Dotty Currency Art Makes As Much As Bitcoin

Dotty Currency Art Makes As Much As Bitcoin

The Art of Making Money Currency might be the title of a book you’ll find in an airport bookstore. Damien Hirst, a young British artist, has taken the title more literally.

Hirst’s latest artwork project, The Currency, consists of 10,000 pieces of handmade paper A4-sized covered in similar, but not identical, coloured spots. Each piece is signed and numbered by Hirst with an artistic title. Each note is numbered and signed by the artist, just like actual banknotes. Hirst made this an interesting experiment in highly irrational economics with collectibles, and blockchain technology.

Every painting comes with a digital certificate of ownership, a non-fungible token (NFT). The electronic token is only available to those who have purchased each painting for US$2,000. They must trade in their token by July 21 2022 if they wish to purchase the actual artwork. The token will be destroyed if they don’t do this. The artwork will be destroyed if they choose to keep the token. They can’t have one or the other.

NFTs Adds To The Excitement

The secondary trade in NFTs adds to the excitement. This shows how much of the art market is driven more by money than love. All 10,000 works were sold for $US20million. Since the artworks were put up for sale on March 1, there have been over 1,800 resales. This amounts to almost US$40million. No. No. 6272, entitled Yes.

We already know from secondary sales whether the buyers will view artworks as being essentially homogeneous or fungible in economic terms. There are still other questions. What percentage of buyers would prefer the digital token or the artwork? This preference will be different between art enthusiasts and speculators. Will buyers be able to wait until the last days to decide whether they want to convert in order to keep the optional value? We can be confident in the answer to one question. These artworks, despite their name, don’t have a lot of currency.

What Is A Currency?

They are not divisible, for one. It would be difficult to find something that is worth less than the one you have with them. You could easily rip a sheet in half, but it is unlikely that anyone would value the two pieces as much as the original.

While Hirst’s work has many of the characteristics of currency, it still lacks critical attributes that make it viable as currency. They are very similar to cryptocurrencies in this respect. Because few merchants accept Bitcoin and Dogecoin as cryptocurrencies, even the most well-known can’t be used to purchase anything. Even more ineffective for payments are the thousands of lesser-known cryptocurrencies.

The Market For The Currency

The initial sale of the original artworks was a public offering of shares. Prospective buyers could register to indicate how many they would like, but not the work. Over 30,000 people requested more than 60,000. This increased demand has led to a secondary electronic market managed and operated by HENI, which was responsible for the initial sales. These sales are shown in the graph below.

There are approximately 500 currently for sale. The majority of recent sales were for US$50,000 or more, which is over 20 times the original asking prices. What makes a work more valuable than another? It’s difficult to say. However, titles seem to play an important role. One of the few works that has a single-word title is Yes, which was purchased for US$120,000.

Valuing Collectables

The bizarre economics of pricing collectables already emerges from Hirst’s experiment. The standard valuation method in economics discounts future value. This assumes that a bird in a hand is worth more then one in a bush.

Art works and other collectables can be very different. While some people buy art for their love, others buy it for the money. They assume that the value of the item will increase in the future. This is the greater fool theory, which basically means that they hope to sell their assets to another speculator for a higher price. The buyer must then expect that someone else will pay more. It continues like this. This graphically has been demonstrated by Hirst’s experiment.

This can lead to a speculative bubble that often ends in tears. The price could collapse. After losing PS20,000 in South Sea Bubble, Isaac Newton regretfully observed, I can’t calculate the movements of heavenly bodies. But I can’t figure the madness and people. Coincidence, Hirst artworks currently trade at the same price per Bitcoin.

The paintings are, at the very least, pretty. There is also the possibility to convert the NFT into something that the owner can hang on their walls. It is possible to swap the NFT into a physical form to give this artful “currency” some fundamental value. This is not true for cryptocurrencies.