A Painting or an NFT of It: Which Will Be More Valuable?

A new NFT platform called Nifty’s released 92,000 NFT’s related to the film “Space Jam: A New Legacy,” which stars LeBron James.CreditCredit…Nifty’s

The British artist Damien Hirst, best known for putting a shark in a tank of formaldehyde, has gotten on the NFT bandwagon.

NFTs, or nonfungible tokens, rely on blockchain technology to designate an official copy of a piece of digital media that would otherwise be cheap or free. Mr. Hirst is selling a collection of 10,000 NFTs, each of which corresponds to a physical dot painting, for $2,000 each. A year from now, the collectors of the series, called “The Currency,” will have to decide whether to keep the NFT or the painting; whichever one they don’t choose will be destroyed.

Is it better to keep the NFT or the physical artwork? Which will be the more valuable investment? It’s hard to know. Certain NFTs are fetching large sums of money, but not all of them are. As with any new art form, what happens over the next few years is hard to predict. And anyone investing in NFTs with an eye on earning investment-like returns needs to understand the risks.

“It’s such new territory,” Diana Wierbicki, a partner and the global head of art law at Withersworldwide. “It can go up; it can go down. It’s like any type of contemporary art: The values aren’t fixed, so you’re taking on a risk.”

What an NFT can be varies widely. Beeple, the digital artist whose real name is Mike Winkelmann, made headlines when an NFT he created called “Everydays — the First 5,000 Days” sold for $69 million at a Christie’s online auction in March. The NFT was a collection of 5,000 images he had already posted online, beginning in 2007.

Among the most widely known NFTs is the National Basketball Association’s Top Shot NFTs — essentially an NFT of a single highlight or multiple ones. Their prices range widely. A pack of NFTs can sell for around $20, while an NFT of LeBron James doing a reverse dunk as a tribute to a famous dunk by Kobe Bryant, who died in 2020, sold for $387,000. And it wasn’t even the only one. (It was No. 3 of 59 in an NFT series of the dunk.)

“NFTs are an asset class like fine art,” said Alex Tapscott, managing director of Ninepoint Partners’ Digital Asset Group. “They’re newer, so they’re riskier, but ultimately they’re still an asset. People buy them with the expectation that they can sell them for more.”

There are certainly people who are bullish on the tokens.

Chris Ciobanica, a cryptocurrency investor better known as Silver Surfer, began buying NFTs last summer. He said he had amassed over $10 million worth of these digital images, most of them linked to physical artworks. (His wealth from crypto investments is many times that amount, said Mr. Ciobanica, a former tech system administrator, but he declined to be more specific.)

“I don’t see NFTs as collectibles like baseball cards,” he said. “I see them as these rare digital artworks. They’re just a different form from what you’d see in traditional art.”