The ABCs of NFTs: More than just Art Imitating Art
An Arm and a JPEG.
Silly, audacious, expensive, vacuous: these are the things that Balloon Dog sculpture artist Jeff Koons has been described by his most loyal of critics.
Those same adjectives are also kindred descriptors for the newest trend sweeping the art world: non-fungible tokens (NFTs for short).
Essentially just a digital file on the blockchain, these tokens are data that can be sold in many forms: audio, videos, a NYT column, or (most commonly) art– Like this recently sold digital collage (see below) by artist Beeple, which sold at Christie's auction house for $69,346,250 USD.
While not only the highest price paid for an NFT, Beeple's "semi-precious" JPEG was the third-most expensive work of art ever sold by a living artist, nearly punting Jeff Koons' 3rd place Balloon Dog (Orange) entirely off the podium ("nearly" because silly, audacious, etc. Koons was sitting comfortably in the #1 spot, as well).
This week, Wonder dives into the digital depths of non-fungible tokens. (but don't worry, this email is not for sale... yet 👀)
EVERYDAYS: THE FIRST 5000 DAYS (Beeple, b. 1981)
Before you try texting this JPEG to an art dealer, this art is non-fungible (see below) .
Source: Christie's
A Non-Fungible Primer.
If you've ever seen a meme resurface from the forgotten era when Facebook and Myspace coexisted, it likely looked "fried" or grainy, due to years of screenshots and repostings, getting progressively compressed and low-res over time.
Same thing goes with buying a CD, importing it to iTunes, and burning a copy for your high school crush. Proximity to source and value are both present and known, no matter how conspicuous the deviation in quality.
That's kind of where "fungibility" comes into play:
Fungibility implies that two things are identical in specification, where individual units can be mutually substituted. Pocket change, oil, bonds, a bag of chips from the bodega, and even Bitcoin are fungible.
If I lent you, say, my Delorean, it is not acceptable for you to return a different car, even if it is the same make and model as my Delorean I lent (as is the case when someone returns your lost dog or cat!). My car is non-fungible– as are land, diamonds, baseball cards, and your furry friend.
Insert: token. Non-fungible tokens are the original digital file– MP3, GIF, or Tweet file (or the original JPEG of that meme from Myspace's final days), and they're all stored on the Ethereum blockchain (a decentralized internet record of transactions).
In order to buy and trade NFTs, one needs to enter an NFT marketplace where all the buying and trading is conducted in Ether coin (Ethereum's hosted cryptocurrency).
“OK, I get it– but why would I care to have the original copy? I don’t need to own Beyoncé’s master recordings to enjoy her music.”
Deborah Small, professor at Wharton School of the University of Pennsylvania, sums it up well:
"The concept of art is much more than the experience of seeing it... You can go visit the Mona Lisa in the Louvre or buy it as a postcard—but, you don’t own the Mona Lisa. By purchasing an NFT, you buy the implicit knowledge that you’re closer to the art’s curator."
Source: New York Times
The Old Man and the NFT.
For a company that was founded before the United States of America (b. 1766 or 255 years young), it may seem unexpected that Christie's caught on faster to NFTs than even the tech-savvy public did to bitcoin and cryptocurrencies, in general.
But that's the key to NFTs: it's not just the intersection of art and technology, it's a 3-way junction with commerce, and this money train only just left the station.
In 2013. Glitch CEO Anil Dash and digital artist Kevin McCoy cocreated the first iteration of NFTs as a means to assert ownership of original digital work in an era when online-sharing was rampant yet devoid of attribution.
Because this is internet culture we're talking about, it gets even weirder from there:
in 2014, The NFT prototype's first live demonstration was held at New York City's New Museum of Contemporary Art. Dash stated: "The mere phrase 'monetized graphics' prompted knowing laughter from an audience wary of corporate-sounding intrusions into the creative arts."
Around the same time, Bitcoin platforms Counterparty and Rare Pepe Directory were used mainly for "meme trading" where you could make your own tradable assets or currencies (similar to how you'd buy items in video games.)
In 2017, creative technologists John Watkinson and Matt Hall created a set of 10,000 unique characters called Cryptopunks on the Ethereum blockchain, establishing today's crypto art movement.
Then crawled in the Cryptokitties... a game centered around digital collectible cats. Unlike trading card games like Pokemón, these tokens could not be copied, destroyed,or stolen due to their digital footprint and presence on the blockchain. To date, the most expensive single CryptoKitty ever sold was $390,000.
Cryptokitties NFTs (perhaps some of the world's most expensive "cats" In general?)
Source: Digital Trends
The Gallery of the Future.
The rapid growth of the NFT market is another reason for their recent popularity, with many experts questioning whether another bubble may be brewing.
The NFT market was worth less than $42 million three years ago but by the end of 2020, it had grown 705% to $338 million in value. And In February 2021 alone, around 150,000 NFTs sold for about $310 million.
As to where this non-fungible frenzy will take us, novelty is not in short supply:
Remember those Cryptopunks? Just like in the material-world art market, antiques do exist– and they sure do fetch a price. One Cryptopunk recently sold for about $1.6 million.
What if popular music operated as the stock market? ROCKI is a streaming service that rewards both the artists for their streams and the listeners for their participation. The first royalty income NFT for a song on the service sold for 40 ETH or $24,800 at that time.
How much is a burnt Banksy worth? physical artwork's value normally increases over time– unless it gets damaged. However, a blockchain company, Injective Protocol, recently bought a physical piece of Banksy's art and burned it on a Livestream, then sold the video as an NFT.
The next Jeff Koons? The Fyrefest sandwich Tweet that inspired dueling documentaries will be auctioned as an NFT for medical expenses.
Source: Yahoo News
Take a look at our full "ABCs of NFTs" research here.
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