A view of the market: through the blockchain
What is an NFT?
An NFT is an intangible asset that exists only in a digital universe. Essentially, these “non-fungible tokens” are digital collectibles kept on a decentralized ledger or blockchain. You can’t touch an NFT, but you can own it. Still don’t understand what all the fuss is about? You may not be alone. An NFT is a unique token that isn’t easily exchangeable with another. The primary use of NFTs is artworks. Millions of dollars of artworks have been selling on the blockchain in the native currency, Ethereum.
Art dealers, gallerists, curators, and a select elite have been long considered to control access to the art market. Today, collectors and artists have technology-aided access via cryptocurrencies and blockchain markets that allow for sales and acquisitions, provenance tracking, virtual galleries, digital art collection exhibitions, and management systems.
An NFT provides the collector with a certificate of ownership representing a specific digital asset. With it comes a smart contract that identifies its uniqueness. The smart contract is minted into a token on a blockchain. Popular forms of NFTs are jpegs, gifs, and videos.
Crypto-artists and collectors can find each other on blockchain marketplaces where artists can upload, market, and sell their work. From a collector’s viewpoint, the value of an NFT is based solely on demand for it. A collector has the digital rights to resell the token but does not have ownership of the original artwork. An NFT may lose some or all of its value if interest dissipates. Also, if an NFT is sold at a profit, expect to pay even higher capital gains taxes than with the profitable sale of traditional assets.
In this issue, L’Anne Gilman of Gilman Contemporary shines light on the potential she sees in NFTs and the opportunities they provide to her collectors and artists. Hailey, Idaho, artist Jill Lear shares her experience merging her more traditional creative skills with technological tools in creating her first digital works of art. Finally, Yanna Lantz, the owner of Friesen + Lantz Fine Art, discusses how she is exploring ways of increasing collectors’ knowledge and comfort, as well as potential investment opportunities in this intangible art form.
DISCLOSURE A View of the Art Market; 2021, 2022 Suzanne Hazlett, MBA, CIMA®, CFP®, is a Certified Investment Management Analyst® and CERTIFIED FINANCIAL PLANNERTM professional. Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements. Nonfinancial assets, such as fine art, are complex and involve risks, including total loss of value. Special risk considerations include natural events, complex tax considerations, and lack of liquidity. Nonfinancial assets are not in the best interest of all investors. Any opinions are those of the author and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description of the securities, markets, or developments referred to, nor is it a recommendation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Raymond James is not affiliated with any of the above-mentioned individuals or organizations. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members. HAZLETT WEALTH MANAGEMENT, LLC is independent of Raymond James and is not a registered broker/dealer. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. 675 Sun Valley Road, Suite J1 + J2, Ketchum, Idaho, 83340 208.726.0605 HazlettWealthManagement.com
