In Defense of an Optimistic Future For NFTs

By June 10, 2021Ethereum
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Beeple’s collage, Everydays: The First 5000 Days, sold at Christie’s. Image: Beeple

Mike Winkelmann is among the top three most valuable living artists in the world and you’ve never heard of him. Better know as Beeple, Winkelmann is the artist behind “Everydays: The First 5000 Days” the first purely digital artwork ever offered at auction by Christie’s.

The artwork sold for $69,346,250.

The collage by Beeple is composed of 5,000 original ‘Everdays’, digital works that Beeple has been creating each day for the past 13 ½ years, since his first on May 1st, 2007, a picture of his Uncle Jim, who he nicknamed Uber Jay.

The buyer, Vignesh Sundaresan, also known as MetaKovan, told CNBC that “This NFT is a significant piece of art history. I had the opportunity to be part of this very important shift in how art has been perceived for centuries.”

In exchange for $69,346,250 of the cryptocurrency Ether, MetaKovan receives a digital file and rights to present the image.

MetaKovan admitted he was prepared to pay even more. “We did have a higher limit,” he said. “I was very motivated and ready to go beyond even what we paid for it.”

To grasp MetaKovan’s investment one needs to better understand art, technology, the impending intersection of the pair.

“I paint flowers so they will not die” — Frida Kahlo

Making Sense of NFTs

Over the past 25 years, with a 13.6% annual rate of return, Contemporary Art has outperformed the S&P 500 whose total return during that time was 8.9%. Art also outperformed other tangible assets during this time including gold and US real estate. Today, Art is a 1.7 trillion dollar market.

During Q1 of 2021, the digital art market ballooned to $2b up 2100% from the $93m worth of NFTs sold between Q4 of last year. As of writing this, the 30-day sales average is $79,911,726.78, a 250% increase from last year.

Still, articles will cite that the NFT market has collapsed, or popped, all too convenient declarations designed to satisfy confirmation biases and get clicks.

Polarizing positions on the future that align with protecting yesterday’s modus operandi are consumed at alarming rates because they represent a vocalization of the last hope of preserving today. These takes satisfy the stubborn fear that has yet to educate themselves on the topic du jour and its paths to adoption. Ignorance isn’t a measure of absent intelligence so much as it is the active choice to suppress curiosity and be, lazy.

A rational position might suggest that NFTs are simply in a discovery phase. Price ceilings are being discovered, as is the secondary trading market. Usage and display methods across physical frames, online galleries, and the metaverse are being discovered. With the barrier to entry for minting an NFT so low, quality too is being discovered.

Lesson #1 is not to judge long-term assets by their short-term performance.

Lesson #2 is that this will all simply take time.

Accelerating discovery and adoption though is the stream of smart money gravitating towards digital art. Smart money first knows that art is not meant to be traded with frequency. As a non-correlated store of value asset, most pieces are purchased with the intention of being held for 3–10+ years, to allow for appreciation. Most NFTs have been only been minted and offered in the past year, it's no surprise activity has slowed.

Smart money also understands that what makes art valuable is its scarcity. Inscribed into the blockchain, digital art can confirm scarcity equally or better than traditional art. Digital art can also be more easily transported, increasing the volume of revenue-generating display opportunities, which also contribute to appreciation.

Smart money is even already addressing the main FUD, fear, uncertainty, and doubt, by making 8-9 figure investments into alternate blockchains advertised as more environmentally sustainable and faster and more energy-efficient.

Still, discipline within NFTs is required. Being a disciple would blind an investor from the most obvious quality of art, that its value is part and parcel subject to the Greater Fool Theory: When items don’t produce cash flow, the only way to make money is if someone else comes along and is willing to pay more for them. But, most assets in the species of collectibles do. One person frames a Ken Griffey Jr. baseball card while another attaches it to their tire spoke for neighborhood noise.

Digital art is no exemption to this. Not everyone needs to value digital art, but for those who do, they will want to show it off.

Displaying digital art

What this author believes to be the largest obstacle to revolutionary adoption for digital art is communicating its display advantages over traditional physical art.

When friends purchase a new home, on house-warming visits, within minutes a tour is offered. A new friend purchases a car and wants you to “come outside” to see it. We like to show off our purchases, partly to confirm we made right decisions, and because we find joy in display.

Art is meant to be displayed. Its subjectivity is what assigns the display experience value. A painting might be “beautiful” to one person and “ugly” to another, but the material object remains unchanged. This is why worldwide we have museums, galleries, and exhibitions displaying art.

Digital art is not exempt from this, and displaying it is only getting easier.

Qonos, advertised as the world’s first custom digital frame for NFT art and collectibles is a purpose-built digital frame that facilitates fashionable at-home displays for investors who want to transport their collections from wallet to wall. Meural by NETGEAR, is transforming NFT’s to the centerpiece of any room you’re in with its digital frame, and the Monox7 is an internet-connected digital frame that handles any image or video that can play in a web browser making it perfect for all types of NFTs. For 3D NFTs, the Looking Glass Portrait displays holograms at home. Even Nifty the premier NFT marketplace released the Nifty Gateway Display App, which allows investors to display all of their beautiful pieces at home.

Online, Showtime introduced an Instagram like experience for users to discover and showcase their NTFs, Lazy, a Mark Cuban backed gallery, advertises itself as the lazy way to show off your NFTs, with an added value proposition of unique gallery names, and Flawnt is a lightweight way to display one's NFT collections. There is even a Museum of Crypto Art, founded by Pablo Rodriguez-Fraile, the collector who bought a Beeple for $$67,000 and resold it for 100 times that just four months later.

Then there is the Metaverse.

The Metaverse is a shared virtual space. It describes a future internet of persistent, shared, 3D virtual spaces linked into a perceived virtual universe.

Decentraland, the fastest-growing crypto-based virtual world, supports NFT display. Users can display a 2D NFT they own in their Decentraland scenes, via frames that adjust to the dimensions of the NFT image. Upland, a metaverse where people will not only play but also socialize and eventually be able to earn money, announced that in 2021 via an NFT gateway users will be able to import NFTs from other blockchains. Cryptovoxels, a user-owned virtual world powered by the Ethereum blockchain, is a place where players can too buy land and build stores and art galleries.

Displaying NFT’s in the Metaverse is not only an easy way to exhibit the artwork for discovery but because they are NFTs, they can be easily purchased by clicking through to the listing.

It can be a lot to wrap one’s head around, but simply dismissing digital art, even after being introduced to its improved display capabilities, transportation, and storage would be unwise, especially in advance of what’s coming.

“When the internet bubble burst, it didn’t wipe out the internet, it wiped out the crap.” — Beeple

What’s next for NFTs

Messari analyst Mason Nystrom predicts the NFT market will surpass $1.3 billion by the end of 2021, predicting that 2021 is poised for “a new Bull Market in the NFT industry.” But, implications will stretch far beyond the economic impacts of a bull market.

Galleries, homes, and museums will begin to curate and display collections of mixed mediums which include digital art. A digital version of Spotify where artists upload their work and are compensated by the number of displays or display time from paying app subscribers will arrive. With it will be a feature where artists can list their work for sale or not, offering a second source of artist revenue within the platform.

Farmers' markets will have stands where digital artist’s portfolios are displayed, purchased, and immediately sent to the buyer's wallet, ready for display when they arrive home.

And a fourth discovery phase will emerge, the discovery of artists.

Artists from around the world now have the resources to introduce their work to the world and be compensated for it. Digital art removes gatekeepers and invites more artists to participate in the $1.7T global art market.

To dismiss the above for the convenience of remaining uncurious is not only complacent but boring. Too, being impatient would be none the wiser. This is an emerging medium of art concurrently experiencing 4 discovery phases.

As Metakovn said “Sometimes these things take some time for everyone to recognize and realize. I’m OK with that.”

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