahey, a managing director at the auction house.
How big is the market for NFT?
According to DappRadar, a company that tracks crypto-based applications, the market transacted $10 billion in the third quarter of 2021.
In what way are NFTs priced?
According to Schachter, it is ultimately about what you can get away with. Nevertheless, the reputation of the artist, including their gallery exposure and following size, are important factors, he said.
Are they taxed?
Taxes on NFTs are typically based on the IRS’ collection rates, according to Shehan Chandrasekera, a CPA and head of tax strategy at cryptocurrency tax software company Cointracker.io.
Consequently, digital artworks held for less than a year will be taxed at a maximum rate of 37%, while those held longer will be taxed at a maximum rate of 28%.
A crucial thing to note, Chandrasekera said, is that people using cryptocurrencies to purchase NFTs will also be liable for capital gains taxes.
Many people don’t realize this, he said. “They think that they have just used their crypto. “I didn’t cash out.’ People need to be very careful.”
NFTs are often bought with cryptocurrencies, why is this?
According to Schachter, there are a lot of overlaps between those interested in digital coins and those interested in NFTs. He describes them as “digitally native people.”
Most crypto investors who’ve seen their cryptos jump in value have had few ways to spend them. It’s not as easy to buy a house or car with bitcoin or ethereum, for example.
There has been a crazy demand, and now all of a sudden there is something to buy,” Schachter said.
What are the criticisms?
Schachter said that much of the criticism of NFTs comes from the traditional art world because it is frightened of disruption.
“The first line of attack is just to equate it with a currency,” Schachter said. “I suppose money is only money. Well, what is more money than art that’s been stored in a freeport and never seen?”
Many naysayers argue that art should be viewed in museums and in person, not on screens. But you already have a piece of hardware at your desk to view NFTs,” Schachter said. “It’s a standalone device that plays your NFTs in a loop.”
According to Anil Dash, an entrepreneur who writes about NFTs, the space is dominated by people cloaking their desires to make money behind a passion for art.
Dash said many of the same people were buying meme stocks. “They don’t think GameStop is suddenly going to get really good at selling videogames any more than they think this lousy drawing of an ape is really monetarily valuable.”
What are the risks?
Buyers must be extremely careful when storing their digital artworks online, but that’s no different from treating their online bank accounts with care.
Fakes are another problem, he says: “Whenever there’s money on the table, there will be criminality.”
The most likely danger is that you will lose all your money if a digital artwork loses its value.
Is it really art?
Several major cities have already hosted NFT exhibits, including London and Cologne.
A museum dedicated to NFTs will soon open in Midtown Manhattan.
“The genie is out of the bottle, and this is just going to grow,” Schachter said.
The technology will coexist with older artforms such as sculpture and painting, he said, rather than replace them.
The sculptures will be projected in 3-D holograms so you just flick a switch and they will appear in your room, he said.
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