Livestream : Tokenisierung von digitalen und physischen Assets: Status Quo und Outlook

Watch our Co-founder and CEO Christoph Ebell discuss Blockchain, NFTs, and the tokenization of digital and physical assets with Christian Aichhorn of Kuble AG.

Language: German

Recorded live 13.07.2021 at Kuble Studio, Zürich.

Kuble Social Media and Digital Agency

NFT News: Current and Upcoming Auctions (June 2021)

It is impossible to escape the buzz that NFTs have created in the art world, and there are two major auctions to take note of and explore this month:

PROOF OF SOVEREIGNTY: A Curated NFT Sale by Lady PheOnix at Christie’s (May 28 - June 3)

Natively Digital: A Curated NFT Sale at Sotheby’s (June 3 - June 10)

And of course, the launch of polarrana’s new original song and live drop event happening June 11!

Tokenizing Fine Art - or How to Survive the NFT Bubble

Check out our CEO Christoph Ebell’s article on value in tokenized art (NFTs).

Originally published on Crypto Valley 5 April 2021.

Tokenizing Fine Art or How to Survive the NFT Bubble

by Christoph Ebell

We are clearly in a bull market for crypto projects. The latest “craze” (to use some observers’ words) is about so-called non-fungible tokens, or NFTs* . What drives the NFT market right now is digital art. From the sensational sale of the now-famous Beeple work to thousands of digital artists' creations –some great, many of questionable quality – there seems to be only one direction for valuations and sale prices to go: up. Marketplaces for Art NFTs, such as Maker’s Place, Opensea, and many others offer selling, auctioning, and buying services to collectors and artists alike. But where is the market headed – is it all just hype, smoke and mirrors?

Yes and no. “Yes” in the sense of a classic bubble, which is perhaps comparable to a 1990s Japan-driven fine art buying bubble that was followed by a crash the market took a decade to recover from. Worries about inflation, a hunger for alternative investment and asset forms, the availability of capital for investment with stock indices at all-time highs, and riding on the back of the general, thunderous, crypto cycle are certainly current drivers. But instead of just crying “bubble!,” it may be more rewarding to look at where lasting value and true utility can be found – and with it genuine investment opportunities rather than gambles.

So what does the future of (art) collecting hold?  

When valuating art for trade, there are a number of criteria to consider. While digital art presents its own categories, it makes sense to apply some or all of the classic criteria to separate the wheat from the chaff. For example,

• Quality

• Rarity

• Condition

• Provenance

• Geographical context

• Cultural context

There are more of course. As an example how such criteria may transpose for digital or digitized art, consider that “condition:” it may be translated to “availability of high-quality files” - important for creating gallery or residential displays. Also, has long-term digital preservation been taken into account, both for on and off-chain storage, including forward compatibility of the token itself? This becomes particularly important when high or very high value is in play.

Therefore, a collecting and investment approach to digital art should be modeled on valuation techniques that are well-tested in the physical art world. The goal is to hold NFTs of art works that will, or at least are able to, stand the test of time and the bust of a bubble. In fact, such art may appreciate disproportionally as the market matures and the community flocks towards value.

Another more radical approach to collecting involves the tokenization of physical Fine Art. From a purely investment-centric angle, Fine Art as an asset class is generally rather illiquid, i.e., it is not straightforward or easy to convert a valuable painting into cash. Nor is it cheap to do so. One solution for making this process easier is the tokenization of Fine Art. There is the often-cited provenance tracking and authenticity certification of course, but there are more, and exciting, possibilities: for example, a valuable painting can now be offered on a marketplace with the option of fractional ownership, thus lowering the bar for individual investors to own a piece by a famous artist. This also opens up the possibilities of a secondary market for traditional Fine Art, depending on the jurisdiction even without the need for a legal entity “wrapper” for the work. In terms of valuation, the artwork carries its appraisal value into the digital world and the NFTs become “asset backed,” and as such, can lower the risk for buyers quite significantly. In terms of regulation, it is important to ensure that it is clear if the token will be seen as a security or not.

Another possibility is to create dynamic NFTs that can ingest data from sources like auctions or even sensors: the token can “know” where the physical work is located, how many “views” it generates in a gallery, or what similar works are sold for at auctions, and so on.

Obviously, there are a number of practical issues to be worked out. Who will have custody of the original? How can we ensure that the token(s) actually represents the physical work? How will these digital tokens be preserved and maintained for the long term? When do we need to consider anti-money-laundering (AML) regulations? Here it is crucial to work with an expert team with a holistic view. There are of course also risks. For example, even if the NFTs can support liquidity, there may not always be a counterparty in this still-not-mature market. However, it seems that on average, the opportunities far outweigh the risks and given the right technology and strategy, there is a lot of potential for exceptional returns and appreciation.

In terms of legislation and infrastructure, we are in a comparatively very good position in Switzerland, where there are consistent laws and regulations. The first part of the new DLT (Decentralized Ledger Technology) legislation came into effect at the beginning of this year and the second is to follow by the end of this summer. The technology infrastructure is excellent, and the Swiss CryptoValley is one of the world's premier hubs for blockchain technology projects. Coupled with the experience in banking, and a global reputation in art (think Art Basel), Switzerland is becoming a destination for Fine Art tokenization.

So you invested in a Fine Art NFT. Now what? Here lies a whole, often overlooked,  additional piece of the NFT market. How do you present your collection and how do you savor and convey the pride of ownership? Sure, a web gallery of your collection is not bad, but there are endless creative options that open up a whole new way of owning and interacting with Fine Art: both natively digital or based on a digital twin of a physical work.  A residence or a gallery can become an immersive art space, with changing displays, large projections, or small treasure chests of holographic objects. Art can become much more interactive, and ownership can be shown, for example by reacting to the biometrics of the owner with a face or voice print. For example, upon recognizing the voice of the collector, a desaturated display can light up in brilliant colors, or a performance art video can start playing.

High quality tokenized Fine Art is here to stay and will see healthy appreciation. As a community and an industry, we must put together the technological infrastructure and knowledge of how markets and culture tend to develop. Depending on the collector’s or investor’s tastes, a sine qua non is a genuine passion for digital creativity in the 21st century and a passion for Millennia of human expression in Art.

“EVERYDAYS: THE FIRST 5000 DAYS” NFT by Beeple sold for over $69 million

Art history was made yesterday as Christie’s auctioned Beeple’s (aka digital artist Mike Winklemann) “The First 5000 Days” for over 69 million USD. The fully-digital work auctioned is a non-fungible token (NFT), which gives the buyer ownership rights. This LA Times article provides a pretty good NFT introduction and some context to the incredible success of this artwork token. The sale represents the third most valuable piece of art created by a living artist, according to Christie’s tweet reported on ArtNet.

How is this relevant to what we do at Arcades Digital? For one, it moves NFTs most decidedly into the limelight - and much more widespread acceptance as an art asset. Collectors and investors are witnessing the rise of digital art NFTs, and the big question for many in the industry is how to collect digital art sensibly (and profitably). While we provide expertise on native Digital Art (One of our co-founders is a digital curation and preservation specialist) there’s another approach: Tokenized (NFT) Digital Twins of physical Fine Art works. In this way, collectors, art dealers, and auction houses can capitalize on an existing traditional art market worth 62 billion USD. Tokenization, done right, will be a disruptive force in this market. Arcades Digital is at the forefront of this development. We’re announcing new partnerships soon - stay tuned for more and use our contact form to get in touch.

Arcades Digital CEO speaks about tokenization on Swiss radio (RTS)

Chris Ebell was quoted on the French-language Swiss national radio website on NFTs, and an excerpt of the interview was broadcast on the morning news. Here’s the text and the radio segment.

First purely Digital Artwork to be sold at Christie’s as an NFT

Screenshot taken of Auction House Christie’s website, 24/02/2021

Beeple's "Everydays: The First 5000 Days" is the first purely digital artwork sold at Christie’s. The NFT (Non-fungible token) for this was minted by the digital marketplace MakersPlace on 16 February 2021. “Everydays” will be offered online from 25 February to 11 March 2021, and payment can be completed in Ethereum (ETH). This event reflects the rapidly growing importance of digital art and its entry into the mainstream channels of the art market as we know it. Beyond that, however, it shows that NFTs are being adopted as the digital certificate of ownership, authenticity, and provenance that the digital world needs and wants. For us at Arcades, it is a confirmation of the path we are taking, except we believe that we take this one step further: building cyber-physical “twin” systems will enable both the digitalization of physical artworks and -importantly- the physical representation of digital art in residential, gallery, and other settings. We build the technologies that enable a seamless experience of digital and physical artwork, and all the creative hybrids in between, including artistic virtual and augmented realities.

Read more: MakersPlace
Go to auction: Christie’s

Screenshot from Auction House Christie’s website, before the lot opens; 24/02/2021.

Screenshot from Auction House Christie’s website, before the lot opens, including smart contract address and special notice that payment can be completed with Ether; 24/02/2021.