【ChainNews Highlights】Cao Yin: Rethinking the scarcity of crypto art, which is more worthy of investment, multiple limited editions or single pieces?

Limited editions have reduced the price and entry threshold for art, making crypto art more accessible to a wider audience. However, this does not necessarily mean that the appreciation potential of multiple limited edition crypto art pieces is lower than that of single edition items.

Original Title: "Cao Yin: Rethinking the Scarcity of Crypto Art"
Author: Cao Yin, Managing Director of the Digital Literary Renaissance Foundation
Source: DappReview

Artworks by artists are often divided into single pieces and limited editions. It is said that rarity adds value, but art has always ignored the laws of economics. In the past, limited edition artworks were a means to achieve artistic democracy, and the pieces themselves were part of the art creation, thus possessing investment value beyond single pieces. For crypto art, limited editions dilute the unit price of artworks, reducing the threshold for collecting. However, this method of creation and sale endows the artworks with traffic value and social tool attributes, and their appreciation potential may not necessarily be inferior to that of unique single pieces. If it were you, which type would you invest in?

When crypto art investors choose crypto art pieces, they often face a dilemma between single editions and limited editions. From an investment return perspective, should we invest in single editions or limited editions?

Before giving my conclusion, let's first understand the concept and origin of limited edition artworks. According to the Tate Gallery in London, limited edition artworks refer to a series of identical artworks, usually limited editions signed by artists specifically for sale.

Limited edition artwork "DCL – Open the Gates," Hackatao, 2020, Edition 1 of 23, auction site: knownorigin.io/edition/136950

In the past, limited edition artworks were mainly various cast bronze sculptures and prints, such as Rodin's "The Thinker" bronze sculpture. Rodin personally cast a total of 25 pieces, each identical, all authentic Rodin works. Artists can maximize the commercial benefits of their works by strictly limiting the production of limited edition artworks.

Limited edition artworks are usually signed, numbered, and dated by the artist, and each piece's artistic value is the same, with no distinction between original and reprint. Besides artworks specifically for sale, artists generally keep the masterpieces for themselves, which are marked as "AP" (Artist Proof). Some limited edition reproductions are produced and released as legacies after the artist's death, such as the Rodin Foundation remaking 26 copies of "The Thinker" in 1998.

New York art bookstore Printed Matter's collection of Artist’s Multiple on the website features limited edition artworks by Jenny Holzer, Yoko Ono, Sherrie Levine, and others

After World War II, with the popularity of various avant-garde art movements, the form and materials of art creation were no longer limited. Various forms of limited edition artworks began to gain popularity, and in the turbulent 1960s of the 20th century, under the influence of avant-garde art and conceptual art waves, the act of limited editions itself became part of artistic creation. Artists used limited edition artworks as a means to achieve artistic democracy, hoping to break the monopoly of the elite on art collection through limited editions and spread their political and social perspectives to the public. Turning avant-garde art into political vanguards, many artists created various limited edition artworks. The non-uniqueness of these limited edition artworks not only does not affect the investment value of the artworks but also makes them more valuable due to their rich cultural and political connotations, with the act of limited editions becoming a means of artistic expression.

Marcel Duchamp's "Boîte-en-valise" is one of the most famous limited edition artworks, completed from 1935 to 1941. Duchamp selected 69 important works representing his artistic career, made miniature replicas, and carefully arranged them. The first order of this set came from the Guggenheim Museum

However, the current limited edition crypto artworks in the market are different from the avant-garde limited edition art forms described above. Limited editions are merely a sales method for crypto artists. Considering that most collectors of crypto art are still predominantly young enthusiasts with limited financial resources, limited editions of crypto art reduce the unit price of artworks, lowering the collecting threshold for young collectors, allowing more people to appreciate and collect crypto art. However, this does not necessarily mean that the appreciation potential of limited edition crypto art is inferior to that of unique single pieces.

The art market seems to have always ignored most traditional economic laws. Although historically, the supply-demand relationship has a crucial impact on the prices of artworks, the rarity of works is an important source of value. However, with the exponential growth in art appeal and value, as well as changes in art collection paradigms, the principle of scarcity is quietly changing. We can observe this interesting change in the "traditional" art market outside of crypto art in recent years.

Last May, Jeff Koons sold his stainless steel "Rabbit" at a New York auction for $91.1 million, becoming the highest-priced living artist at an auction. Since its debut in 1986, this extravagant steel rabbit has caused a sensation. Influential New York Times art critic Roberta Smith described it as, "A huge rabbit, with a carrot, once made of inflatable plastic. Its stainless steel version now brings Brancusi's advocacy of perfect form into a whole new realm, even though it seems to have turned the wild rabbit into an unidentified extraterrestrial invader." However, for a limited edition artwork with only three pieces (the artist also kept a reserved edition), the sky-high price of $91.1 million seems somewhat incredible and goes against the principle of art market scarcity.

Jeff Koons, "Rabbit," 1986, stainless steel. 41 x 19 x 12 inches (104.1 x 48.3 x 30.5 cm)

However, the pursuit of top limited edition artworks by collectors reveals a contradictory value system among the global elite community: they both want to stand out and be extremely conformist. These individuals at the top 0.01% of the wealth pyramid want to possess wealth symbols that are recognizable among themselves. High-end cars, luxury watches, and custom clothing are examples, but the symbolic value of these luxuries is not as significant as that of limited edition artworks.

If you collect a stainless steel rabbit by Jeff Koons, it means you are entering a social club with two other super-rich individuals who own the same rabbit (interested readers can Google who they are). Perhaps you can establish a kind of boastful secret relationship through this single piece worth $91.1 million. From this perspective, those top limited edition artworks can be seen more as precious memberships to a top-tier club at the pyramid's peak.

Moreover, contemporary art differs from classic artworks by Van Gogh, Picasso, Monet, etc., as it has not undergone the test of time, and the artistic status of the works is uncertain. Therefore, the value of contemporary art is becoming more like speculation, with buyers often spending millions or even tens of millions of dollars on contemporary art pieces without fully understanding them. Limited edition artworks at least provide some reassurance to these buyers because at least someone has purchased the exact same artwork, especially if a well-known collector or museum has already acquired and collected the same limited edition artwork, subsequent buyers will feel more secure. This is the case with Jeff Koons' stainless steel rabbit, as another identical rabbit of the same version was on display at the Oxford University Museum last May during the auction.

Although the total value of all crypto artworks combined may not equal the value of a single Jeff Koons stainless steel rabbit, the market mechanism behind these limited edition artworks is also applicable to crypto art. We can summarize:

1. Limited edition crypto artworks can provide market price references between each piece, supporting prices. (This is especially important for the overall crypto art market in the price discovery stage)

2. Limited edition crypto artworks can become symbols of social identity for the same collectors and serve as social bonds between collectors. Imagine if you and KAWS owned the same crypto artwork. (This has already been demonstrated in the small crypto art market. Since I started buying Osinachi's Green Bottle, several Osinachi collectors have contacted me through private messages on Twitter)

3. Limited edition crypto artworks have greater display possibilities because more collectors own the same piece. (This is extremely important for the current crypto art market, where collectors mainly showcase their crypto artworks through various social media platforms such as Instagram, Twitter, Wechat, Facebook, and online galleries specialized in crypto art, such as Superrare, KnownOrigin, etc.)

Regarding the last point, I would like to elaborate further. The value of crypto artworks is closely related to the display traffic of the artworks, and according to Metcalfe's law of the Internet, the value of the network is equal to the square of the traffic. As native Internet artworks, the value of crypto artworks should be directly proportional to the square of the display traffic. We can represent this with a formula, Crypto Art Market Value = Display Traffic Volume^2 * Proportional Constant n.

Assuming the display traffic of a single-piece crypto artwork is 10, its value = 100n. For a set of 10 limited edition crypto artworks with each piece having the same display traffic of 10, the total display traffic is 10 10 = 100, then the value of each limited edition crypto artwork = 100 100n/10 = 1000n, even greater than the value of a single-piece crypto artwork.

Of course, this calculation method has many limitations, such as the display volume of truly outstanding single-piece artworks should be the same as that of an entire set of equally outstanding single-piece artworks, and the number of versions of limited edition artworks should not be excessive, otherwise it would completely violate the law of scarcity of artworks, and the value formula would no longer be useful, perhaps within 10 pieces is an appropriate number of versions for limited edition artworks.

As art collectors undergo generational changes, there is a fundamental shift in collection paradigms. In the eyes of emerging young collectors, the boundary between Fine Art and trendy commodities is increasingly blurred, making them more receptive to limited edition artworks with commodity attributes.

In 2018, Pace Prints introduced three silk screen prints by superstar KAWS at the Miami Basel Art Fair, selling a total of 100 sets for $65,000 each, and selling them at the VIP opening of the art fair in a "first-come, first-served" manner at the booth for 15 minutes. The organizers also marketed through Instagram. As a result, this set of 100 pieces was very popular, selling out within 15 minutes, and the organizers had to resort to a lottery for sales.

KAWS, "LOST TIME," "ALONE AGAIN," and "FAR FAR DOWN," 2018, silk screen print, 32 x 53 ¼ inches each, edition of 100. $65,000 per set

In the past, limited edition artworks were a way for the previous generation of artists like Duchamp, Picasso, Andy Warhol, and Boyer to democratize art. However, in the contemporary era, in the age of the internet where there is no socializing without social media, the creation and sale of limited editions have given artworks new traffic value and social tool attributes. For truly market-tested excellent artworks, limited editions not only do not reduce market value but may make the artworks more valuable. The internet attributes of crypto art may further amplify the market effects of limited editions. Collectors, it's time to rethink the meaning of scarcity.

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