This article was prompted by a question that's been on everyone's mind, but rarely voiced.
Recently, @cryptoxicate (torum.com) courageously posted that question:
"... is there a reason or real explanation why spending 205 ETH for an image?? physical art i get it but this?"
@cryptoxicate, this is for - and because of - your unfettered, candid curiosity. JaiChai
In order to understand the current NFT craze and the seemingly outrageous valuations of NFT Art, you must first have a basic understanding of the legacy Rare Objects Market Economy.
The value of rare art and historical artifacts is the end-result of many complicated and dynamic factors.
Nevertheless, let me attempt to provide you with a "Micro-Primer on the Rare Objects Market Economy".
Like any market economy, it's based on supply and demand, plus the current opinion of the market sellers and buyers.
What kind of buyers are in this market?
Speculators and investors who buy for future profit.
The wealthy elite that buy for vanity - aka "bragging rights amongst their peers".
And "Legacy Aficionados" who purchase art and/or artifacts as a personal tribute to a piece's provenance.
Several industries are built on the custody, pre-auction and after-market products and services of each piece within the Rare Market Economy.
This includes, but not limited to:
Appraisal firms, auction houses, art and artifact insurance, custom built protection displays, professional preservation services, commercial security ("cash cow" bodyguards and state of the art anti-theft technology), charitable and museum custody networks, armies of specialized >$1000/hr. tax attorneys and off-shore financial advisors, a >Billion dollar derivatives speculation and financial collateralization services - the list goes on and on.
The above is just a taste of a financial world that's been hiding in plain sight ever since Man began scrawling images on cave walls.
And as you might expect, the legacy Rare Object Market Economy is fraught with draconian centralization, greedy middlemen and rampant counterfeiting, corruption and fraud.
This is what NFT promises to eliminate. Blockchain technology is immutable. That means that Limited edition NFTs are provably rare.
Just like Bitcoin, it cannot be counterfeited.
Custody and ownership cannot be disputed.
Because decentralization cuts out exploitive, "rent-seeking" and so-called "trusted" third parties from the picture, the lopsided disparity in creator rewards vs. seller profits will diminish and eventually go by the wayside.
IMHO, similar to the current DeFi phenomenon, the NFT movement is a nascent technology that represents the next revolution in decentralization.
To all Landers:
Hope this brief exposition was useful for you.
May you and yours be well and love life today.
In lak'ech, JaiChai.
Jaichai 3-4-2021. Simultaneous multi-site submissions posted. All rights reserved.