NFTs – or Non-Fungible Tokens – are digital files whose unique identity and ownership is stored via blockchain technology on a public, digital ledger for all to see. Different forms of NFTs have taken the world by storm the last few months. An unlikely offshoot of the rise of cryptocurrency and open-sourced ledgers have soared in popularity, and in some cases stupidity, as a speculative way to purchase “art” and goods with true, identifiable scarcity.
In the first “crypto-boom” around 2017, CryptoPunks were a set of 10,000 unique characters that were algorithmically generated to create scarce “art” with no two punks being alike. CryptoPunk #3100, one of just nine alien punks and one of 406 punks with a headband sold for 4200 ETH, or about $7.58mm. A more recent rise was the creation of playing card like NBA Top Shots – a collection of NBA player highlight slam dunks, assists, game winning shots and more – which has sold over $230mm worth of clips through February. If you can get lucky enough to get a $9 pack that contains a rarer video clip or someone of a highly demanded player, you might be able to resell the video snippet for a handsome profit. Or how about Kings of Leon, releasing an album as an NFT. You can still hear their music on Spotify, Apple Music or anywhere you listen to radio these days, but for only $50, you can get a digital copy with unique album artwork and some more expensive versions include benefits like front-row seats for life. Lastly, Beeple, the most well-known digital artist, recently minted a compilation piece of his 5000 consecutive days of digital art projects. Christie’s auctioned the rights to the piece, and it sold last week for over $69million. It was the third highest ever sale for a piece of art from a living artist.
While that’s all innovative, is something so trivial worth that much money?! In some regards, there is a truly unique and scarce aspect to the artwork. A DJ for example offered NFTs to collaborate on a song made specifically for you. Or art, just as it hangs on your wall, can be viewed online whenever you’d like. Imagine the internet is a museum for anyone to view the art from anywhere at any time and your name is listed as the owner of a 1 of 1 piece… that is worth something, right? For example, if there was an auction to be the sole owner of something as iconic as the Mona Lisa, how much would you pay to own it? Perhaps a billionaire would pay much more than $69million. However, at the same time, anyone can click the link to the NFT, hover their mouse over the image, right click and save the JPEG to their desktop. Or anyone can recreate the specific combination of TV clips for a massive LeBron James poster dunk.
We don’t know if this trend is here to stay or will fade over time. We certainly know there is demand for these “rare items” now and high prices to go with it. Stay tuned.