Digital art and non-fungible tokens (NFTs)
Works whose ownership is represented by a token recorded on a blockchain, whose risk lies less in physical damage than in lost keys, wallet hacks and the fragility of the referenced file.
A non-fungible token is a blockchain record that links a unique identifier to a digital file and a wallet address. Owning the token means controlling that wallet's private key. The risks do not resemble those of a painting: the key can be lost with no means of recovering it; the wallet can be drained through phishing or malware; the exchange or custody platform can be hacked or go bankrupt; and the file itself, often stored off-chain, can vanish if its hosting ends. Traditional fine art policies do not cover these events, which fall under cybersecurity and digital asset custody, where a few insurers offer cover for professional custodians. The value, highly volatile since the 2021 speculative peak, also makes the notion of agreed value hard to apply.
On March 11, 2021, Christie's sold Beeple's Everydays: The First 5000 Days, a digital work backed by an NFT, for 69.3 million dollars, the first NFT sale by a major auction house and the peak of a market that later collapsed.
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