What happens when people are both rich and bored? They tend to go on a vanity power trip and spend millions as part of a therapeutic exercise. Most people get a kick out retail therapy. It lifts mood and incentivizes us to learn and earn. Apologies to those of you who are trying to ‘make a difference’ with your vocations. The lockdown imposed to stop the spread of COVID-19 virus did much more than its original mandate.
In tandem with the catastrophic chaos, an emerging trend has broken all records for the auction of a piece of digital work. Welcome to the world of non-fungible token (NFT). NFTs are tokens that we can use to represent ownership of unique items. They let us tokenise things like art, collectibles, even real estate. NFTs can only have one official owner at a time and they’re secured by the blockchain – no one can modify the record of ownership or copy/paste a new NFT into existence.
Non-fungible is an economic term that you could use to describe things like your furniture, a song file, or your computer. These things are not interchangeable for other items because they have unique properties. Fungible items, on the other hand, can be exchanged because their value defines them rather than their unique properties. For example, ETH or dollars are fungible because 1 ETH / $1 USD is exchangeable for another 1 ETH / $1 USD.
The NFT market ballooned over 2020, climbing to a market value of at least $338 million, from about $41 million in 2018, according to a report by NonFungible.com and L’Atelier. The surge in interest led to the expansion of online marketplaces.
Sold!
Famed auction house Christie’s facilitated the sale of a digital collage made by Beeple. The $69 million price tag raised both eyebrows and questions about the sanity of events. As per media reports, the piece of digital art was purchased by a cryptocurrency investor based in Singapore called Metakovan.
Metakovan is the founder of Metapurse, a crypto-based investment firm. Metapurse outbid dozens of rivals over the course of the 15-day online contest to win Beeple’s pixelated fusion of irreverent drawings and fantastical landscapes that the artist combined into a single collage called “Everydays: The First 5000 Days.” Incidentally, Metakovan, who acts as the fund’s financier, paid for it with about 42,329 of the cryptocurrency ether.
Yearning for Earning
The biggest use of NFT today is in the digital content realm. That’s because that industry today is broken. Content creators see their profits and earning potential swallowed by platforms. An artist publishing work on a social network makes money for the platform who sell ads to the artists followers. They get exposure in return, but exposure doesn’t pay the bills. NFTs power a new creator economy where creators don’t hand ownership of their content over to the platforms they use to publish it; ownership is weaved into the content itself.
When they sell their content, funds go directly to them. If the new owner then sells the NFT, the original creator can even automatically receive royalties. This is guaranteed every time it’s sold because the creator’s address is part of the token’s metadata – metadata which can’t be modified.
Control See, Control We
Seeing is believing. This phrase is probably in intensive care at the moment and could soon perish from the periphery of both vocabulary and human psychology. It is said to mean that if you see something yourself, you will believe it to exist or be true, despite the fact that it is extremely unusual or unexpected.
Cynics often bring up the fact that NFTs “are dumb” usually alongside a picture of them screenshotting an NFT artwork. “Look, now I have that image for free!” they say arrogantly. Well, yes. But does googling an image of Leonardo da Vinci’s Mona Lisa make you the proud new owner of a multi-million-dollar piece of art history? Ultimately owning the real thing is as valuable as the market makes it. The more a piece of content is screen-grabbed, shared, and generally used the more value it gains. Owning the verifiably real thing will always have more value than not.
Ceaseless Evolution of the Internet Economy
Supply creates its own demand is an old economic doctrine. Much of the shake, stir and grind in the NFT ecosystem at present is nothing but an act of faith. The prerequisite of a market, for a commodity or service, is the presence of sellers and buyers. When either two or sufficient number of people, as the case may be, congregate either in person or online to sell and buy, the principles of a free market prevail.