No Fleeting Trend
We need to talk about NFTs. Everybody else is and the hype surrounding them is almost impossible to avoid. The pandemic is still with us, bitcoin is starting to break out of its recent slump, the Oscar nominations have been announced and yet NFTs are still making the headlines.
To some, NFTs represent the latest evolutionary stage of cryptocurrency: a new and ingenious way to break from traditional asset classes. To others, they’re a senseless bubble and yet another way of parting fools from their money. The debate is raging and isn’t likely to die down anytime soon. Even Guy himself is getting curious.
Added to all this hype are the customary complements to any crypto-related story: some truly eye-watering sums of money. Crypto doesn’t do small numbers and NFTs are duly getting with the program, with some changing hands for the sort of prices to convince many that the world may finally have lost its mind.
Today we’re going to dive into that ocean of money and look at the most expensive NFTs to date. Some of you will be nodding your heads in admiration, others shaking them in despair. To some NFTs are like the cavalry riding in to save the day, to others they’re the firth horseman of the apocalypse. But for many, at this stage anyway, they might still be a total mystery…
WTH are NFTs?
If you’re already in the know as to what NFTs are, then good for you and feel free to skip ahead to the next section. Those not yet up to speed, read on.
NFT stands for non-fungible token and let’s clear up the question of fungibility before we go any further. If an asset is fungible, then it can be freely exchanged with another asset of the same denomination.
The best example here is a dollar bill. The dollar in my pocket is worth exactly the same as the dollar in your pocket: they are fungible. One bitcoin is the same as another bitcoin: they too are fungible, regardless of whose wallet they’re in, or what price they’re trading at.
Non-fungible assets therefore have a unique value. Take football trading cards as an example here. A card representing Paris Saint-Germain forward Kylian Mbappé (signed for €180 million in 2018) is almost certainly worth more than the one for Fulham FC midfielder Joe Bryan (signed for a little under €7 million in the same year). Both are trading cards representing people much better at football than any of us, yet they have different values to a collector. They are non-fungible.
An NFT is a digital representation of an asset that stores information about said asset, including who owns it. The NFT itself is stored on a blockchain, which means that the information it contains cannot be altered or destroyed. Almost anything can be represented by an NFT, including artworks, title deeds, web domains, collectables audio files and even people’s identities. Ownership of the NFT can denote ownership of the asset it represents, though not necessarily the copyright to that asset.
It’s here that NFTs can start seeming nonsensical to many. I could own an NFT representing a jpeg file of Picasso’s Guernica painting, but that wouldn’t mean I owned the original painting and I couldn’t stop others from distributing images of it online or elsewhere.
What seems even crazier is the fact that many people have been willing to pay huge sums of money for NFTs representing ‘artworks’ that aren’t… well, aren’t really any good. Art is of course subjective and what may seem like a load of crap to one person may be a work of staggering genius to another, but the fact remains that artists are able to create works in minutes and sell them as NFTs, despite them having little to no real value.
But this isn’t to say that NFTs are no more than a big old scam. They do have the potential to be a force for good, allowing artists to profit from their work without the intervention of middlemen like dealers and galleries. Because NFTs are built using smart contracts, they can be coded to ensure that, if sold on, the creator can automatically be granted a proportion of the profits. In this way, artists can continue to earn a living from their work.
1. Everydays: The First 5,000 Days – artwork by Beeple, $69.4 million
If the NFT sector was hotting up in early 2021, then on 11th March it went thermonuclear. On that day, in an online auction manged by ultra-posh London auctioneers Christie’s, a digital collage by Mike Winkelmann – better known as Beeple – sold for a shade under $70 million dollars to a collector from Singapore.
Yes, you are reading that correctly. A jpeg file – not existing in any physical form – sold for more than works by Titian or Raphael and put its creator behind only Jeff Koons and David Hockney in terms of the price paid for a work by a living artist. When you put it like that it seems completely insane. Unsurprisingly, many in the art world remain unimpressed.
The work itself is a collage, created using 13 years-worth of images, which Beeple created on a daily basis during that time. It may be an encrypted jpeg, but a lot of work has gone into it. Beeple himself has not suddenly appeared as if from nowhere. He has worked with the likes of Apple, Nike, Justin Bieber and Katy Perry and his usually sci-fi influenced work has gained him many fans over the years. It’s unlikely though that anyone saw this coming.
The buyer remained anonymous at first, before being revealed to be the founder of the crypto fund Metapurse, going by the pseudonym MetaKovan. In a statement released by Christie’s after the auction had ended, he said:
‘Techniques are replicable and skill is surpassable, but the only thing you can’t hack digitally is time. This is the crown jewel, the most valuable piece of art for this generation. It is worth $1 billion.’
While many may interpret this, especially the last part, as wishful thinking, MetaKovan could still be proved right. Art – like anything else – is worth only as much as others are willing to pay for it, but if NFTs live up to their potential then Everydays: The First 5,000 Days could theoretically increase in value over time. In the meantime, whether it turns out to be a wise investment or a colossal waste of money, it certainly has got people talking about NFTs.
2. CryptoPunk #3100. $7.6 million (4,200 ETH)
So we come to CryptoPunks and enter the world of digital collectables. CryptoPunks are, according to their creators at Larva Labs, a set of ‘10,000 unique collectable characters with proof of ownership stored on the Ethereum blockchain.’ They first appeared in 2017 and were handed out for free to anyone with an Ethereum wallet who applied for one in time. Each one is unique, though some quickly became more highly valued than others.
A secondary market for these CryptoPunks sprung up, with nascent NFT technology making it possible to sell and trade them. The fact that only 10,000 were ever made and that each one was immutably stored on the Ethereum blockchain made them increasingly sought-after, culminating in #3100 changing hands for north of £7 million a few days ago. Not bad for something that was given away for free a few years before.
The CryptoPunk craze is not dissimilar to that of CryptoKitties, which launched around the same time and was at one point responsible for slowing down the entire Ethereum network. These cute, customisable digital cats commanded some pretty insane prices themselves, with some changing hands for hundreds of thousands of dollars. Their prices have since been dwarfed by the CryptoPunks, but people still do pay good money for the rarest ones.
3. CryptoPunk #7804. $7.5 million (4,200 ETH)
This pipe-smoking bad boy briefly held the record for the most expensive NFT ever sold, before being overtaken a day later by #3100. Both changed hands for the same amount of ETH, but a rise in the ETH price (a not uncommon event) saw the later sale win out.
4. Jack Dorsey’s First Tweet – $2.9 million
If the Beeple collage and CryptoPunks sagas haven’t awakened your sense of the surreal, then perhaps this next NFT will. Jack Dorsey, the luxuriantly-bearded founder of Twitter, has currently auctioned off his first-ever tweet as an NFT. And the winning bid was $2.9 million. Yes, once again, you did read that right.
Valuables has an interesting answer to the obvious question of why anyone would want to pay to own a tweet:
‘Owning any digital content can be a financial investment, hold sentimental value, and create a relationship between collector and creator. Like an autograph on a baseball card, the NFT itself is the creator’s autograph on the content, making it scarce, unique, and valuable.’
In this way, NFTs represent the same obsessions that people have always had with owning certain things which they perceive to have value. Some people still set great store by owning postage stamps and are willing to pay huge sums to fill gaps in their collections. To most of us, this seems like a waste of money, but not to the collectors.
Although a digital asset isn’t a tangible thing, does that make it any less valuable as an investment? It’s easy to laugh at those putting forward these huge sums, but if these assets increase in value, it’ll be them doing the laughing further down the line.
5. CryptoPunk #6965. $1.6 million (800 ETH)
Ok, so CryptoPunks are going to dominate the rest of this list, so we’ll run them down quickly before touching on some other NFTs that are generating a whole lot more interest. To the untrained eye, there might not be much to differentiate CryptoPunk #6965 from #7804, #3100 or indeed any of the other CryptoPunks. If you agree with that statement then congratulations, you’ve just saved yourself a whole lot of ETH.
NFTs – Just Getting Started
To many, NFTs are a bubble that must surely burst. It’s hard not to agree at times, especially when you see collections of pixels changing hands for millions of dollars. These big-ticket buys may suggest that the world has finally lost its mind, but look beyond them and a different story emerges.
The worlds of gaming, collectables, art and music are all starting to embrace NFTs and it looks like they’re getting along famously. The idea of owning something entirely digital may seem absurd to those of a certain age, but to those who already spend large amounts of their lives online in one form or another, it makes perfect sense.
Just because something doesn’t physically exist doesn’t mean it can’t be owned, or that someone else might someday be willing to buy it from you for more than you paid for it.
That said, expect sales of digital photo frames to start going through the roof.