NFT pics are the funhouse mirror high-end art deserves

The funny thing about many of the absolutely insane things happening in the world today is that from a certain perspective, they actually make perfect sense. Take the famous brands buying metaverse real estate, for example. At first glance, it makes no sense at all. At second glance, assuming the user base of the respective projects grows over time, it’s like buying an ad banner on a website, just at a higher markup. Considering how many headlines you get on the purchase, the purchase becomes quite sensible even if you do nothing with your plot of virtual land.

It’s quite possible to make the same case for nonfungible token (NFT) art, another major trend in the blockchain space, at least in how much buzz it has generated. Just a few months ago, Paris Hilton and Jimmy Fallon checked how deep the cringe abyss goes on live TV as they showcased their Bored Apes. And that’s just a few of the mainstream celebs who have joined the NFT art hype train recently, with quite a few of them managed by the same entity, United Talent Agency. And would you believe it, UTA also represents Yuga Labs Bored Ape Yacht Club’s makers.

Welcome to the club, @guyoseary ! ☠️⛵️

— Bored Ape Yacht Club (@BoredApeYC) October 12, 2021

This may hint at an interesting nexus between the entertainment elites and the poster kids of the NFT scene. BAYC at least has more than pictures to offer, though, which is not always the case for NFTs we see popping up at leading auction houses Christie’s and Sotheby’s. As these two worlds move closer to each other, their similarities come into the spotlight — and reveal some pretty funky truths along the way in how we perceive both art and value.

On the other end of this equation are, well, the end-users, for lack of a better word, and all of the off-chain legal intricacies. Let’s take taxes again, for example. When selling an art piece from your collection, you have to pay the capital gains tax. The same goes for selling an NFT.

With traditional art, though, you can avoid paying this tax with a neat trick. You can keep your treasures in a high-security warehouse in one of the world’s many freeports, and it can sit there for decades, changing hands, but not its location. As long as the art sits there, there is no need to bother the esteemed taxman about the transactions.

NFTs live on-chain, and any transaction moving its ownership to a different wallet will be open for anyone to inspect — including the U.S. Internal Revenue Service. Hypothetically speaking, even when it comes to freeports, there could still be a few tricks to try. Say you have a cold wallet with a bunch of expensive NFTs, and you keep them in a freeport, albeit the tokens are still on-chain. And when you decide it’s time to sell them, you sell the device itself, with no on-chain transactions. Would it make sense? This depends on the exact return on investment everyone involved gets.

This leads us to an ironic conclusion: In a world where art is a speculative asset, the future of NFT art depends not on its artistic value but on its properties as a financial instrument. Can you get a tax cut by buying a cheapo NFT, amping up its value through a few wash trades (in other words, trading it between your own wallets) and donating it to a museum or a charity? How about staking, or temporarily locking your NFT into a digital protocol? Can you stake it into a museum’s wallet, perhaps, to get some tax relief? Can you fake an NFT theft, simply bouncing it to your other wallet, to write off some tax on capital loss? Would it make more sense to buy an NFT from the official in charge of that juicy, juicy tender, or perhaps that cool vase on their table works better?

These are all good questions, and if you earn enough to pay people specifically for figuring out how you can avoid taxation, your lawyers are probably already looking into that. For everyone else, the NFT art market is at best another venue for supporting their favorite creators, which is quite different motivation-wise from getting rich quickly. In this respect, it has little more to offer than a rat race for finding the next big thing, and judging by the cool-off and the dominance of the top collections, the next big thing may only come from — and for — the big boy club.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Denis Khoronenko is a publicist, fiction writer and content editor at ReBlode PR agency.