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A Beginner’s Guide to NFTs and Their History at Auction

On March 11th, 2021, Christie’s became the first major auction house to offer a digital artwork in the form of a non-fungible token, or NFT. Before the sale, many in the art world had doubts about NFTs and their possible value at auction. The conversation quickly changed, though, when Christie’s achieved USD69.3 million for its first offering in the category, Beeple’s EVERYDAYS: THE FIRST 5000 DAYS. This far surpassed previous records for digital artworks and quickly made NFTs the talk of the industry.

Even as dozens of auction houses and platforms enter the fray, Christie’s remains at the forefront of expanding the conversation around NFTs and bringing trailblazing examples to auction. More collectors are finding NFTs that resonate with them. At the same time, a growing number of investors are realizing the possibilities of NFTs as an asset class.

As the conversation develops, you may wonder if NFT artworks are a good fit for your portfolio. In this article, you will learn more about NFTs, Christie’s efforts to spearhead the category, and what investors should know before acquiring their first NFT.

What Is an NFT?

A non-fungible token is a digital collectible that is inseparably tied to information about its ownership and previous sales. The NFT is both the collectible and the data attached to it. Anything an investor can imagine collecting can be an NFT, from baseball cards to artwork to even memes. However, auction houses like Christie’s most regularly auction off digital art as NFTs.

Creating and owning digital art has existed for decades, long before NFTs. But, in the past, it was too easy to copy digital works or make false claims of ownership. Investors could not in good faith acquire an asset that was difficult to authenticate and protect from forgery. That is why the ability to bind digital collectibles to incorruptible data about ownership in an NFT has been vital. Investors now have access to definitive information on who created a piece, owns it, and acquired it in the past.

Beeple and Christie’s Category-Defining Achievement

Despite the massive strides towards authentication made possible in digital art through NFTs, many were still skeptical of the category’s potential. Anchors on American news programs such as Today took turns joking about the category. Why own an artwork or collectible that anyone could look at on their phones for free? While many disregarded NFTs, Christie’s saw an opportunity to lead and innovate.

Far from simply testing the waters, Christie’s first NFT offering showed it was all-in on the category. EVERYDAYS: THE FIRST 5000 DAYS represented over a decade of creative output from Mike Winkelmann, better known as Beeple. In 2007, Beeple decided to produce a digital artwork each day, pieces he called “everydays.” The first was a modest picture of his uncle. The last, made over 13 years later, was a celebration of the unique language Beeple had created with his 5,000 “everydays.” The work wildly juxtaposes politicians, pop culture references, and gross-out imagery.

The $69.3 million price achieved at Christie’s for EVERYDAYS: THE FIRST 5000 DAYS set an auction record for NFTs and made Beeple the third most valuable living artist. It also spurred a conversation in the auction industry and among investors worldwide about NFTs’ viability as an asset.

Expanding the Possibilities of NFTs

The possibilities of what NFTs can be are virtually limitless. In the months following the record-breaking Beeple sale, Christie’s has presented many lots that challenge boundaries. That includes Hi, my name is…, a digital artwork by former MLB second baseman Micah Johnson. Johnson’s work often features Aku, a Black child wearing an astronaut helmet. Aku serves as Johnson’s reminder to Black children that they can be anything they want when they grow up.

In Hi, my name is…, Johnson introduces a new helmeted child to his work. The winning bidder of this piece will get to decide whether or not the child removes their astronaut helmet, revealing their identity. The new owner will also work with Micah Johnson on a name for the child. Hi, my name is… introduces the captivating possibility of collaboration in NFTs. When the digital artwork came to auction in July 2021, it achieved $43,750.

Christie’s presented another category-defining sale the next month when it offered ten designer furniture NFTs by Misha Kahn. At first, furniture and NFTs may not sound like a perfect fit. One is inherently bound to physical space and the other to the digital world. However, the medium allowed Kahn to blur the line between functionality and whimsy. “I wanted to see how far I could push furniture and the idea of furniture and still have people vaguely recognize the gesture of a floor lamp or the idea of a chair,” said Kahn.

Kahn’s designs can be appreciated in a digital wallet or used as real-life furniture. Winning bidders in this Christie’s sale can use a 3D printer to bring these works into the physical world. Kahn even offered the services of his studio to print each item. When the pieces came to auction in August 2021, they sold for prices ranging from $6,875 to $47,500.

Christie’s continues to lead the way in NFT innovation. Later this September, Christie’s Hong Kong will offer the first NFT sale from a major auction house in Asia. Aptly titled No Time Like Present, this sale will introduce NFTs to a more diverse range of collectors. Featured lots include a CryptoPunk, a Meebit, and a Bored Ape, all examples of the profile picture subcategory of NFTs.

Should You Invest in NFTs?

Investing in NFT artworks makes sense for the investor who is not only looking to turn a profit but also places value in viewing and owning art. Ideally, the NFT artworks and collectibles you invest in will appeal to you aesthetically. That way, viewing them in your digital wallet or projecting them onto physical displays will bring you joy in the months and years before you sell the asset.

Compared to other artworks and collectibles, NFTs are also a uniquely liquid investment. While Christie’s and other auction houses offer NFTs, collectors need not go through the traditional third parties to sell digital artworks. Certificates of authenticity are linked to NFTs, and shipping is not a concern. Therefore, investors can buy and sell NFTs in a quicker, more dynamic manner than they could physical pieces.

Despite many benefits, it is still impossible to say whether investing in NFTs is a perfect fit for you. Each person’s portfolio and tolerance for risk are different. You should consult with an investment advisor or wealth manager before acquiring an NFT.