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The Cognitive Trap of Positional Goods: From Fake Vermeer's to NFT Assets.

The graphic image of people standing around in art gallery
Image credit: Freepik

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Han van Meegeren started painting his final counterfeit in July 1945, using a badger hair brush. In a decade, he rose to become Europe's top con man, an artist who sold his work for millions of dollars. He had deceived critics, wealthy collectors, and even a high-ranking Nazi official into believing his pieces were genuine, fueled by rejection from the art world. Furthermore, he had decided to do it by imitating the works of Jan Vermeer, a technically flawless painter of the Dutch Golden Age. After WWII, however, a "Vermeer" picture sold to Nazi Reichsmarschall Hermann Göring was traced back to van Meegeren – a painting of such excellent quality that specialists concluded no one could possibly have faked it, when it was proved that it was indeed a fake Meegeren got a slightly uptick as “the man who swindled Göring.

Han van Meegeren painting Jesus and the Scripters, 1945

This is the story of Han Van Meegeren, the most dramatic forger of the 20th century. He succeeded in selling forged Vermeers to the public and to the Nazis for tens of millions of dollars — without anyone ever suspecting they were forgeries.

The story of this forger and his beautiful fakes is worth knowing, because, arguably, what we are seeing now in the rise of non-fungible tokens is no different from the rise and fall of the counterfeit Rembrandts and others. We are seeing this again in the era of crypto assets.

In the past, the value of the art you owned was determined by what you were willing to pay someone else for it. This meant that the market price of a work of art generally corresponded to the supply and demand for that work of art in the marketplace. The art dealers played an essential role in facilitating the buying and selling of art and they helped to set the market price of the art they sold. However, recent developments in the technology behind cryptocurrencies have created new opportunities for the valuation of works of art that are no longer based on the prevailing market forces but instead are based on direct interaction between the buyer and seller facilitated by a smart contract on the blockchain. This is known as non-fungible tokens (NFTs) and it is this technology that is behind the growth of NFT marketplaces such as the OpenSea marketplace, CryptoKitties and WAX.

The value of NFTs — of which CryptoKitties is one of the most popular examples — can be volatile for a number of reasons, not the least of which is the fundamental difference between art and NFTs: the latter are digital assets that are traded on an open market; the former is not. Most artists create their pieces with the expectation that they will be sold at a high price one day to a like-minded collector, who appreciates the artistic merits of the work. In the case of an NFT, on the other hand, the price of a token is determined entirely by demand from investors. The higher the demand for a given asset, the higher its price is likely to be at any given time.

None of this is to say that the value of some NFTs is entirely divorced from their artistic merit. Some, like CryptoKitties, have achieved popularity simply because of their usefulness as a collectable item, while others are built on the promise of a profit-making venture. And some NFTs fall into the middle category, where they have become popular both for their utility and for their aesthetic value.

Valuing Art

Although there has been a long-running debate among scholars and art critics about how art should be valued and how valuable it should be, there is little agreement about this issue. Art is often valued using one of a few different methods, such as its scarcity, historical importance, and current popularity. Often a mixture of all three of these factors is used when appraising an artwork. An example of an art that is commonly valued based on scarcity is Warhol's "Mao" silkscreen painting. Because Warhol only made two copies of this painting and they are easily identifiable as such, they are worth millions of dollars today.

Artists generally believe that their art has intrinsic value and they are unwilling to accept payment for work unless they believe it is worth a lot of money. Collectors often take a more pragmatic approach when it comes to valuing works of art and they have different opinions about what constitutes good value and what doesn’t.

However, there is no scarcity value for NFTs because it is not intrinsic physical object, it is a token generated by a computer algorithm and does not have an intrinsic value of its own. Rather it is based on the perceived value of the underlying asset and how the demand for that particular asset changes with changing market conditions. Moreover, the ownership of an NFT token has no counter-party risk associated with it since it does not possess a physical existence and can be owned by anyone at any time. All these factors have contributed to the increasing popularity of NFTs in the digital space in recent times and have led to the creation of several new blockchain-based projects in the NFT space like the CryptoKitties project which is currently the most popular NFT in the world.

Sentiments, Speculation, Bubbles

The recent price declines of crypto-art have raised concerns that the market is facing a bubble and that if investors decide to exit the market we could see a sharp drop in the value of art assets as well. A variety of factors have led to the recent slump in the market and some of them include the excessive speculation on crypto assets, the lack of liquidity in the crypto market and the fact that many of the major NFTs are facing technical challenges in their infrastructure. There has been a lot of talk about the speculative nature of the crypto-art market and this is an issue that needs to be dealt with urgently if the market is to avoid a crash in the near future. Volatilities of NFTs may have been triggered by the volatility of other digital currencies like Bitcoin. However, it is not just external factors that are causing the turmoil in the NFT market; there are internal issues that also need to be addressed such as the lack of regulation and lack of trust among stakeholders.

How does blockchain technology affect the art world? Will it change the way collectors collect art and artists create art? Is it going to disrupt our art galleries around the world or is it just going to bring a new way of doing things to the art world that we know now? These are some of the questions that interest all of us at the moment. Needless to say, there is a lot of speculation around these topics at the moment but there is no doubt that blockchain technology will have an impact on how we see art and the way it will function in the future. Only time will tell if this technology is going to see widespread adoption in the wider market and how it is going to change the status quo in how we look at art and the ecosystem that surrounds it but one thing is for sure: blockchain is here to stay and it is going to play a big part in defining the future course of the art world in the next few years.

John Myatt, a songwriter and a part-time art teacher, was rasing two small children alone in a farm in the West Midlands of the United Kingdom. He made the acquaintance of a con-artist John Drewe, and they managed to sell 250 forgeries painted by Myatt and provenance provided by Drewe. It is estimated that Drewe made over GBP 25 Million for these forgeries, It is worth pointing out that like in the case of Meegren all of these forgeries were authenticated by reputable experts, and sold by venerable art dealers. They believed they were selling an original Dubuffet when they were just selling an original Myatt!

The laundry list of discovered paintings that fetch an astronomical sum is quite lengthy, The problem is compounded by an over reliance on experts who are gullible and perhaps more so as they have a commitment escalation problem for what would explain our ever expanding search for new paintings by the masters who painted far, and fewer paintings than the world now seems to demand. Vermeer, for example, today has 34 totally authenticated paintings attributed to him by the standards of 17th Century the number is quite paltry.

Going back to Han van Meegeren’s Vermeer forgeries, these are truly remarkable paintings because they demonstrate how far we have come in our quest to bring authenticity to the world of art. For centuries the fine art world has relied on one technique to establish the authenticity of an artwork and that is the use of expert appraisal to determine its authenticity. We now live in a world where the authenticity of a piece of art can be verified by using the latest in blockchain technology and it is no longer necessary to rely on third-party certification to verify the authenticity of a painting but sometimes technology can deceive as well, for the great man from Delft never Harry Potter-esque animated art. . .


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