Are You in the Crypto Art Game?
Did you collect anything as a kid? Comic books, stickers, or Legos?
Your collections allow you to look back on comforting memories or reminisce about a time you feel strongly about. Maybe those nostalgic items allow you to hold on to your past as it fades. I once met a Buddhist monk in Santa Monica, California who told me that holding on to sentimental thoughts or material things eases anxieties while preserving you in a perpetual plight of not letting go. Be present. There is only the now. “The only dance there is.” I think he has it right. He also owns a Malibu beach house and two Lambos.
The things you collect and own might be of great personal and dollar value or have no monetary value at all. Maybe they’re part of looking back at nostalgia or part of an investment looking forward. As an investment vehicle, you might use that rare 1952 Mickey Mantle card you somehow acquired as collateral for your new McDonald’s franchise, while your elementary school pencil toppers won’t get you a Venti Starbucks latte.
What do you collect now — silver, wine, sports memorabilia? What about crypto art or non-fungible tokens? We’ll get to that in a bit. But first, let’s talk about scarcity and ownership.
Scarcity and Ownership
In the physical world people own and invest in real estate, precious metals, and priceless art. And while our world holds an abundance of items, there is also scarcity.
The concept of scarcity, whether real or perceived, can prompt FOMO (fear of missing out) which can have a powerful effect on driving the value of an item up. Around two-hundred copies of the original Declaration of Independence were printed on July 4, 1776. 80’s artist Jean-Michel Basquiat produced around 600 paintings before he died at age 27. Sure, you can make perfect copies, but that concrete limit of the original items is one of things that makes them rare.
Whether it was a feature or a bug, the digital world did away with the notion of one of a kind or limited edition. An image made of pixels can be copied a boundless amount of times without degradation and be immediately distributed to everyone with an internet connection. An internet meme can go viral in a flash. Conceptually, everyone can have it. Unlike Ben Franklin, I could now write a document and immediately distribute it billions of times.
Regardless of what you collect, pizza boxes or pinball machines, and whether those items are scarce or not, you can own stuff. There’s the concept of ownership. Those Beastie Boys t-shirts are my property. But digital items in the online world aren’t really owned if anyone can have them. It’s a gray area. There are two concepts that haven’t fully materialized in the online realm: scarcity and ownership… but that’s changing. Fast.
Ownership in the physical world means you have the freedom to own and transfer tangible or intellectual property. Blockchain technology, known as non-fungible tokens, now brings you ownership in the digital world. CryptoKitties are hardly a Picasso. But you can verifiably own CryptoKitties (aka non-fungible tokens), unique collectables that prove your ownership on the Ethereum blockchain network.
Fungible vs. Non-Fungible
Besides scarcity and ownership, there are two other concepts that are important to understand in this next wave of collecting items and art online. The term fungible is generally a finance word that describes an asset that can be exchanged for an asset of the same type, like money. Let’s say I borrow one dollar from you. You loan me the dollar, I go and spend it. A week later I give you a dollar back to show you that I’m not a deadbeat. You and I implicitly understand that the paper dollar I give you back is not the same physical paper dollar I borrowed from you. It has a different serial number, it may have been printed in a different year, I may have given you four quarters, or Venmo’d you the buck, etc., but it doesn’t matter, you got your dollar back. Money is interchangeable, exchangeable and substitutable. It’s fungible. A fungible item can be substituted for a similar item. Without fungibility a currency would be unstable.
Money isn’t the only thing that’s fungible. Oil, precious metals, bonds, bitcoin, or a grain of rice are all fungible.
Non-fungible on the other hand refers to things that are unique or non-interchangeable. If there’s a single painting that screams Picasso, it’s Girl Before a Mirror from 1932. Perfect copies exist but there’s only one original. It’s one of a kind.
As much as I want concert tickets or airline tickets to be fungible they’re not; those pre-pandemic economy plane tickets to Burbank aren’t exchangeable with business class tickets to Maui. They’re essentially non-fungible assets or in some cases semi-fungible. All right, you smarty pants, I know we can go deep into the fungibility rabbit hole and debate the particulars of what’s absolutely fungible and what isn’t, but you follow my point.
Non-Fungible Tokens
A non-fungible token (NFT) is a type of cryptographic token certified on the blockchain which represents something unique — a rare minted asset you can own, trade, sell, auction, etc. NFTs are starting to be used for collectibles like CryptoKitties or NBA digital trading cards. Doctor Who will soon enter the crypto card game using NFTs. There’s a game on the Ethereum blockchain using NFTs called Sorare (global fantasy soccer). Major League Soccer has had its 700+ players tokenized as digital collectables. This is just the beginning and it’s super early. You’re going to see items in the digital world and the physical world tokenized, whether it’s you who creates these tokens, or buys them, or sells them, or collects them.
NFT ownership is currently tracked via smart contracts on the Ethereum blockchain. These core contracts keep track of ownership (metadata) and ownership transfer. The non-fungible token is proof that the asset is real and there’s a true owner. Yes, you are the proven owner of that jpeg or wine collection. Authenticity and provenance is transparently available for anyone to verify.
Platforms like OpenSea.io and NiftyGateway are enabling any visual creatives or artists with an internet connection to turn their art and graphics into NFTs and sell them for cryptocurrency on their platforms as unique, rare collectibles.
This is a boon for creatives in the 21st century.
Here’s an example of the first NFT I minted as a test.
I drew the character and have now posted it on OpenSea as a unique item.
Building a 21st Century Portfolio
The world is moving more digital not less; the pandemic has been an accelerant into this inevitable digital world. I don’t fully understand this technical practice of minting unique digital tokens and art assets –yet. But I’ll continue going deeper into this NFT exploration to learn more about it, participate in it, and write about what I’m learning and discovering along the way.
This whole NFT thing could go bust before it really takes off, but not likely. It opens up all sorts of avenues that haven’t been explored yet. It’s an opportunity for artists to productize their intellectual property and monetize their collections to thriving customers in a digital-first world. It’s an opportunity for investors and collectors to build a 21st century portfolio of scarce assets they might not have been able to previously own.
