NFTs Remarkable New Money Culture
NFTs are eating the world. The Non-Fungible Tokens category jumped from a $2.5 billion wannabe during the first half of 2021 to over $40 billion by year’s end, according to Bloomberg. People are still strapping on bungie cords and jumping in. Making the NFT space one of the fastest growing communities on the planet.
It was all hypothetical fun until February, 2021 when hundreds of people paid musician Grimes nearly $6 million for a series of artworks that included a video with original music titled “Death Of The Old”. (True, digital artist Beeple sold $3.5 million worth of art through Nifty Gateway in 2020, but let’s face it, we were distracted in 2020 and Beeple did not have the same stick.)
More recently, the NFT “CryptoPunk #7523” sold for $11.8m at Sotheby's in early 2021.
Originally created outside of the traditional financial system to help track payments for shipments and other use, the solid and steady Blockchain has been steered onto roller coaster tracks.?
Crypto steps outside of the traditional economic system and sometimes seems to turn non-fungibility itself into a value. This may sound like an episode out of “Billions” or “Wall Street”, but it is a new reality. In the future, virtually any person, place or thing could have a programmable token that surrounds itself with value
Like Dadaism or Cubism, economy as microcosm has become an art project. And like Dadaism or Cubism, it’s an art project that ultimately may be worth millions of real dollars. (Note: At $40 billion, NFTs are now approximately the same size as the total global art market.)
Digital art NFTs are not the only place where people are putting their coin. People are paying virtual dollars for virtual real estate—in other words, buying spaces in virtual reality, to become land barons in a virtual world.
In 2017, Decentraland was proposed as a digital concept. In June 2021, someone paid $900,000 real U.S. dollars for virtual land in Decentraland, the largest amount for virtual land to date, according to DappRadar, a website that tracks NFT sales data. And in June 2021, someone purchased artist Krista Kim’s “Mars House” a virtual 3D version of a bricks and mortar house, that sold for 288 Ethereum tokens, the equivalent of over $500,000.??
NFTs are not the first time that people have adopted another form of currency. In the 1950s, when your grandmother went to the grocery store, she received trading stamps with every purchase. When she got home, she pasted the S&H green stamps inside a small booklet kept for that purpose. In time, the stamps (which were worthless—nonfungible--outside its own ecosystem) were redeemed for valuable sets of stainless silverware, dishes, even holiday trips.
?“We’re not creating new behaviors,” says Caty Tedman, head of partnerships at Dapper Labs. “We’re tapping into the things that people already love.”?
“Moreover, because the blockchain is public, it’s even possible to send additional products directly to anyone who owns a given token,” explain Steve Kaczynski and Scott Duke Kominers in the Harvard Business Review. NFTs give “holders value over and above simple ownership — and provide creators with a vector to build a highly engaged community around their brands.”
This means a world of change akin to the 1990s launch of the World Wide Web, when profound changes were predicted, proposed, deemed impossible and ultimately disintermediated the traditional worlds of entertainment, music, sports, gaming, publishing and almost everything else.
“NFTs are the easiest way to value and sell ideas,” says Daouda Leonard, CEO at virtual management and multiverse development company CreateSafe. “It could be a smart contract or a ‘recipe’: like the building blocks for a new streaming game.”
And because token holders are communities community engagement can be envisioned, launched, managed and optimized. Creating real meaning and value
A market.
Where have we heard this before? When people think of boom and bust environments, they often cite the Dutch tulip hysteria of 1636-1637. Despite its evergreen notoriety, the boom was actually short-lived (only 39 weeks). Importantly, the tulip craze was not spread over a large interconnected network of strangers, but was restricted to a small, tightly conformed clique of about 350 successful merchants who already knew one another. They were bound together by community. This is revealed by Anne Goldgar, a professor of early modern history at King’s College London. Tulip insiders were “very often connected with each other…through a profession, family or religion,” she cites. Low-income bystanders looked at the tulip frenzy and asked themselves, “Who would pay $7 million for a speckled tulip?”
More recently, the whole thing started (sort of) in June, 2017 when CryptoPunks began a mass experiment to gauge people’s interest in NFT ownership. CryptoPunks released 10,000 of the first non-fungible tokens on Ethereum. This began as an experiment so CryptoPunks and their partners Larva Labs started out using the freemium model, which meant that anyone could claim the first 10,000 24x24 pixel art NFTs for free, as long as they had an Ethereum wallet and paid the gas fees.
Each NFT was algorithmically generated, meaning so that no two characters would be alike. Some NFTs had traits that were rarer (and ultimately more valuable) than others. Proof of ownership was tied to the Ethereum blockchain, which arguably is the inspiration for the new ERC-721 standard that powers most digital art, collectibles, virtual worlds, and blockchain game items today.?
Most importantly, the way it works is that there will never be more than the original 10,000 CryptoPunks.?No 10,001.
Whether barter or bullion, economies are formed by communities of like-minded people—and the wealth and creativity embedded in NFTs has started conversations that have logged thousands of hours on Clubhouse, Twitter, Substack, podcasts and other infodumps.
Your NFT needs to be the center point of a storyline that includes a backstory of how and why this “token” came into being. Even if that story is, “We were smoking dope in Cabo and suddenly realized there is this wide-open space that no one else is paying attention to.”
Next, we want to know why this thing exists, what is your token’s reason for being?
You can hinge value and purpose on the ever-popular “Why?”, but you must differentiate yourself from everything else in the marketplace. Note that Grimes’sNFT bulleted an appeal: “Don’t forget a % of the proceeds from the #NFT sales will be donated to @carbon_180!” A higher purpose.
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Once we know where you’re from and what you’re about, we have to be able to identify your NFT. In most cases, this is key to understanding value. We have to know that it’s really you and not something else—someone trying to poach your popularity. CryptoKitties cites that each of its collectible, breedable cats is one-of-a-kind and 100% owned by you, and cannot be replicated, taken away, or destroyed. Of all the pixelated NFT faces, does yours have the blue background or red? Security is iconic: which is why banks have traditionally had pillars.
We also have to understand the rites of ownership. How do we find you? How clearly do we understand the process of purchasing you? Once we have you, what comes next?
“Patron culture is so much better than for people having to pay,” asserts Grimes. “It’s actually a very democritizing idea.”
Every community has its own set of words that prime those who belong, and NFTs are nutsy about jargon. To be a part of the NFT community, you have to know the words. Not knowing the words will instantly reveal you as an outsider—“out” you, and could invite troubles large and small. It’s a long list (this isn’t a comprehensive Glossary, sorry) but here are some terms or references you’ll have to know in order to navigate nonfungible tokens (NFTs), Blockchain and the meta verse. “gas war,” “gm,” “ape in,” “flipping,” “sharding,” “hollowchain,” “mint,” “mutant ape yacht club,” “Ethereum,” “cardano,” “multi node,” “Solana,”, “opensea,”?“roadmap,” “rarity,” “presale,” “smart contract,” “whitelist,” “transaction history,” “coolcats,” “Zombie Ape Alien” and more.?
Learn the words. Better: this is virgin territory, so you can invent your own words.
All communities have people who do not want to belong to your community. Outsiders, outliers, outlaws. In this case, these people want to remain in the conventional fungible monetary system. In a fledgling economy these doubters, skeptics and misbelievers provide the counterargument that says you should not exist--sometimes pushing forward the truth of why you must exist.
By arguing against you, these nonbelievers help people understand your reason for being, raise awareness and attract others who share your same values. They legitimize you.
Evidence of this is everywhere in the metaverse. Not only are there traditional naysayers, but splinter groups within the community itself. Value creation is a fickle thing and if people don’t like your assets, they can create their own. In the NFT marketplace, this can happen overnight.
All communities have a leader. Someone that everyone can point to provide guidance, rule sets, distinguish right from wrong. We can point to Bored Apes and Cyber Punks as first movers. But the fact that the founder of cryptocurrency (him/her/them) was a pseudonymous character named Satoshi Nakamoto leaves an open door for someone else to become leader. Or everyone else.
Viewed from the outside, NFTs seem to exist to make some lucky individuals insanely rich. They are missing the point. Old school.
There is another way to look at it. We are witnessing the rise of an inclusive new Millennial culture. Whereas some cultures use words to keep people at arm’s length, crypto invites people in. There is a saying, “WAGMI,” which runs counter to the GenZ get-rich-quick Influencer and multi-level marketing scams. WAGMI means, We're All Gonna Make It.
“There are scams to be sure,” admits one insider. But the general theme is ubiquity.
People start the day with a text “GM.” Good morning. “Which floor should we sweep today,” is not the lonely etude of the sole healthy person in a Covid-filled household (as I misinterpreted it). But rather, “Which floor (cheapest nfts of a collection) should we sweep (buy a lot of them before the price goes up).”
The whole point of a multiverse is multiple galaxies—and each NFT is its own galaxy with access to community, networking, collaboration, and memberships. The NFT might be embedded with any kind of value—admission to events, parties. Holders can enjoy airdrops (the project holder sends NFTs for free to your digital wallet), they can have merchandise?offers, access to the metaverse,?build a collection, share rises in value, have coupon codes, share special access or discounts to future NFT projects.
And it even goes further: “staking” can mean getting rewards as a form of passive income.
Ownership of royalties so you can use your NFT and the NFT’s brand to create your own business like a bored ape coffee brand, or a bored ape band which is signed by Universal Music, (Timbaland signed a different hip hop bored ape band). Ownership of royalty from music NFTs is a form of passive income when the song is streamed. Use your NFT in a game and you can earn crypto.
The utility of NFTs is expanding almost daily
The larger order of things is that economies tied to old values are tottering (carbon is just one example). Pollution, climate change, the pandemic and defunding petroleum are taking their toll—instability and change can lead to decentralization and opportunity. Bitcoin was introduced in 2008 and both Bitcoin and Ethereum emerged as pioneering entities and these days about 24% of people are at least “somewhat familiar” with NFTs, according to an IPSOS study conducted in August, 2021.
“Blockchain is the future in every way,” declares musician Grimes during a phone call. “Smart contracts is the shit of the future, and Crypto might be the thing that provides stability.”
The timing is curious. People are building new monetary value while others are seeking new societal values. Just as in the 18th century, there are the societal extremes of the haves and the have nots, and the two do not understand one another. We are immersed in an era of decentralization, diversity, gender equality, social injustice, democratization, self-actualization, authenticity, and teeming power shifts about who owns what.
The radical end thought is that, through blockchain, traditional powers do not hold the money. People do.
This article was written with Martina Skangalova