Unravelling a billion-dollar market for ephemeral digital art

Afast-growing market for digital art, ephemera and media is marrying the world’s taste for collectibles with cutting-edge technology. In the 10 years since Chris Torres (inset) created Nyan Cat, an animated flying cat with a Pop-Tart body leaving a rainbow trail, the meme has been viewed and shared across the web hundreds of millions of times.

On Thursday, he put a one-of-a-kind version of it up for sale on Foundation, a website for buying and selling digital goods. In the final hour of the auction, there was a bidding war. Nyan Cat was sold to a user identified only by a cryptocurrency wallet number. The price? Roughly $580,000.

Torres was left breathless. “I feel like I’ve opened the floodgates,” he said. The sale was a new high point in a fast-growing market for ownership rights to digital art, ephemera and media called NFTs, or “nonfungible tokens.” The buyers are usually not acquiring copyrights, trademarks or even the sole ownership of whatever it is they purchase. They’re buying bragging rights and the knowledge that their copy is the “authentic” one.

Other digital tokens recently sold include a clip of LeBron James blocking a shot in a Lakers basketball game that went for $100,000 in January and a Twitter post by Mark Cuban, the investor and Dallas Mavericks owner, that went for $952. This month, the actress Lindsay Lohan sold an image of her face for over $17,000 and, in a nod to cryptocurrencies like Bitcoin, declared, “I believe in a world which is financially decentralised.” It was quickly resold for $57,000.

People have long attached emotional and aesthetic value to physical goods, like fine art or baseball cards, and have been willing to pay a lot of money for them. But digital media has not had the same value because it can be easily copied, shared and stolen.

Blockchain technology, which is most often associated with Bitcoin, is changing that. NFTs rely on the technology to designate an official copy of a piece of digital media, allowing artists, musicians, influencers and sports franchises to make money selling digital goods that would otherwise be cheap or free.

In an NFT sale, all the computers hooked into a cryptocurrency network record the transaction on a shared ledger, a blockchain, making it part of a permanent public record and serving as a sort of certification of authenticity that cannot be altered or erased.

The nascent market for these items reflects a notable, technologically savvy move by creators of digital content to connect financially with their audience and eliminate middlemen. Some NFT buyers are collectors and fans who show off what they have bought on social media or screens around their homes. Others are trying to make a quick buck as cryptocurrency prices surge. Many see it as a form of entertainment that mixes gambling, sports card collecting, investing and day trading.

Eye-popping NFT sale prices have attracted some of the same confusion and derision that have long haunted the cryptocurrency world, which has struggled to find a good use for its technology beyond currency trading. And there is uncertainty over the stability of values, since many of the transactions are using cryptocurrencies, which have fluctuated wildly in worth over the last two years.

But true believers remind people that most big things in tech — from Facebook and Airbnb to the internet itself and mobile phones — often start out looking like toys.