Non-Fungible Tokens - stupid and brilliant at the same time

Get yours before the bubble pops

There are no shortages of bubbles at the moment, this is just the next one, but once it pops (again) there are some really good reasons for keeping it around.

First something on the term non-fungible tokens.

• Fungible assets are things like cash (or bitcoin) as one is like the other and can be used interchangeably
• Non-fungible assets are unique and can’t be used for easy exchange, if you own a house it would be your largest non-fungible asset
• Tokens are a representation for something else. Money used to be tokens for gold or silver, but gift cards are a current example as they represent the cash that is stored in them.

In the beginning - 2017

The buzz around NFT’s followed the introduction of Ethereum’s smart contract ability. A thing could have its identity and ownership recorded in the blockchain making it easier for its ownership to be demonstrated.

One of the first projects I saw was for tracing diamonds from where they were mined to who currently owns them. It would give anyone looking to buy a diamond the ability to know if the person selling it was able to and to determine where the diamond came from. De Beers initiated the process and is now run vai the diamond industry via via Tracr

Another good project was one Kodak has given its name to to manage the ownership of digital images. Unfortunately it has not panned out although it is still being pursued by the company that approached Kodak - Ryde.

It blew up though when a team created CryptoKitties in 2017. The purely digital creations could be bought and sold and used to make more kitties. Each is unique and some were sold for a lot of money, millions in fact. They are still around and with the current prices you may be looking at 20 Eth for one which is about half a million.

What it allowed was a way to create a new special kind of proof of ownership that would not only track who currently owns but everyone who has ever owned it.

The entire system now belongs to a company called Dapper Labs and in October last year kicked off something even more likely to create a buzz than a digital cat - an electronic basketball card.

Slam dunk

NBA Top shot are short clips of baskets being scored in matches and can be bought to own the way you might collect traditional basketball cards.

The issue to overcome was having a crypto wallet and dealing with high transaction volumes Dapper Labs have built their own network to resolve that and you can buy and view the digital cards on your phone. If you buy a certain number in a specified space of time you can get additional bonus shots. In time they will be turned into a game where I assume you can use your shots to win against opponents or unlock other special ones by competing.

The basic packs go for about R150, but they can cost a lot more, the current premium pack which has 6 clips retailed for R1500 and is sold out.

There is no limit to how many packs they may create and they are likely to create as many as they can sell.

In one respect this is like a coin mint that relies on the scarcity of the minted coins to sustain its price even as they continue to mint new coins. That at least has a base metal value. The digital ones lack this.

It may also look like the market for trading in rare sneakers, well Nike has patented the idea of CryptoKicks

The future is bright and scary

Something else that is very clever about how an item can be created is that currently the creator of an artwork often gets the smallest return and their work may only really take off once they die. NFT’s can be set up to automatically send a portion of the sale price to the creator with each sale. This would be a welcome addition for many creators.

Because the ownership can be tracked you can imagine celebrity creators will make a quick buck even if they are only asked to own it for a little while to boost the price.

Elon Musk’s partner Grimes is an artist of many forms and also made sales of about R75 million this weekend selling her artworks.

There are multiple sites that allow for the sale of digital art and there will be many more given the amount of money that is at stake.

• Rarible
• Nifty Gateway
• SuperRare
• OpenSea

And then these two

• HashMasks
• CryptoPunks

In the end it will live and die by the demand it can sustain and faith that it will last by those that choose to use. Andreessen Horowitz makes the case for the fans.

Power to the Beeple

The digital art star at the moment is Mike Winkelmann known as Beeple who sold a piece of art in October 2020 for an impressive R1 million, it was resold in March 2021 for R98 million. It was a 10 second video.

CNBC asked him about the impact he is having on the the popularity and practically of NFT’s

And in case you think it was a once off he currently has the first piece of digital art on auction at Christies which can be bought with cryptocurrency and the current top bid is R48 million.

Beeple is not an overnight success though, the artwork Everydays is a collection of 5000 images that he has produced daily since May 2007.

The potential for digital ownership of real world or digital items is significant but before we get to something stable and good there will be a phase when things get a little silly and it won’t be the first time and Beeple shared himself

hey all, something serious for a second here that nobody wants to talk about with NFT’s...

PLEASE, PLEASE be careful not to get sucked into the ARTISTIC VOID created by NFT’s. I’ve seen buyers succumb to this and it is real and it is dangerous. BE CAREFUL!!!! 😱😱😱 pic.twitter.com/DDTiVGRki4

— beeple (@beeple) March 3, 2021

This article first appeared on 702 : Non-Fungible Tokens - stupid and brilliant at the same time

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