Damien Hirst melds art and NFT to mess with blockchain investors
The artwork or the NFT, take your pick
What makes a currency?
For one thing they are not divisible. It would be hard to buy something worth a lot less than one of the paintings with them. One could rip a sheet in half but, as with half a bank note, it’s unlikely anyone would consider the value of the two pieces anywhere near the original.
So while Hirst’s works have many of the attributes of actual currency, they still lack attributes critical to work as currency. In this sense they are similar to so-called “cryptocurrencies”. Even the two best-known, Bitcoin and Dogecoin, can barely be used to buy anything, because few merchants accept them. Thethousandsof less well-known cryptocurrencies are even more useless for making payments.
The market for ‘the currency’
The original sale of the artworks worked like an initial public offering of shares. Aspiring buyers could register and say how many they wanted (but not nominate which individual work). The offering was over-subscribed, as more than 30,000 people wanted more than 60,000 tokens (that is, three time the available number).
This demand has spilled over into a secondary electronic marketplace (managed by HENI, the company that handled the initial sales). The graph below shows these sales.
Secondary sales of Damien Hirst’s ‘Currency’ art works
Almost 500 are currently listed for sale. Most of the recent sales were for about US$50,000, more than 20 times the original asking price. What makes one work worth more than another? That’s hard to say, though titles appear to play a big part. “Yes”, which exchanged hands for US$120,000, for example, is one of the few works with a one-word title.
Valuing collectables
Hirst’s experiment already highlights the strange economics of pricing collectables.
In economics the standard valuation technique “discounts” future values. It assumes a bird in the hand is worth more than one in the bush.
But art works and similar collectables are different. While some buy for love, speculators buy for money — on the assumption the value will be more in the future. The rationale is essentially the “greater fool theory” — the hope they can sell to another speculator at a higher price. That buyer in turn must expect someone else will pay even more. And so it goes on. Hirst’s experiment has so far demonstrated this graphically.
This often leads to a speculative bubble, which usually ends in tears. The price may collapse. As Isaac Newton ruefully remarked after after losing £20,000 in the South Sea Bubble of 1720: “I can calculate the motions of heavenly bodies, but not the madness of people.”
By coincidence, Hirst’s artworks are currently trading around the same price as one Bitcoin.
I think the paintings are at least pretty. And there’s the option at least to swap the NFT into a physical form the owner can hang on their wall. There are enough people who would like to do that to give this artful “currency” some underlying fundamental value.
That can’t be said of cryptocurrencies.
Article byJohn Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society and NATSEM,University of Canberra
This article is republished fromThe Conversationunder a Creative Commons license. Read theoriginal article.
Story byThe Conversation
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