NFT WTF (Part 1): Prologue

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The Psychology Behind It

What you can do with US$70 million? You can buy Kim Kardashian and Kayne West’s California house at The Hidden Hills, or a Bombardier Global Express, or adopt 7 million trees a year. Maybe you can consider buying digital art over the blockchain.

Non-fungible token (NFT) is making it into mainstream media and almost every other person you know are talking about NFT after Beeple’s “Everydays: The First 5000 Days” was auctioned off by Christie’s recently for US$69.3 million.

Fungible and Non-Fungible Assets

In this article, I am not going to discuss what is NFT, but about WTF.

Why people buy NFTs? There are various reasons behind it, however, they are not that much different than the reasons people buy a piece of art.

  1. People buy arts for capital gain. Many art collectors buying artworks from budding artists to gain from their future values. It is an investment.
  2. People buy artworks for the stories behind them. For example, The Mona Lisa. The story of this pregnant lady painted by the great master Leonardo Da Vinci makes people willingly pay high dollars for it. However, no matter how much you willing to pay for it, The Mona Lisa is not for sale.
  3. People buy artworks because of the creators. The number of hours of practices Michelangelo put into his works, the skillset he had, worth every penny paid. I once had the chance to admire Michelangelo’s draft of his paintings on the Sistine Chapel’s ceiling in Tokyo when they were on display in The National Museum of Western Art in 2013. The exhibition was named “The Making of a Genius and the 500th Anniversary of the Sistine Chapel” and the works displayed touched me until today.
  4. People buy artworks because of the messages they carry. As MetaKoven, the buyer of Beeple’s work, said, “If you work hard … all 5,000 days, you will be successful.” Beeple started to make one image a day started 1st May 2007. He has not missed a single day for 13 years. (My sister, Emily, has been giving me a morning call every day for the past 7 years. I would tokenise our conversation if I did have the recording of the calls. Too bad. A shout out to my sister.)
  5. People buy artworks to support the artists and their works so the artists can continue to produce what they like.
  6. People buy artworks because they want to display them on their premises. This is one of the main functions of artworks.
  7. People buy artworks because that makes them happy.

The list can go on and on. We wonder why people do what they did because we were not in their shoes. Like people from the equatorial wonder why people form the North hates snow.

If you do buy art, leave a comment and share with us why you buy an artwork.

Tokenisation of an artwork doesn’t have to mean digitalise it or it is only for digital art. The token can also represent the right to distribution of copies of the original artwork, or as Graham puts it, “the ability to transfer”.

Tokenising artwork doesn’t necessarily mean putting the artwork itself on blockchain either. Putting a large file on the blockchain is expensive and not really practical at this point in time. The actual Beeple’s work might still be stored somewhere off-chain.

There are many types of NFT. In Jeff McDonald’s tweet, he categorised them into programmable, special right, identity, and proof-of-existence. I will discuss more of these when I talk about the use case “Train your dog” I mentioned in Ethereum 2.0 vs Symbol (Part 6).

Ethereum 2.0 vs Symbol (Part 6): Non-Fungible Tokens

Facts don’t lie. However, the way we interpret them can form a totally different story, and they might have different meanings to us at different points in time.

Arguably the most widely publicized art sale in history was the auction of Leonardo da Vinci’s Salvator Mundi, which raked in more than $450 million at Christie’s New York in 2016 during a postwar and contemporary art event. — artnews.com

Beeple’s work is not the most expensive artwork in the world, but it is the most expensive digital art, and also it is the most expensive NFT sold, thus far. While many argue that a digital copy of the art can be easily downloaded, so as Salvator Mundi. Many historians doubt if Leonardo really did paint it. Over the years, the artwork has been retouched and it is not as original as it was even if Leonardo did paint it. A digital copy will not have those issues.

The price tag on the artwork we see today is in USD. 5 or 10 years down the road, we might say, “This art was sold for 600 ETH.” rather. Dragon of CryptoKittie was sold for 600 ETH in 2018 and was worth USD170k at that time is now worth over USD1 million. It could be sold for more than 600 ETH, and that would be a double capital gain, both from the appreciation ETH and the digital art’s worth.

For no-coiners, US$69 million could sound a lot. For someone who has been mining Ethereum from the very begininig, this could really mean about 40.5k ETH, which doesn’t really cost much in the early days. It all depends on where you are and where you were.

If you think NFT is a bubble, I think so too. So as Bitcoin and our beloved fiat currency. Their values are all based on our beliefs and faith in them.

CY TWOMBLY’S UNTITLED (NEW YORK CITY) (1968) SOLD FOR $70.5 MILLION — A RECORD FOR THE ARTIST — AT SOTHEBY’S NEW YORK IN 2015. Source: https://www.sothebys.com/en/articles/cy-twombly-by-the-numbers
My niece Ashlyn’s artworks

Cy Twombly’s work is great. I think my niece’s are great too! Do you think I shall tokenise them? Will you buy it?

By the way, if you have not noticed, my last name is Fung and hence I do have strong affinity to tokens, fungible or non-fungible. (Just to make you remember me *wink* )

Interesting Reads:

  1. https://www.businessinsider.com/grimes-nft-art-warnymph-sells-for-millions-20-minutes-2021-3
  2. https://coinranking.com/nfts
  3. https://www.nytimes.com/2021/03/11/arts/design/nft-auction-christies-beeple.html
  4. https://www.theguardian.com/technology/2021/mar/13/how-non-fungible-tokens-became-the-latest-tech-speculation-bubble
  5. https://www.rollingstone.com/pro/news/kings-of-leon-when-you-see-yourself-album-nft-crypto-1135192/
  6. https://www.theguardian.com/culture/2021/mar/05/what-is-cryptoart-how-much-does-it-cost-and-can-you-hang-it-on-your-wall
  7. https://www.cnbc.com/2021/03/16/sothebys-enters-nft-world-in-collaboration-with-digital-artist-pak.html
  8. https://www.thefashionlaw.com/nfts-what-are-you-buying-and-what-do-you-actually-own/
  9. https://www.businesstimes.com.sg/banking-finance/singapore-based-buyer-unmasked-in-claim-to-us69m-nft
  10. https://edition.cnn.com/2021/03/14/tech/nft-art-buying/index.html
  11. https://www.artnews.com/list/art-news/artists/most-expensive-old-masters-works-1234581432/

NFT WTF (Part 1): Prologue was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.