You Down with NFT? Yeah you know me.
A potential ecosystem that will provide verifiable ownership and a path to monetization for literally anything.
Is this it? Has the sheer weight of the internet and all its content; shrieking clubhouse sessions, snarky podcasters, Twitter shitposters and TikTok-punchable-faces (TPFs?), plunged us into a post-irony world where we are just shelling out millions for a .GIF?
On March 11th, 2021, Christie’s auction house sold Beeple’s Everydays: The First 5000 Days for the eye-watering sum of $69m. Sixty. Nine. Million. Dollars.
An obscene amount of money for a JPEG file that you can just “right-click” on and save to your device.
Well no, it’s not that simple.
*Homework Assignment Voice* The Non-fungible Token (NFT) is a unique on-chain token minted by the original creator representing the ownership of an off-chain asset. A token that is immutable (unchangeable) and thus eternally verifiable is supported by a smart contract to determine its variables and attributes. It is essential to understand that the token is not supposed to hold or save the asset itself, but only embody a relationship to it that is only verified by the creator and the surrounding community. Like a digital IOU, scribbled into the Blockchain. That link between the on-chain token and the off-chain asset is reflected in different ways depending on the asset itself. In the case of digital art, it is merely a link to a file that can be stored in different methods on the internet. I will not get into the technicalities of this, as there are many articles out there that explain it very well. In other assets, the representation could be shaped in the form of a serial number, an ID, a hash, or even a simple algorithm.
Beeple’s Everydays: “The first 5000 Days” represents a collection of 5000 artworks created over a period of 5000 days stitched together into one massive piece that shows the evolution of the artist from doing basic drawings to remarkable 3D digital art. So what does the owner of the $69m digital artwork actually own today? If you find yourself delving into technicalities of JPEGs and saved files, then you are failing to understand the utility of NFTs all together. The value is created by the relationship between the on-chain token and the off-chain asset, and the social contract and community that validates that relationship. What this means is that Beeple can easily just create another token, representing the same digital artwork, and sell it again rendering the original NFT worthless. On-chain assets are enforceably scarce, but the associated off-chain asset is not! You are buying into a fragile social contract, that everyone including the platforms, marketplaces, creators, and corresponding community promise to withhold. Remember during sleepovers when you all played ouija board? Even though we all knew that the older sibling was nudging the ring, we collectively decided to believe in the paranormal and scare the shit out of each other.
The realm of physical collectibles is very similar in that sense, without the social contract, nothing will have value. Without strength in community, this all falls down.
With that said, the underlying foundations and structure of NFTs are extremely reliable. Smart contracts on the blockchain hold incredible utility in giving unique attributes to the different tokens, giving them a universal address, providing digital security, indicating a finite number of how many of each exist, determining how people can interact with them, verifying their ownership, and most importantly making them easily transferrable. It is providing people with a new medium of exchange of valuable items and collectibles and empowers creators to eliminate the need for middlemen and auction houses to monetize their hard work. The last piece of the puzzle is a way to showcase and show off your NFTs, and I will get to that later.
As the NFT hype ramps up, the core concept is being applied to different types of collectible items with projects and creators are emerging daily. Some absurd, and others incredibly ingenious. Marketplaces have sprung up creating an ecosystem with millions of dollars worth of daily transactions. Even old school art houses like Sotheby’s are in on it. On top of the digital art scene, some of the more successful NFT projects include (there are many many more):
NBA TopShot: A new and evolved take on upper deck cards. Only now instead of static player cards, you have player highlights in video format. Instead of buying physical packs of cards hoping for that shiny Tim Duncan rookie card, you are now buying a virtual pack that you open digitally to receive randomized video highlights and hope for a Limited Edition of Lebron James Dunking. One of which recently sold on the NBA TopShot marketplace for 210k$. These video highlights are freely available on youtube one might think, but putting video highlights on the blockchain to instill an element of ownership and building a community around your project has proven to intrinsically create incredible value.
CryptoPunks: Literally an NFT collection of 10k pixelated portraits with certain predefined aesthetic attributes. Currently second on the list in terms of transaction volume, and a staple-point in the NFT craze. Along with putting Bitcoin in your bio, owning a crypto punk and displaying it as your social media avatar has become somewhat of a cultural phenomenon, a mere nod between “crypto believers” or “bitcoiners” that places them into a category of people who consider themselves pioneers for being all-in on blockchain as a technology that will eventually take over the world. On average Cryptopunks are selling for 25k$, with the highest sale being 7.57m$.
No that is not a typo, that number is accurate.
Prices are purely being pushed via the cultural element that envelopes the project. Celebrities and technology enthusiasts paying massive amounts of money to own punks. Some would argue that value will drop as the hype subdues, but this argument fails to consider the scarcity when correlated with overall cryptocurrency adoption. Ten thousand Cryptopunks with a current average of 1.65k monthly users is minuscule when we look at the potential global adoption rate of cryptocurrencies. Maybe there will be a big dip in value in the near future, but eventually as adoption grows, and the number of Cryptopunks remains fixed, verifiable ownership and community will continue to exponentially propel prices.
Eulerbeats: This is one of my favorite projects personally, as the art + music NFTs created are generative. Generative means that the NFTs are algorithmically generated, with a limited edition of 27 originals and prints priced on a bonding curve. Bonding curves allow for a token’s price to be a function of its supply. Every time a token is bought, the following tokens’ price increases at a rate specified by the curve. EulerBeats bundles maths, art, music, royalties, and scarcity into a neat digital pack. It’s a first of its kind.
The first known human reference to the idea of money were collectibles that were used in barter. Tribes would determine what resources other neighboring tribes would value, and go about collecting them to use in trade. These collectibles were scarce and usually passed down generations as a store of value. This behavior and addiction to collecting items continued to evolve throughout history leading to the creation of a common standard as a medium of exchange called currency. People continued collecting items, and the ownership element of these items gives most humans a sense of gratification that never really subsides. Paintings, sculptures, watches, antique furniture, old video game cartridges, sports cards, toy figurines...etc, are all just a small subset of things that some people collect and obsess about. We can display and showcase them to our local communities and circle of friends. Part of the allure of NFTs today is the same sense of desire to own unique items and show them off, but on steroids. NFTs have a potentially global audience with the availability of global marketplaces to provide liquidity and monetization. I think of it as an emergence of a new virtual economy backed by an updated framework for digital ownership.
NFTs have the potential to redefine the fundamentals of ownership, and there is a possible future where everything potentially valuable a person owns can be represented as an NFT. Real estate assets, cars, tweets, jewelry, furniture, clothing, social media profiles, or even memes. All physical/virtual goods represented on the blockchain, with immutable and verifiable ownership, that can be traded on global marketplaces providing new paths to monetization and seamless liquidity. There is additional value created with the ability to trace back ownership across years and generations.
There are so many possible future cultural and emotional implications to this. Imagine 50 years from now being able to open a blockchain browser and trace back all the different possessions of your great grandparents, find out who currently owns them, who previously owned them, and then try to buy them back. You might find out that your great grandfather used to own Cryptopunk #169 that he later sold for 50 ETH to Marc Cuban (the 48th president of the United States). What was he thinking selling it for so little? Maybe you find a wallet address of your now deceased grandmother, and notice that she used to collect Luka Doncic NBA TopShot highlights from his rookie days, now worth billions after he wins multiple rings and retires as a HOFer.
You do not have the seed phrase to unlock the wallet and take ownership. Oh, the horror. The future possibilities of jumping into different rabbit holes are endless.
You can travel through time on a blockchain explorer, weaving through time-stamped transactions and looking for patterns and connections.
The growth trajectory of the NFT craze will continue to evolve and change, with easily foreseeable ups and steep downs that will take many projects and enthusiasts with them on the ride. An expansive amount of different applications, projects, and marketplaces will spring up as people try to catch waves.
One still underdeveloped element of the whole ecosystem is the display part. On the internet there are many possibilities, with wallet apps, social media platforms, and different marketplaces allowing you to easily navigate your wallet and showcase your collections. But in my opinion collectibles are meant to be displayed in the physical world as well. The current market for this is quite bare, as companies are still trying to gauge the longevity of NFTs before diving into developing hardware. There are a few DIY options using raspberry pis and a startup called Qonos that is developing really expensive NFT focused HD displays.
Verve invested in Leia before we knew what NFTs were. We looked at it through the lens of mobility and reimagining the interior of the car. With autonomy comes a newfound well of time and attention during a commute. Dashboard displays have been designed to eliminate and avoid driver distraction, but now, they will be expected to enrich the in-car experience with productivity and entertainment options available. The real estate of the inside of your car is set to be the next big battleground.
Leia uses light-field technology advancements to provide a holographic, three-dimensional image without the need for a headset or glasses. We saw the possibilities for navigation and in-car entertainment. So did Continental.
Maybe that is the future of NFTs, incorporating display technology across devices so that these million-dollar art pieces can be carried around and displayed whenever some clout is needed. Imagine shuffling over to the bar, sitting down next to your guy or gal of choice, running your fingers from your knee to your pocket, slowly and firmly removing your phone, and breathlessly whispering “Hey. You wanna see my NFT*?”.