Johnny Harris explains NFTs in the video above. He made it pretty easy to understand... but still thorough (even defining the blockchain). In his news letter this morning, Noah Smith claimed that NFT's are sweeping New York. "It’s insane," he wrote. "Everyone is just talking about their NFTs... The effects of crypto wealth have only begun to make themselves felt in our society and our economy. More is on the way. When some people look at NFT culture they see a scam or a Ponzi scheme; others see the glimmer of a bold new web3 that will transform how we live. What I see is the tip of a very very big iceberg. And the iceberg is made of money."
In mid 2020, the total market capitalization of all cryptocurrencies was estimated at around a quarter of a trillion dollars; since then, it has risen to $2 trillion.
Bitcoin, the original crypto, represents less than half of this total.
This is an absolutely enormous amount of wealth-- almost 4% of the entire value of all U.S. public companies-- that just appeared out of nowhere when people decided crypto was worth more than before. It’s extremely liquid by now. And crypto wealth is extraordinarily concentrated-- a year ago, it was estimated that Bitcoin “whales” owned over 70% of all Bitcoin (about $579 billion at today’s price). Other cryptocurrencies like Ether are also believed to be extremely concentrated in the hands of a few super-rich owners.
These crypto whales are so rich that even they probably can’t comprehend it. Surely, they don’t mind spending just a little bit of their vast fortunes, especially since most of them are probably crypto bulls who expect their wealth to keep increasing exponentially anyway. Life is short, and there’s no point in dying on the world’s biggest pile of digital gold. If the whales own 70% of crypto, and decide to spend just 5% of their holdings this year, that’s $70 billion in new spending — perhaps not enough to materially contribute to inflation, but enough to absolutely transform slices of the economy. The artists and scam artists running around hawking NFTs in New York Bars are just one example.
And as crypto’s market cap grows and whales decide to loosen their wallets, we could see effects far beyond anything we’ve seen from the NFT boom so far. So let’s think a little about how much wealth might get splashed on the economy in the years to come, who will get it, and how it’ll change our society.
I received an e-mail from top-flight L.A. art dealer Paul Kopeikin today and then spoke with him on the phone. The reason I called him is because one of the artists he represents, Jeffrey Milstein, a photographer, architect, and pilot, will drop his first NFT's through the fellowship Trust on the Foundation Platform. These will be the square "Aircraft As Art" images, of the underbellies of various planes. There will be five drops of ten images per week.
Paul wrote that Milstein's photographs, like "Virgin Atlantic Airways Airbus A340-600 50" above, "have been exhibited and collected throughout the world, and have been featured in international publications including the New York Times, Time, Esquire, Fortune (cover), Bloomberg, Harpers, Vanity Fair... San Francisco Chronicle (cover,) and Los Angeles Times."
Milstein's work is in the collections of the Scottish National Galleries, LACMA, George Eastman House, Musee de L'Elysee, Portland Art Museum, Akron Art Museum, and the Smithsonian National Air and Space Museum, where he had a year long solo show.
A few months ago, ARTnews, explained that an NFT "is a unique unit of data employing technology that allows digital content-- from videos to songs to images-- to become logged and authenticated on cryptocurrency blockchains, primarily Ethereum. Once content is logged onto the blockchain, every transaction from transfers to sales is recorded on-chain, creating an easily accessible ledger of provenance and price history. The main impact of NFTs is making it easy to own and sell digital content. Previously, for example, digital artists could build up large followings on social media, attract freelance commercial work, and maybe sell prints and other merch with their designs, but they had trouble monetizing digital art directly, as consumers asked, Why should I buy what I can screenshot for free? While the technology behind NFTs made it easy to trade and sell images online, it is really the NFT community that has to be credited with creating a market for these digital assets, because technically, as many detractors point out, digital images that have been turned into NFTs can still be saved or screenshot without cost."
Typically, creators (or, if you prefer, artists) will mint their work on an NFT marketplace, which includes platforms like OpenSea, SuperRare, Nifty Gateway, Foundation, and many others. Minting is the act of creating an NFT, which means creating a smart contract that will be stored on the blockchain. The smart contract contains a lot of important information: it lists the creator of the work and ensures that the creator, or other parties, receive royalties each time the NFT is sold.
The ability for artists to collect returns on resale value automatically is part of NFTs’ draw for artists (all platforms make their money by receiving a small percentage of royalties through the smart contract). But the process isn’t perfect: technological glitches can make it so that parties don’t always receive royalties. And a smart contract does not have the legal weight of copyright-- it will take a relevant court case to see how the law regards smart contracts.
...While NFTs have had a positive impact on many artists, there isn’t enough data available yet to see if NFTs are benefiting the many or just a select few. Detractors call NFTs a Ponzi scheme. The only comprehensive study of NFTs published so far collected prices from 2017 to April 2021, and reported that $15 was the average sale price of 75 percent of NFTs, with only 1 percent of NFTs reaching prices higher than $1,500. This data, however, should be taken with a grain of salt. It is heavily skewed because the majority of its data points hail from a time before NFTs were adopted at the current scale.
Preventing theft is an ongoing challenge: artists who have held back on creating NFTs have often seen their work minted by unknown parties, and only a few NFT marketplaces verify a piece’s creator before allowing it to sell. Artists who have complained about this issue online have been told to create NFTs of their work just to stop theft, an imperfect solution that has artists feeling as if they’re being forced to create NFTs. Additionally, many artists have refused to create NFTs on moral grounds.
One reason some artists have held back on making NFTs is because they don’t want to profit from the polluting infrastructure of Ethereum. Basically, cryptocurrencies like Ethereum consume immense quantities of power to operate. Currently, a single transaction on Ethereum consumes as much electricity as does a house in a workweek, according to Forbes. While there are alternative cryptocurrencies with a much lower environmental footprint, like Tezos, they have not yet been adopted widely (and the NFT platform built on Tezos recently dissolved). Some NFT platforms buy carbon offsets to mitigate their impact but the actual efficacy of carbon offsets is debatable. The majority of the NFT community has looked past the environmental impacts because Ethereum 2.0 is coming, which will utilize a significantly less polluting infrastructure. It is said to be arriving in early 2022, though its deployment has been “imminent” for years.
Or maybe you'd prefer to put your money into collecting a limited-edition CPAC MAGA hat instead (one of a kind). "President Trump," the sales pitch avows, "is REALLY excited about this CPAC-edition MAGA Hat, and we know he’ll be disappointed if a top Patriot like YOU doesn’t enter. We’re updating him the moment you take the next step and enter, so don’t wait."
If anything, this craze certainly makes the case that taxes on the very rich are way too low and that a minimum 80% marginal rate on anything above a few million dollars is exactly what is called for.