Crypto investor spends big on digital art
What are NFTs, and why did one just sell for $95.7 million? David Court explains.
Something incredible happened last week. The NFT from a piece of digital art titled Everydays: The First 5000 Days sold for US$69.3 million (NZ$95.7m), making it the third-highest price paid (at auction) for work by a living artist.
It’s quite an achievement for said artist, Mike Winkelmann – known as Beeple – who up until very recently had only been charging US$100 for prints of his work.
How has this happened? Good question. Something called NFT has happened. And it’s mental.
NFT stands for ‘‘non-fungible token’’, and is a new technology that runs on blockchain (of course) to mint a digital file that acts as a record of ownership.
Confused? You should be. It doesn’t really make sense. So let me answer a few more questions you might have.
The person behind the winning US$69.3m bid hasn’t been identified.
Instead, Christie’s – the auction house that sold the NFT – issued a press release with an unusual opening paragraph:
‘‘Metakovan, the pseudonymous founder and financier of Metapurse, the largest NFT (unique digital assets) fund in the world, successfully bid and acquired EVERYDAYS: THE FIRST 5000 DAYS, for $69,346,250 (42,329.453 ETH)’’ and only linked to his Twitter handle, @MetaKovan.
There are a couple of things to unpack here. First is that the bid was made in Ethereum, which is a lot like Bitcoin, only not as popular and less damaging to the planet. Though, it’s still pretty bad.
Second, according to its website, Metapurse is a ‘‘crypto-exclusive fund that specialises in identifying early-stage projects across blockchain infrastructure, finance, art, unique collectables, and virtual estate’’.
And the ‘‘most important aspect of what we do is help push the NFT space into an era of experiences and consumption from one of collecting and flipping’’.
Mission accomplished, I’d say. For (just) 42,329.45 Ethereum, the Metakovan and Metapurse have got the world talking about NFTs.
So what is an NFT?
As I said earlier, NFT stands for ‘‘non-fungible token’’. I know that doesn’t help much, so let’s break it down further.
Fungible is something that is mutually interchangeable: you can walk into a bank and swap five $1 coins for a $5 note. Cash is fungible.
Something unique is, therefore, non-fungible. A rare stamp, classic car, old comic book, trading card, old coin, vinyl record: these are all non-fungible. If you sell or swap them, you no longer have the thing.
This is what NFTs are trying to imitate in digital form. The nonfungibleness of a thing. And it sort of does, as blockchain technology is used to verify NFTs – which are essentially just a series of characters – on a shared digital ledger that no one computer can change.
The NFT that Beeple sold, for example, is part of the Ethereum blockchain.
Isn’t Ethereum a digital currency? Yes. But it can also store extra information, which in this case is NFTs.
What’s the point of NFTs?
I don’t get it. But then again, I’m not a collector, and I think collecting rare coins and stamps is arguably just as mental.
The argument used by people who think NFTs have a point is that they produce a sense of ownership.
Anyone can share, download, or pirate a digital jpeg of Beeple’s Everydays: The First 5000 Days for free. There is no value in it.
What can’t be shared, or downloaded, or pirated is who owns its non-fungible token, as it’s protected by the blockchain. And this is what has got people fired up.
It’s not just art that NFTs are being minted for. Jack Dorsey, chief executive of Twitter, is next on the list of overhyped NFT auctions, selling an NFT of his first Tweet.
The current bid is US$2.5m, with the auction set to close tomorrow, and it’s anyone’s guess where the bidding will end up.
My advice is to stay well away from NFTs. They’re just the latest bubble in a long line of tech bubbles.