Markets and Insights #2 - NFT : deciphering a parallel universe

For our second edition of Markets & Insights, Clarisse Leduc, Deputy Head of Asset Management at Société Générale Private Wealth Management, covers the recent rise of NFTs (Non Fungible Tokens) and their potential impact on the art market.

NFTs have been in the news for a few months, but this innovative concept is still in its infancy and is therefore not always very clear. These three letters designate "Non Fungible Tokens": these are unique digital certificates stored in a blockchain registry, and which act as title deeds of digital assets. The main difference between these crypto tokens and others like cryptocurrencies is based on the principle of non-fungibility, i.e. they are not interchangeable. NFTs can be bought and sold, but each NFT represents a unique good with its own characteristics and therefore cannot be considered interchangeable with another NFT representing another unique good.

The primary feature of an NFT is its definitive registration in the blockchain ledger. This inscription makes it possible to establish its authenticity, the traceability of the chain of ownership of a good and the price at which it was exchanged historically. In addition, some tokens include a feature that gives authors of the targeted digital content the opportunity to receive a percentage each time the NFT, and therefore their work, changes hands and, for example, to take advantage of the fact that their work is gaining in popularity over time.  Finally, artists can address collectors directly in this way and control their dissemination, while the art market as it is more classically known usually involves intermediaries such as galleries, which have strong decision-making power. 

The NFT market has developed well in recent months, particularly in connection with the rise of the exchange of collectibles, whose sales volumes are nothing to be ashamed of compared to those of works of art, and which generate a colossal secondary market.

Download the entire article to learn more about our perspectives by clicking on the link below.

Deputy Head of Asset Management Société Générale Private Wealth Management