With DeFi markets sputtering earlier this week, crypto twitter seemed to suddenly shift its attention to the next shiny new thing this week: NFTs, or non-fungible tokens.submitted by CryptigoVespucci to ethereum [link] [comments]
But NFTs aren’t new. In crypto, the concept has been around for over 5 years. However, this market cycle, they are inherently more interesting. Today, I’ll briefly sum up what NFTs are and dig into one fascinating aspect of this market: high-end crypto art.
What are NFTs
Items that are fungible can be replaced with another identical item without anyone caring. For example, any $5 bill can buy a hotdog just as effectively as any other. Bitcoin, ether and pretty much any crypto asset you see on messari.io fall into the “fungible” bucket.
Items that are non-fungible are unique and can’t be exchanged 1 to 1. The simplest example being art. Try asking the people at the Louvre to swap your 5 year-old’s crudely painted hand-turkey with the Mona Lisa and you’ll experience true non-fungibility.
So in the crypto world, NFTs are simply tokens that represent something unique. Unsurprisingly, NFTs attached to unique pieces of purely digital artwork are gaining steam.
Crypto’s Art Scene
In many ways, much of crypto is simply the recreation of existing human behaviors in a purely digital environment. Markets. Trading. Lending. Borrowing. Speculation. As such, it should be no surprise that markets have formed around trading and speculating on works of digital art.
Like NFTs, crypto art markets have been around for years. As with NFTs and DeFi as a whole, the underlying technology is much more mature this cycle. Add in the fact that there’s a ton of freshly created wealth in the space from DeFi’s casino summer, and you get a crypto art market that’s heating up. After all, investors need to park all those DeFi gains somewhere.
Nowhere is this combination of technological sophistication and wealth on display than in this piece from Matt Kane titled, “Right Place - Right Time” that sold for almost $100K on a platform called Async Art.
Right Place - Right Time
If you look at the above screenshot of Matt Kane’s work, it just looks like a cool piece of Bitcoin art. What’s under the hood is what makes it interesting. Kane wrote an algorithm that’s tied into a BTC pricing feed. Every 12 hours, the algorithm updates the piece based on Bitcoin’s volatility from that day, which you can see on display in this GIF.
In addition to being an evolving work of art, there are a few other components that make this interesting. For one, Kane has retained an ownership token that allows him to fine-tune the piece over time - a novel aspect of NFT based artwork that allows the artist to retain some level of control over the work. Artwork no longer has to remain static, and instead, can adapt and evolve as an artist builds upon their work over time.
Secondly, as this piece responds to the rhythms of bitcoin volatility, it will mint 210 individual NFTs based on significant days of movement. For example, say BTC hit’s $20K, a new NFT will be minted and sold based on what the piece looks like on that day. Whoever buys that NFT will have the ability to claim a physical print version.
The next point of interest are the rights baked into the sale. The work was purchased by a collector going by the name of TokenAngels. As the piece generates and sells new NFTs, TokenAngels will receive 21% of each new sale. So in addition to the potential for the work to increase in value, it’s also a productive asset. Again, something fundamentally new, all codified into the underlying work
A Shift in the Balance
Traditional art is a $65 Billion dollar market, with the balance of power firmly in the hands of wealthy collectors.
There was an infamous contemporary art sale in the 1970’s by a collector named Robert Scull. Scull bought up works from living artists around the world from $600-$10,000 and then sold them at auction for many multiples of his purchasing price. All-in-all, Scull’s total collection sold for an unheard of $2.2M ($14.7 million adjusted for inflation today).
While this auction is credited for the birth of the highly speculative contemporary art market, Scull was criticized for how little of the windfall went to the actual artists. For example, Scull bought a piece from an artist named Robert Rauschenberg called, “Thaw” for $900 and sold it for $85,000. Rauschenberg didn’t see a dime in royalties.
NFTs come with the benefit of more artist-friendly terms, leading to a shift in the balance of power between artist and collector. Note that TokenAngels receives 21% of the residual NFT sales from Matt Kane’s piece, not 100%. Similarly, an NFT art marketplace called SuperRare bakes a 10% creator royalty commission into all secondary sales - something Robert Rauschenberg would have appreciated in 1973.
A New Frontier
More artist-friendly terms along with curated marketplaces like SuperRare and Async Art are attracting a flood of new artists into the space. For a profession that’s notoriously impoverished, the allure of large amounts of money sloshing around these markets make crypto art even harder to ignore.
In addition to Matt Kane, we’re already seeing early signs of a new breed of artists. Another name gaining steam is an artist that goes by the name of Pak. In true crypto fashion, Pak is completely anonymous and there’s speculation over whether their art is the product of one person or of artificial-intelligence produced by a collective of engineers. Pak has over 140K twitter followers and has sold over $350K in NFT artwork, including this piece that recently went for around $10K.
Given that this is crypto, it’s also worth noting just how ripe these markets are for manipulation. Imagine how easy it would be for a whale to purchase a Pak piece for $10K, sell it to a friend for $25K, buy it back for $50K and then sell it to an unsuspecting speculator for $100K. Wash trading has already become problematic on a platform called Rarible and undoubtedly is taking place. (Rarible has recently introduced platform fees in order to disincentivize wash trading, although it likely won’t be a bullet-proof solution to the problem).
Wash trading aside, all of this speaks to the fact that the NFT hype isn’t without merit. These are new behaviors uniquely made possible through new marketplaces primarily built on Ethereum. And crypto art is only the beginning.
NFTs can and will be used to represent other non-fungible items. The obvious being other forms of creative outputs like music. Less obvious but equally intriguing are financial contracts like insurance. Imagine taking out a policy on your work of art that insures against loss of the work’s private keys.
The integration of DeFi primitives into the NFT space is accelerating rapidly. For example, using a platform called NFTfi, you can now post your NFT as collateral and take out an ETH denominated loan. Another platform, Niftex enables NFT holders to fractionalize their assets into multiple tradeable tokens. While these applications are new, it’s not hard to see them taking off alongside the rest of the crypto art and NFT market.
In a few decades, the rise of Ethereum art markets might be comparable to Robert Scull’s introduction of the speculative contemporary art market. The key difference is that this time, artists will be well compensated for their work. Perhaps the masterpieces of the future will be on display in galleries held in metaverses like Decentraland, each insured by NFT policies, on loan from the collector with the original artists still collecting royalties on their work years after inception.
Stay up on all-things NFT
Mason Nystrom has been a great source for all-things Web 3 and NFTs, so give him a follow on twitter,
More resources (paywall warning)
If you’re a business guy you could look at the current construct versus the new construct and say ‘aren’t you just building a big database?’As Bitcoin became more famous, its dubious nature became increasingly obvious to mainstream observers. So the buzzword of choice shifted from “Bitcoin” to “the blockchain”, or just “Blockchain”.
– Charley Cooper, R3 Blockchain Consortium
A plan that considers the supporting acts; AI and Machine Learning, BOTs, and Cognitive computing will accelerate the pace of change and then there is Ethereum.Capitalisation in original. There is a form of argument called the “Gish Gallop”, named after young-Earth creationist Duane Gish, in which you throw half-coherent claims at your interlocutor as fast as you can, and if they fail to address any of them you claim a win. It works on the principle that it takes ten times as long to properly refute a ridiculously not-even-wrong statement as it takes to make it. But let’s note that “AI and Machine Learning, BOTs, and Cognitive computing” are barely associated with blockchains, and “bot” is a shortened form of “robot”, not an acronym. The Ethereum claim is … vivid.
Someone asked me what Ethereum was… My response: ‘Imagine giving the Internet a dose of Viagra and increasing the dose each day'… The Blockchain Age is here!
Because they have no central friction or variation of the corporate truth and completely disintermediate markets in a single move.This is an example of the “promise” of Blockchain, in the sense of “strong but unfounded claim”.
It starts with the decentralization of everything, a single version of the truth (Golden Source) that removes the need for constant validation of everything. In the past few decades, there has been an erosion fundamental trust in commerce and especially any transactions involving government and/or banks.The first sentence appears to contradict itself (how do you decentralise to a single Golden Source of truth?). The second sentence is shaped like a claim of fact, but claims to be measuring a decrease in a subjective quantity (some particular meaning of “trust”) while the economy has grown significantly.
Customers are looking for their version of the truth. This has manifested in ‘negative commerce’ where the focus is placing the burden of proof and risk on individuals and the ‘small people’, whose rights have been diluted and whose identity has been tampered with, as well as a forced reliance on systems that control your credit ratings, delay payments and play with your private information over which control has been lost, leaving people feeling powerless and exposed. With Blockchain, the underlying governance, risk and compliance essentially change, returning control and trust.The second sentence states a problem; the third claims to fix it, but without specifics. The reader would assume such strong claims are going to be substantiated in detail later, but we’re over halfway through already.
Blockchain is a diversion of power on all sides as it levels the playing field and makes the rules of engagement equal. However, in other areas it gives one a 1000% advantage. Leaving the broader social impact to one side, Blockchain along with its tech friends (AI and BOTs) will remove 90% of the non-value added roles in any organisation and 50% of the value added roles that will require only partial human intervention.In this paragraph, the implied promise is “You can fire most of your employees.”
And there are Autonomous Agents that moves us one step closer to Distributed Autonomous Enterprises (DOA) that will start with hybrid models that control functions and run Business Units and discrete operations. Time and cycle time will be independent of human interventions. The disruptions I see in a new Blockchain world are:I would love to think that initialising Distributed Autonomous Organisation (not “Enterprise”) as “DOA” was intentional. The author’s understanding of financial technology and of the capabilities of real-world artificial intelligence appears to be on the level of magic.
Excess capacity in what – human resources? Capital assets? The new asset classes presumably means cryptocurrency and similar tokens and their derivatives; the “off grid” appears to be from half-remembered cyberpunk science fiction.
- excess capacity will be sold creating new asset classes, traded by individuals who may live off grid
This is obviously attractive to business, but there is no detail of what this actually means.
- all types of value can be stored and controlled by their owners (rights)
This is not making a substantive claim, and the jargon term appears to have been invented for this article. (A web search on “i-commerce” turns up a software package and a multilevel marketing scheme.)
- new levels of cooperation and collaboration will increase the volume of individual commerce (i-Commerce)
Bitcoin already failed to manage micropayments, and the extensions to help it do so (sidechains, Lightning Network) have spent years in development hell. This claim appears to be extrapolated directly from already-disproven hype. The phrase “the exchange of value itself” seems meaningless.
- the use of physical cash will reduce by 90% with digital tokens taking over via micro-payment social media structures and the exchange of value itself
This is the Bitcoin claim “be your own bank”, which turned out so unattractive in practice that even Bitcoin advocates overwhelmingly keep their coins on rickety and unreliable exchanges.
- people will be able to trade and compete on equal terms with corporations, or without them (banking without banks)
This is not making a substantive claim.
- the nature of leadership and decision making will change and managers will be accountable in new ways
This is a common “Blockchain” promise, where smart contracts run on a blockchain with magical zero delay; the “consensus” makes no sense here except in the sense of the blockchain transactions being verified.
- rewards, pricing value and payments will be immediate, transparent and secure, with consensus
The first part of this is not substantiated in any manner. The second appears to mean the substitution of a blockchain for an ordinary ledger.
- the concept of GDP will disappear as a means of judging value (output) and the need for double entry and audit will diminish
The promise of being your own bank again, and again it is entirely unclear what special sense of “value” he is using here.
- new forms of banking (not banks) will enable ordinary people to hold and trade value not just cash and assets
This is a form of the ideological libertarian claim that all regulation is unnecessary friction that must be removed, with unsubstantiable claims of gains from doing so.
- the costs we associate with many of the things we consume should more than half as unnecessary bureaucracy and intermediaries are removed
The first part is ’80s cyberpunk fiction, the second is slightly more nuanced ’80s cyberpunk fiction; neither seems to follow from blockchains.
- people will create versions of themselves (avatars, social profiles) and will control/manage their online image, content and data, requiring a fundamental change in the law and intellectual property rights
The first part of this is at least a clear claim: that a business’s operating model will be implemented largely in smart contracts on a blockchain. His meaning for “living services” is not clear. “IoT” is the Internet of Things, and it’s not clear how smart lightbulbs or fridges fit in here.
- operating models will not be operating models but a means of sharing and transporting value as defined by smart contracts, living services and IoT insight
The replacement of other ledgers with a blockchain ledger, and typing so fast that grammar and basic proofreading fall by the wayside.
- standard cost accounting already struggling in a digital world will be replaced as value measurement on the back of entirely new into new asset classes
This is a libertarian fever dream I’ve never seen stated quite so concisely, but there is no mechanism whatsoever by which it would close any inequality gap.
- open free trade will replace WTO using smart contracts helping to close the inequality gap
Ayton read too much William Gibson as a lad, and seems to be living in hope that Blockchain will make Mona Lisa Overdrive real.
- augmented reality using VR and holographic systems will feed off sensory layers that will sit on the Ledger of Things connecting the world
Financial authorities have so far not imposed significant regulation before the fact, but they’ve been moderately active when the perpetrators of egregious fraud interface with real world money.
- Governments will try to regulate Blockchain and will fail
- Banks and Financial Services organisations will have their own version of the truth ‘permissioned’ Blockchain’s which is a distorted view of the truth and lies
This is a substanceless claim to finish on a fearful note.
- CEOs and C-suite management teams will be fired more frequently for non-performance where all decisions and corporate conversations will be testament to their tenure
Bitcoin core developer Peter Todd defended Blockchain art startup Verisart against Terence Eden June 13 after claims the company believed he had painted the Mona Lisa. They’re based on the Bitcoin ledger, meaning the false deed generated for the Mona Lisa is there for practically forever: an outrageous and potentially business-ending blemish in the face of their mission statement. Blockchain tech isn’t a magical fix for high-value security — there still needs to be trust and standards involved for processes that aren’t just transferring fungible value. The Mona Lisa and many other beautiful items we now own are examples of what was 'trending' at that time. reactions What may be trending in the future might be some form of really awesome abstract art, provided the artist has managed to nail down the definition and emotion of the artwork. How To Secure Your Bitcoin Wallet - 14th October 2020; What You Need To Know About Bitcoin - 14th October 2020; Why should you Choose A Hardware Bitcoin Wallet Over A Web Wallet? - 13th October 2020 With Halving Having Passed, Is Now The Time To Buy Bitcoin? - 12th October 2020 Augur Price Hits New One Year High After V2 Release - 10th August 2020; Press Release: Synergy of Serra – New Cargo ... Mona Lisa. If you could print money from your computer would you? No. That would mean that your friend could also print money from their computer, and their friend could, and so on.
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