The Real Reason Why A JPEG file Is Worth $69 Million

Beeple’s art piece with a US$69.3 million price tag

Beeple, a digital artist whose real name is Mike Winkelmann rarely sold more than $100 for his works has successfully auctioned his piece “Everydays: The First 5000 Days” for an eye-watering US69.3 million. This has caused a stir in the art and cryptocurrency world when Metakovan, the chief financier of crypto-based fund Metapurse bought the landmark work at an online auction on March 11.

Beeple creates digital art, and usually, the work is a jpeg file. This time, Christie’s auctioned not the jpeg file itself, but the NFT (Non-Fungible Token) of the piece.

NFT is a non-duplicable digital certificate of ownership for digital assets, that is authenticated using blockchain technology. Its authenticity and traceability are deemed to be inviolable. A record with the artist’s electronic signature in the blockchain points to the “official” version of the painting. This record shows that the NFT was transferred from the painter (founding owner) to the buyer.

The buyer did not obtain the exclusive right to use the jpeg file of the painting. Anyone can still copy the original jpeg file, and every copy is exactly the same as the original. The only “exclusive” thing obtained by the buyer is that his copy is “certified” by the painter. The NFT the owner has is the only one. This is a bit like a photo that can be duplicated indefinitely, where each one is exactly the same. But only the buyer’s photo has the photographer’s signature on the back.

The sale of “The First 5000 Days” catapulted Winklemann to third place on the list of works from a living artist. It is second only to Jeff Koons sculpture “Rabbit” and David Hockney’s painting “Portrait of an Artist (Pool with Two Figures)”. The other two are much more pleasing to the eye.

This might seem that if artists are hardworking enough and manage to catch the wave of technology, they have a chance of getting rich overnight. But in-depth exploration will reveal that behind the scenes are full of traces of human manipulation.

NFT Bundling

First of all, the buyer is an investor who specializes in collecting NFT. The buyer who goes by the pseudonym Metakovan is one of the oldest investors in NFT. He is the chief financier of crypto-based fund Metapurse.

Metapurse is an investment fund that specializes in collecting NFTs (it claims to be the world’s largest non-fungible token fund). They then bundle up these NFTs which are then fractionalised and sold as “B20 tokens” to enable shared ownership. If the average person cannot afford the NFT of Beeple, they can invest in Metapurse by buying the tokens, which is equivalent to owning a small part of the NFT owned by the fund.

Metapurse is particularly fond of collecting Beeple’s works. In an auction last December on online marketplace Nifty Gateway, they bought 20 single edition pieces of Beeple’s work for US$2.2 million.

So far, Metapurse’s behavior is understandable. Many traditional art collectors will deliberately collect the works of a certain painter. At this time, collectors and artists form a symbiotic relationship: if the price of an artist’s work increases so does the collector’s assets. Conversely, if the price of the works falls, it will also drag down the other works the collector owns. Therefore, collectors have an incentive to “mark-up” the price of new works to protect their existing assets.

But when the artist has involved himself, it’s not so simple.

Artist himself an indirect buyer?

As mentioned, Metapurse issues cryptocurrency themselves called B20 tokens. Buying a B.20 is equivalent to owning a small part of the NFT owned by Metapurse. 10 million B.20 tokens are issued and are referred to as the “keys” to the digital vault.

Imagine throwing a bunch of NFTs into a digital vault, and then cutting the safe into 10 million copies and selling them to different people. That is the concept of Metapurse.

As Amy Castor has pointed out, holders of B.20 and Metapurse benefit when the prices of B20 go up. Nothing wrong with this.

But the token distribution is something to pay attention to. Metakovan has 59% of all B20 tokens. And Beeple, the creator of the artwork actually owns 2% of all the B20 tokens! No conflict of interest here?

So Beeple invested in the buyer’s cryptocurrency. And if we do villainous speculation, could it be that this transaction is simply to increase the price of B.20? That Beeple first arranges with the buyer to bid for the work at a high price. In fact, money does not need to change hands at all. The actual expenditures of both parties are only the commission paid to the auction house, which is about 9 million U.S. dollars. Surely this will make the B.20 token and the rest of Beeple’s works appreciate?

Maybe Metakovan and many others really love the art of Beeple that has resulted in such a high bid.

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