NFT

Ejo #152 – The Case For NFTs: Masterclass

OK, so can we all please just take a big breath in, and a big breath out.  We’re here.  We made it.  We got through the hard bit, and now we can finally start talking about the good stuff.  Art.  And I’mma jump straight in and tell you that there is no such thing as NFT art and there is no such thing as an NFT artist.  There are artists, and there is art.  And that is all.  And because you’ve done my NFT Foundation Course, you already know that to be true, so let’s kick on.  

More than 700,000 years ago someone drew an outline of their hand onto a cave wall in Indonesia, creating the very first known work of art.  The artist, our ancestor, was attempting to capture the moment (and nailed it).  Since then, humans have continued to express themselves in a myriad of ways, including etchings, pottery, sculptures, paintings, screenprints, photographs and more.  Today, our lives are predominantly online.  Everything is digital, from maps to music to healthcare to entertainment to relationships to work.  Is it such a huge leap to accept that art too, must evolve into the digital realm?  And by the way, digital art itself is not something that’s new.  People have been creating it since the 1960s.  The difference now, with the advent of NFTs, is that digital artists can finally be as recognised, rewarded and acclaimed for the work that they create on their computers as their traditional artist counterparts are for the work that they create on canvas, wood, paper and clay.  Which is fantastic, right?  Who wouldn’t want that for them?  Another difference is that when an artist mints their NFT, they can program a percentage of future sales for themselves into the smart contract code, theoretically guaranteeing that they receive royalties for secondary sales of that artwork in perpetuity, even after their death.  How awesome!  Why shouldn’t artists benefit from future interest in the work that they’ve created?  Hell yeah, I’m all for it!  And let’s not forget that NFTs make art more accessible, making it available to anyone who is interested, and not just to a small group of privileged and connected few.  NFTs are the most modern and most efficient tool for the creation, certification and distribution of art in 700,000 years. 

Sure, I understand that it can be hard to wrap your head around the concept of “owning” a piece of digital art, for instance something as simple as a jpeg.  We’ve all right-click-saved pictures from the internet before.  So why would anyone choose to pay any amount of money, let alone millions of dollars for a picture they could just copy online?  The simple answer to that is the voracious human appetite for scarcity.  The blockchain has finally made it possible to prove ownership and provenance of digital art.  You can right-click-save as much as you like, but the owner of the original file can now verify that an image is theirs, and theirs alone; which makes it scarce.  And scarcity drives demand.  The same concept applies to all art.  Why else would an unsigned screenprint of Banksy’s Girl With Balloon be worth $200K?  I’ll tell you why, there are only 600 of them in the whole world.  And human beings will always want what no-one else can have. 

Pictures of the Mona Lisa don’t dilute the value of the Mona Lisa.  And having a picture of the Mona Lisa on your computer doesn’t mean that you own her.  Just like saving a picture of my NFT to your camera roll doesn’t give you my NFT.  You’re not stealing it from me by right-click-saving it, because when I buy an NFT, I’m not buying the jpeg.  So go ahead, and right-click-save all you like.  I own my NFT, and the blockchain can prove that.  And I’m the only one who can sell it and make money from it.  All you’ve got is a pretty little screenshot on your phone, so have fun with that.

You know, some folks are perfectly happy to buy counterfeit Louis Vuitton handbags, knowing that what they’re carrying on their arm is a fake.  And some people pay good money for replica artworks, knowing that what they hang up on their wall is a forgery.  But those facsimiles will never reduce the value of the real thing.  Because people will always want the real thing.  They need to have it.  It’s imperative to the human condition.  It’s the reason why people buy Rolexes and Ferraris and Louis Vuitton handbags. And really expensive art. 

I once saw a photo of a well-known artist’s limited edition screenprint in a magazine, and instantly fell in love with it.  Head over heels in love.  I tapped into google and found a high resolution jpeg of that particular work of art, which I right-click-saved, and then printed, framed and hung up on my wall.  And it made me happy.  A few years later I had the good fortune to actually buy one of those limited edition prints.  Which one do you think I enjoyed more?  The photocopy of the jpeg I copied online, or the original screenprint signed by the artist himself?  I think you know the answer. 

So OK, there’s nothing intrinsically valuable about NFTs.  But is there anything intrinsically valuable about anything?  What’s intrinsically valuable about Picasso’s Guernica?  It’s literally a piece of canvas with some paint splattered on it (albeit artfully splattered paint), but the market has decided that it’s worth $200 million.  We seem to inherently understand, and accept, that value can be assigned to traditional art.  But we aren’t used to it with digital art.  Not yet.  We’re in a massive growth and learning period where cryptoart is concerned, with the blockchain finally affording digital art the same framework, respectability, value and marketability as traditional art.  And it’s about fucking time.  It’s time digital artists got theirs.  And it’s time that access to global art markets opened up to everyone.  It’s definitely time. 

I’ve loved and collected art for years.  I bought my first piece when I was 27 years old, working as an au pair in Connecticut, earning just $137 a week.  One day I was at the local high school to donate blood (cool story so far, yeah?) and as I slowly inched forward in the line, I found myself eye to eye with a canvas painted black but for a whorl of midnight blue bleeding from the middle of the painting.  The piece was titled Sadness, and as I was reluctantly propelled away from it towards the nurse’s station, I couldn’t get it out of my mind.  A few days later the principal hooked me up with the kid who made the painting.  The little fucker figured me for a mark and demanded $400 for it.  I laughed in his pimply face and offered him one week’s salary, no more no less.  He made a show of umming and ahhing about it, but his mum impressed upon him that no-one else on earth, in a million years was going to offer him cash for any of his art projects, ever again.  And that’s how the deal went down.  Since then my salary has increased steadily, and I still spend every spare penny I earn on art.  It’s not just a passion, it’s almost an obsession (just ask my long-suffering husband, whom I often wrangle into buying art with me, and sometimes, if I’m lucky, for me).  I’ve been buying art for the last 23 years, and the transition from traditional art to cryptoart actually feels really natural to me.  It feels like a step in the right direction.

The reason I love NFTs is because I love art.  And I’m not the only one.  In fact, there are lots of us out there, if the money flowing into the space is anything to go by.  OpenSea, the largest NFT marketplace, posted $5 billion in trades in the first month of this year.  And they did a record breaking $476 million worth of NFT trades in one single day on 1st May.  In a bear market!  NFTs are not going away.  Weirdos like me are more than happy to stump up a fair sum for beautiful artwork.  Sure, some people are in it for the short term gain, hoping to sell a piece for more than they paid for it.  But others are in it for the long haul, seeing it as an investment and a safe store of value.  Some collectors buy art simply for the flex, and some of us do it for the pure enjoyment of owning something beautiful.  Of course collecting art is different to investing in it.  But despite some of my NFTs already increasing in value, I don’t view them as an investment vehicle, just as I don’t view the art on my wall as an investment vehicle, but rather as something to admire and enjoy.

Art historian, writer, tech guru and NFT doyen Jason Bailey (@artnome) is a passionate and vocal advocate for art, and he’s someone that I look up to and consider to be a mentor in the labyrinthine maze of the NFT galaxy.  He’s not only a cheerleader for NFTs, he’s also an educator and has recently set up ClubNFT, a company that assists collectors to protect their NFT investments.  His excellent advice to people interested in buying NFTs is:

You can’t go wrong.

And that’s been my credo in the NFT space from the beginning.  Well, since February anyway, which is when I bought my first non-fungible token.  Since then I’ve purchased dozens more, and I haven’t sold a single one.  I don’t ever plan to.  Because I’m not in it to speculate, or flip, or make shitloads of money.  I’m in it because I love them and because they bring me joy.  I’m in it because I think NFTs are a spectacularly exciting development in the art world and I’m thrilled to be a part of it.  And I’m in it because I really get off on the feeling of knowing that I’m supporting an artist in a new arena.  Artists I never would have discovered if it wasn’t for NFTs. 

Even if you don’t know much about NFTs, you may have heard about the one that was sold by Christie’s auction house in March, 2021.  And if not, you’re in for a treat.  Digital artist Beeple’s piece, titled “Everydays: the First 5000 Days” opened with a bid of just one hundred bucks, before the hammer went down on the astronomical sum of $69.3 million.  I’m not here to make a judgement about whether the piece is worth that amount, but I do want to take a closer look at it.  In May 2007 Beeple committed to creating one digital artwork a day, and he did so every single day for thirteen years and eight months (i.e. 5000 days), including the day he got married.  I can’t think of anything (including eating, shitting or sleeping) that I’ve done every single day for 5000 days.  Everydays, the artwork, is a digital composite of each of those 5000 images (which you can inspect individually on his website).  Whether you like his artworks or not, I believe that the sheer magnitude of the piece is truly astounding.  And it absolutely tickles me pink that it’s shaken up the stolid, dusty, old art scene and challenged the status quo.  Sotheby’s and Phillips’ are also getting in on the NFT auction action.  That these historic and revered auction houses are so readily accepting NFTs as a valid artform is a big stamp of approval.

Look familiar? The formidable “Everydays”.

Wikipedia, however, could not disagree more.  They recently removed the sales of two NFTs from their list of most expensive artworks, deeming NFTs “not art”.  One of those works was Beeple’s Everydays.  Personally, I think that’s an egregious error, based on a dismal lack of understanding and appreciation of what NFTs are.  As justification, one of the editors pooh-poohed, “This list is for paintings, sculptures, and closely related works, not whatever these NFT things are”.  As you and I both know, the NFT is not the art.  The art is the art.  And who the hell gets to decide what art is anyway?  People said that Marcel Duchamp’s Fountain wasn’t art.  They said that Andy Warhol’s Campbell’s Soup Can wasn’t art.  They said that Jackson Pollock’s Blue Poles wasn’t art.  And they said that Mark Rothko’s Orange, Red, Yellow wasn’t art.  And they were all wrong.  Every single time.  And they’re wrong now.  These art “experts” simply don’t have the vision to understand that art evolves.  Art doesn’t sit still.  It breaks boundaries and it leaps beyond horizons.  It’s dynamic.  It shape-shifts, it challenges and it defies. 

Duchamp’s Fountain, which he called a “readymade sculpture” also referred to as found object art. It was last sold in 1999 for $1,762,500 to a buyer who said it represented ‘the origin of contemporary art’.
Several versions of Soup Can exist, and the highest price ever paid for one was $11.8 million in 2006.
There was an uproar when the National Gallery of Australia bought this painting in 1973. In 2016 it was valued at $350M.
Mark Rothko’s Orange, Red, Yellow is known as a colour field painting and was sold in 2012 for $86.9 million.

NFTs democratise art by removing the gatekeeper mentality that galleries and art dealers (and online encyclopaedias) have enjoyed for far too long.  The rarified world of traditional art is competitive and exclusionary.  It is a zero sum game, which fosters unhealthy competition and limits the number of artists that can succeed.  If you win, I necessarily lose.  NFTs on the other hand, thrive within a beautiful and truly global art community, with everyone involved uplifting and supporting each other.  The difference between the two realms is vast.  Traditional art is an opaque world by design, with galleries and dealers dictating from behind closed doors, not only which artists make it and which don’t, but also which collectors can purchase art and which can’t.  They control the market with an iron fist, creating unfair and insurmountable barriers to entry, for artists and collectors alike.  NFTs smash that barrier. 

Which is not to say that it’s easy.  There are still plenty of hoops to jump through.  Even just the process of buying cryptocurrency on an exchange and then getting it to a crypto wallet is burdensome and awkward.  But it’s not impossible.  I’m the least technically proficient person I know, and I managed to do it.  Which means that you can too.  Your only barrier to entry now, as a collector or as an artist, is your own willingness to learn.  The best way to enter the space is to arm yourself with information.  Do the research.  Ten hours is great, a hundred hours is better.  Spend time watching videos, enroll in online courses, read articles, listen to podcasts, follow NFT pundits on Twitter (I’ve linked to all my favourites) and you will be richly rewarded with what Kurt Vonnegut called the most valuable commodity on earth, knowledge. 

A quiet aside to the artists out there.  I don’t want to paint a false, rosé-coloured impression that you can just quit your day job and roll around in mountains of cash by turning your art into NFTs.  Just because Beeple became an overnight millionaire doesn’t mean that you will too.  Sure, one advantage of removing the gallerists and dealers from the equation is that they’re no longer squeezing you for 50% on sales.  But the big disadvantage is that now you have to do all the work.  You have to do the networking, you have to promote yourself, you have to create the online community, and you have to sell your own art.  Which is really tough to do in a saturated market.  The majority of NFT primary sales are for less than $200, and that’s before fees.  It’s still a very tough industry to crack, and NFTs do not guarantee you success.  They do, however, significantly open up the market.  And they do make it easier to potentially earn a living from your passion, if you’re prepared to put in the hard yards.  I mean jesus fucking christ, in the last 12 months alone, $44 billion was spent on NFTs.  And they’ve only been around for five years.  To put that into perspective, the entire traditional art industry in 2021 was worth around $65 billion.  There’s money out there for the taking, my beautiful artist friends.  You just have to go out there and get it. 

Crunch the numbers my artist babes.

It might feel scary and intimidating for traditional artists to take the leap from physical art to digital, but turning your artwork into an NFT takes it from being a picture that can have a million exact copies taken of it, and turns it into the one copy that you can verify as being the original.  It gives the power of ownership back to you, the artist, and aligns digital art ownership and provenance with that of the traditional art world.  And because I like to practice what I preach, I minted my very own collection of NFTs to make sure that it is actually as easy and painless as I’ve been making it out to be.  And yes, it is.  It was relatively cheap too, costing me less than $150 to mint seven photographs (feel free to make me an offer 😉 ). 

I call this one “Airport Road”, coz it’s the road I drive on my way to work. At the airport.
This one’s titled “It’s Alright, Baby It’s Alright” because those are the lyrics to the song, “Road To Nowhere” by Talking Heads, and I have no idea where these roads are going. But also because I took this photo from my beloved therapist, Zimmy’s, apartment building before one of our sessions, and she always makes me feel alright. ♥

For the would-be collectors out there, the only advice I have is that there’s no need to rush into buying.  Dive in and check out what’s being created.  Get involved on Twitter and start trawling the marketplaces.  There’s so much out there, it can actually feel really overwhelming at first, but eventually you’ll figure out what you like, you’ll find your niche, and then you can start buying it.  I didn’t get there right away, it took me a while, but for me, now, the holy grail of NFTs is generative art, and in particular generative art that uses the blockchain as part of its creation.  This is some next level shit, producing some of the most beautiful, expansive and creative artwork I’ve ever seen. 

You may not have heard of Art Blocks, but it is the most influential platform in the generative art world.  And you may not recognise the names of blue-chip generative artists Dmitri Cherniak, Erick Calderon (the founder of Art Blocks), or Tyler Hobbs yet, but one day I think you will, just as you recognise the names Picasso, Monet and Warhol.  These guys are virtuosos of the generative art form, producing artworks of breathtaking scope.  Generative art is a glorious marriage of order and chaos, and I understand that on first glance the genius might not be apparent.  It wasn’t immediately obvious to me either.  But the more you learn about generative art, and the more you study it, the more you will come to appreciate it. 

Tyler Hobbs’ Fidenzas
Dmitri Cherniak’s Ringers
Generative art is sometimes criticised for being dry and soulless, but Erick Calderon’s Chromie Squiggles prove that generative art can be fun and whimsical. Aren’t they pretty???

Unlike PFPs, the prices of blue chip NFTs like Tyler Hobbs’ Fidenza are not driven by speculation, but rather by an appreciation of the artworks themselves.  There isn’t a lot of liquidity in these markets and that’s because collectors are buying, and holding onto them. People don’t spend hundreds of thousands of dollars to buy a Fidenza so that they can flip it three days later.  They’re buying it because it’s a long term investment, just like a Banksy, just like a David Hockney and just like a Tracey Emin. 

My heart skips a beat whenever I see Fidenza #313.

Fidenza #313 is a work of staggering beauty.  It is arguably the most extraordinary NFT ever created.  The Tulip Mania bubble may have popped nearly 600 years ago, but ever since Bitcoin was invented, naysayers have been comparing cryptocurrencies (and more recently, NFTs) to tulips, claiming that they are a Ponzi scheme and a speculative bubble with no inherent value, which will one day be worth nothing.  Sceptics mock those of us who have conviction in the future of Bitcoin, Ethereum and NFTs.  This particular artwork, part of an archetypal collection of 999 pieces by Tyler Hobbs, is especially impactful because it actually resembles a tulip.  It stands alone as a work of art, but as part of the Fidenza collection, I think it’s one of the most beautiful things I’ve ever seen.  The mind-blowing thing about it is that the artist didn’t even program the algorithm to output a tulip.  As I mentioned earlier, it was the randomness coded into Hobbs’ algorithm which resulted in #313 being created and minted as a tulip.  Even he didn’t know that that would happen.  Which is absolutely incredible.  It makes the imagery and symbolism that much more powerful.  This gorgeous piece of art was recently bought by my favourite collector and Twitter NFT guru, the anonymous Punk6529 (more on him soon), for 1000ETH (worth $3.3 million at the time of the sale).   He says he has no plans to ever sell it. 

While most of us have missed the boat on blue-chip Fidenzas, Ringers and Chromie Squiggles there are lots more artists working in the genre whose art is affordable right now.  If you’re keen to start collecting I’d highly recommend buying from marketplaces that run on the Tezos blockchain (such as objkt and fx(hash) and Versum).  First of all, being an open source proof-of-stake network, Tezos is environmentally cleaner than Ethereum but it also hosts some of the most exciting artwork at super reasonable prices.  Because Tezos isn’t as well known as Ethereum, the market has a kind of village feel about it.  It’s very welcoming, and a lot of the people know, and respect, each other. It’s proof that there really is art out there for everyone, and for all budgets.  For instance, yesterday I bought a piece called Golden Glow by one of my favourite artists, Zancan, for 103 Tezos (USD170).  I also bought a work from Nick Dima last week for just 1.9 Tezos (USD3.11).  I mean c’mon, at that price I almost felt like I was ripping him off. 

I also own this Zancan generative drawing titled “Skyscraper”. I absolutely love it.
Nick Dima’s BLEND #507

On the other end of the scale, if you want to be inspired by some truly gorgeous, prestigious artworks, check out this exquisite exhibition of the NFT collection owned by another guy I follow on Twitter, Aftab Hossain (@iamDCinvestor).  I mean seriously, check out how many Fidenzas this guy owns!!!  

As I mentioned earlier, NFTs are the perfect segue into the metaverse.  As we speak, online galleries and museums are being built to facilitate a viewer’s experience of walking through a space and seeing art up on a wall, in an augmented reality kind of way.  These experiences will only become more realistic as the technology advances. 

The inimitable Punk6529.

And as we come to the end of our NFT Masterclass I’d like to introduce you to Punk6529 (@punk6529), who, as you can see, has taken his CryptoPunk PFP and built an entire goddamn philanthropic empire around that identity, leading as always by example.  When I first got into NFTs, I found myself a little bit adrift (there is an almost incomprehensible amount of information out there) and then I discovered Punk6529.  He was the one person consistently putting out thoroughly researched, accurate and super interesting information in a really thoughtful way, with absolutely no hidden agenda, and shitloads of skin in the game.  He helped guide me in my NFT journey, and he’s articulate, worldly and freakishly intelligent.  And in case you can’t tell, I have a massive nerd-girl crush on him. For me, he’s the biggest player in the NFT game, and that’s because he goes beyond NFTs.  He’s not only a visionary, an authority, a father-figure, a philosopher and a big-picture thinker, the dude actually walks the walk. 

The preeminent online NFT art museum 6529 Museum of Art is his brainchild, and hands down the best online art gallery in the world.  And the museum precinct is only the beginning.  It’s just the first phase of a much larger, ongoing project to bring us all a community focussed, decentralised Open Metaverse.  This guy really knows his shit and is putting his considerable fortune where his punk mouth is. 

The precinct is gated by an absolutely stunning Fidenza.  The Tulip, natch.  Being inside one of the many curated museums, each displaying a different genre of digital art, is not only an exhilarating experience, it’s also just a shitload of fun.  You can run around the precinct, chat to other people (if you want to), and if you press the space bar you can even fly!!!  Well, not really, but you can jump really high and get a birds-eye view of the entire city.  It’s fucking awesome.  And in some ways, it’s almost better than being inside a real museum.  You can take your goddamn sweet time in front of each piece, you can eat whatever you want and drink milkshakes while you peruse sublime artworks, there are no lines to wait in, and no other people to dodge (because you’re even given the option to enter the public version or go in solo).  You don’t have to pay anything or buy a membership or check your bag in a locker.  You don’t have to view the artworks from behind a velvet rope, and there are no attendants to yell at you if you feel like taking a picture.  You can appreciate a huge range of multi-million dollar artworks in your underwear from the comfort of your own home.  I’m telling you, real museums don’t even compare!!! 

Pressing the space bar gives you a bird’s eye view of Genesis City, the first metropolis of what will be dozens of cities in Punk6529’s vision for the Open Metaverse.

Ponzi schemes don’t usually feature charlatans buying millions of dollars worth of NFTs, everything from blue-chip generative art to PFPs to $20 photographs, and committing over 2000 pieces of art to a permanent collection displayed in a world-class museum for everyone to enjoy.  Not normally.  So why has Punk6529 put together the largest and most valuable collection of NFTs for people to freely peruse?  He, and the likes of Jason Bailey, are putting their money where their mouths are, ensuring that Web3 framework is being built solidly and securely for the future, and for the people.  They are keen to educate, for no other reason than they are passionate about NFTs and wish to share their knowledge.  They’ll never tell you what to buy, but they will help you build foundational understanding so that you can figure out for yourself which artworks appeal to you.  They’ll teach you how to safely enter the space and how to protect yourself and your digital assets against the many nefarious players that lurk in the shadows trying to steal your money and your art.  

And when you’re armed with information, you can navigate the space safely and avoid the bandits and the highway robbers.  Because while there is danger out there right now, the actual foundation is stable.  And that foundation is blockchain.  It’s the backbone of Web3 and while you’ve been going about your life blissfully unaware of its existence, it’s been working as it was designed to work, for almost 13 years.  So while it might seem scary right now, I do believe in its longevity.  Eventually, everyone will know more about it.  Everyone will interact with it.  Everyone, even you.

I’m hoping that by now you have a relatively comprehensive understanding of what NFTs are, and why they’re such an important technology in the art space.  If you do, congratulations, you’re part of a very small and select group of people.  There are nearly eight billion humans beings on earth and, by some estimates, only one million of them get this shit.  My goal in writing this is to help more and more people understand it, and I really hope that I’ve helped you with that today.  Because I truly believe that it is a revolutionary and transformative technology that will be around, after you and I are long, long gone. 

Gallery 6529 PHOTO A , just one of several museums and galleries you can visit.

Read these very simple instructions before entering the Open Metaverse.

Go ahead and check out Punk6529’s Open Metaverse Museum Precinct. I’d love to know what you think.

Ejo #151 – The Case For NFTs: Foundation

Welcome to my NFT Foundation Class. If you’re here it’s because you’re interested in acquiring a basic, but solid, understanding of NFTs as they pertain to art (either that or I made you promise me that you’d read it).  Some parts of this ejo are going to be necessarily dry and a wee bit technical, though I’ve tried my damndest to keep it simple and interesting.  I beseech you to stick it out and make it through to the end, and hopefully you’ll find it worth your while.

I love art.  And I love NFTs.  And I desperately want to talk to you about why those two things go hand in hand.  But the world of non-fungible tokens is murky and overrun with jargon and technical mumbo jumbo, making it difficult for the average person to understand.  I’ve spent almost 1000 hours studying crypto and NFTs so that I can smash through all the bullshit and explain to you, in as simple terms as possible, why they are such an important development in the art space.  Don’t worry, I’m going to start with the assumption that you know absolutely nothing.  This class is all about laying the groundwork so that in the next installment we can have a meaningful conversation about it on a relatively level playing field.  As always, if you have any questions at all, please feel free to drop me a message.  OK, let’s do this!

If you googled “what is an NFT” right now, you’d be rewarded with 272 million results and definitions ranging from the not-very-helpful (iT’s a noN-fUNgibLe tOKeN…. uh, duh) to the esoteric and super technical.  Investopedia defines NFTs as “cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other”.  Clear as mud. 

So let’s break it down.  What the fuck does fungible even mean?  The definition of fungible is something that is mutually interchangeable.  So think of a five dollar note in your wallet.  If I also had a five dollar note, in the same currency, we could swap them and we’d both feel OK about it.  Because for the purposes of being used as currency, they are the same.  They are mutually interchangeable.  Therefore they are fungible.  Another example.  If you “accidentally” drank the bottle of Whispering Angel rosé wine that I brought to the picnic, I’d be more than a little upset with you, but you could very easily make it up to me by heading out to the store and bringing me back another bottle of Whispering Angel rosé.  Because bottles of Whispering Angel rosé are all the same.  They are interchangeable.  Therefore they are fungible. 

Since they’re fungible, theoretically, we could use bottles of Whispering Angel rosé as currency. It’s about as arbitrary as using bits of paper with numbers written on it.

So now that we know what fungible means, let’s have a look at the definition of non-fungible.  If we take it to be the opposite of fungible, it must mean something that is not interchangeable with anything else.  Something that is unique.  Your house is non-fungible.  Your neighbour’s yappy dog is non-fungible.  A birthday card your mum gave you for your sixteenth birthday is non-fungible.  These items are all unique.  They are not interchangeable with anything else.  Therefore they are non-fungible.  Receipts are non-fungible, which is why stores won’t issue refunds without an original.  And legal contracts are also non-fungible because they contain specific clauses, relating to two or more specific entities.  Each signed contract is unique, and not interchangeable with other contracts.  We don’t normally think of things in terms of their fungibility because it’s an incredibly clunky way of describing something, but hopefully you’re getting the idea. 

So now we know what non-fungible means.  But what are tokens, in the context of cryptography?  First here are some simplified definitions of things that will help you to understand. 

A blockchain is a public digital ledger where transactions are correctly and permanently recorded and stored.  Bitcoin and Ethereum are examples of blockchains.  A smart contract is a computer coded digital contract, stored on a blockchain, which executes automatically when certain parameters are met. 

I really don’t want to get into the weeds on cryptocurrencies or blockchains here, but in super broad brushstrokes, a cryptocurrency like Bitcoin is a blockchain’s native digital currency, which is built into the blockchain itself.  It’s part of the blockchain’s DNA.  A token is different.  A token is a piece of code which is part of a smart contract that’s built and implemented on top of the blockchain (usually Ethereum).  And there are several different types of tokens.  For instance, utility tokens allow a user to access a service or a network.  Security tokens are like digital shares.  Governance tokens grant voting rights.  And (drum roll, please) non-fungible tokens are used to represent unique assets. 

So what are these unique assets?  Well, NFTs can represent anything.  Jpegs of course, but also songs, gifs, collectibles, avatars, movies and gaming wearables.  Art represents only a small fraction (14% in 2021) of all existing NFTs.  The technology is also being widely used in real estate, music and the verification of IDs, medical and academic credentials.  NFTs are tracking supply chain logistics, being used for ticketing (for everything from concerts, to parking your car to airline flights) and also helping to eliminate voter fraud in elections.  You can literally create an NFT for anything (yep, even your grandmother if that’s the kind of person you are).  The only kind of NFTs I’m interested in however, are the art kind, and when I refer to NFTs from now on, that’s what I’m talking about. 

Collectibles, including PFPs, make up the huge majority of NFTs.

So far we’ve shown that non-fungible means unique and one of a kind.  And we’ve established that tokens are lines of code on a blockchain which identify, certify and represent an asset.  But did you know that when we talk about non-fungible tokens, the non-fungibility (i.e. the uniqueness) isn’t actually referring to the asset at all.  It is the token’s code itself which is unique and non-fungible.  The combination of the token ID number and the smart contract address (i.e. where it sits on the blockchain) unite to create something unique.  No other token can ever have this combination of numbers.  And that, ladies and gentlemen, is what makes a token non-fungible.  To demonstrate how that relates to art, if a photographer were to print out 100 physical copies of a single image, those prints would all be fungible.  They are mutually interchangeable and there’s nothing to differentiate them.  But if that photographer were to mint 100 individual versions of that same image on the blockchain, each piece would have its own unique NFT representing it, resulting in 100 unique digital assets.  And despite them all looking the same, they would no longer be mutually interchangeable.  So, to reiterate, the NFT is not the artwork.  The NFT is the code that represents the artwork.  And it exists in order to certify the asset, as well as to facilitate its sale, purchase and transfer. 

Pop quiz time: which of the above is an NFT?

So what about copyright?  Well, that’s another weedy area I’ll be steering well clear of today.  But broadly speaking, NFTs rarely confer copyright ownership to the purchaser.  Which is no different to traditional art.  For instance, if I were to buy a unsigned print of Banksy’s Girl With Balloon (with the spare USD200,000 I have just lying around), there’s no dispute that I would own that artwork.  But I sure as hell wouldn’t own the image.  And I certainly wouldn’t be permitted to profit from the image, even though I paid very good money for the right to hang it up on my wall.  And it’s exactly the same with NFTs.  They are artworks that you can buy, and verifiably own.  But unless it’s specifically written into the smart contract (which it very rarely is), you do not own the image, the intellectual property or any of the copyright associated with the image.  The legal side of NFTs is still very much a messy area, one that I’m not very familiar with, and which goes well beyond the scope of this class.

Even though there are 600 unsigned Girls With Balloon (as well as 150 signed versions), only one person owns the copyright and their name is Banksy.

So let’s go deeper into an area that I am familiar with, starting with a quick history lesson about the internet.  Web1 (1990 – 2005) was the introduction of the world wide web, the internet being made available to the masses.  It is commonly referred to as the “read-only” web because it was mostly used to search for information and had very little interactivity built into it.  Web2 (2005 – 2012) encouraged interactivity, participation and online socialising, giving rise to centralised social media platforms, like Facebook, Instagram and YouTube.  It ushered in an era of collaboration, community and dialogue.  It saw the rise of user-generated content, though the vast majority of creators were not able to monetise their creations, the platforms themselves cashing in on a creator’s popularity.  Web3 (2012 – ) is not yet fully realised, though elements are already in place.  The user can actually monetise their own content, rather than conceding control to the tech giants.  It allows users to interact amongst ourselves (i.e. peer-to-peer) rather than the interaction being facilitated by a centralised platform such as Meta (aka Facebook).  With the help of blockchains, NFTs and other tokens, Web3 is where the metaverse is taking shape.  

So what is this metaverse?  Well, firstly, there will be more than one, and they almost certainly won’t be movie-like, 3D virtual worlds where we are plugged into a matrix.  It’ll simply be a more integrated and seamless version of the internet that we experience today.  It’ll be a more complete way of being online.  People already rack up an average of eight and a half hours of screentime a day.  That’s more than half our waking time, and in the future it’s likely that we’ll spend even more time online.  It makes sense that a digital evolution of humanity into the metaverse will occur, and plenty of brainpower and technology is already being used to facilitate that.  And NFTs are going to be a big part of it. 

Whenever I talk about NFTs though, what I often hear back are the words “scam”, “Ponzi scheme”, “tulips”, “bubble” and “burst”.  NFTs are none of those things. They are, quite literally, a goddamn revolution.  But I do understand how people might get that impression.  So before we can have any kind of discussion about NFTs and art, we absolutely first need to address the ape in the room.  I’m referring to PFP (or profile pic) NFTs.  Whether you know anything about NFTs or not, you may still have heard of CryptoPunks and Bored Ape Yacht Club (BAYC).  After all Jay-Z, Heidi Klum, Jimmy Fallon, Madonna, Tom Brady and Justin Bieber are all proud owners of at least one of them.  But what exactly are they, and what’s all the fuss about?  PFPs are essentially a collection of (usually 10,000) digital images, each one unique in some way, designed to be used as profile pictures or avatars on social media, such as Discord or Twitter.  That’s the basic definition.  But PFPs are so much more than that.  They are about belonging to an exclusive community.  And they make perfect sense in a metaverse environment, allowing for the expression of digital identity and personality. 

“In-the-know” celebrities have adopted BAYC as their NFT poster child, and they do carry some cachet in certain circles. Personally, I don’t see the appeal. (I said what I said.)

When I first got into NFTs, I have to admit that I, too, was swept up in the PFP craze.  I bought into it, and picked up a couple of profile pics for myself.  But, as I spent more time in the space, as I delved deeper, reading, listening, watching, learning and evolving, I pretty quickly figured out where the true value of NFTs lies.  And I don’t believe it’s in new PFP projects.  Which is not to say that I don’t rate CryptoPunks.  On the contrary, I completely get it.  And I want you to get it too. 

CryptoPunks was the first algorithmically designed, random-generated PFP project released on the Ethereum blockchain, way back in the olden days of 2017.  The CryptoPunks series was actually released as an experiment, and they were virtually given away for free.  To everyone’s astonishment and delight, the project was a runaway success.  Owning a CryptoPunk now is a badge, declaring you an OG, or… perhaps just declaring that you have a shit tonne of money and want to be part of the cool kid club (hello Serena Williams, how you doing?).  Either way, it’s a huge flex, for people in the know.  Part of the appeal is that they are representative of something subversive, counter-cultural, avant-garde and underground.  And of course, they were the first.  Bored Ape Yacht Club, released in April 2021, capitalised on the fortune of CryptoPunks, becoming successful in its own right.  And as of March 2022 the combined value of both projects was estimated to be around $3.6 billion.

Yes, each of these 24×24 pixel images is probably worth more than your house.

But for those who still don’t understand the allure of these types of NFTs, perhaps the best way to explain their exorbitant prices is to compare them to baseball cards, which are also extremely sought after and valuable.  The most expensive baseball card in the world is a 1909 Honus Wagner which recently sold for a record breaking $6.6 million.  I mean, what the fuck, right?  It’s literally just a piece of cardboard.  But, as long as baseball fans agree on that value, then that is what it’s worth.  And as long as NFT fans agree that CryptoPunks are valuable, then they’ll continue selling for hundreds of thousands, and sometimes millions of dollars.  At the end of the day, asking why CryptoPunks are so expensive is exactly like asking why diamonds are.  Number one, scarcity.  Number two, strength (cryptographic immutability for the NFT, and physical toughness for the diamond).  And number three, demand.  Personally, if I were ever given the option to choose between a diamond and a CryptoPunk, I would take the punk every single time. 

So now that you know what PFPs are, let’s talk about their downside.  The problem with the stratospheric success of 10K projects like CryptoPunks and Bored Apes, is that they have spawned a shitload of copycat projects trying to cash in on the hype.  Is there value in profile pics?  Well, there are more than 700 PFP projects out there, shilling over 80 million NFTs to kids hungry for the same cult status and financial success of CryptoPunks and Bored Apes.  You do the maths.  Most of the hype is baseless and rooted in sheer FOMO.  Fear of missing out has driven extreme risk-taking and speculation in the PFP market, leading to a culture of flipping, scamming and a lot of innocent folk getting the rug pulled out from under them.  If there’s a Ponzi scheme anywhere to be found, PFPs is where it’ll be lurking.  And if you’re looking for a bubble, you need look no further.  I don’t think it will always be like this, and I do think that the space will mature.  After all, PFPs’ greatest utility, the metaverse, is just around the corner. 

So, I think we’re finally ready to move on and start discussing art in my upcoming NFT Masterclass, but before the bell rings today I’d like to stress that yes, PFPs might be the public face of NFTs, but they are not representative of the entire NFT ecosystem.  They are simply a subset of NFTs (albeit a big, loud, and sometimes obnoxious one).  As I said earlier, the true value of NFTs is not in cute cartoons.  The true value of NFTs lies in art.