Brian Patrick Eha is a New York-based journalist, fiction writer and author who spent nearly five years following the rise of Bitcoin, leading to his book How Money Got Free. Over the past year, he has been investing in and researching the meteoric rise of non-fungible tokens, examining their impact on our physical and digital realms. Part reportage, part personal essay, the following text charts the feverish highs and lows of buying the riskiest, most volatile asset class in the world
Cartoon faces with animal eyes stared back at me: bear noses, bared fangs, skin in unreal shades of green and red, some wearing masks or goggles, others flanked by flies or carrying spears. This was the new frontier of art and identity; these were the faces of my peers and compatriots, a motley crew of collectors, flippers, influencers, opportunists and superfans. It was December 2021 and I was browsing the online marketplace Objkt.com, looking at Ziggurats, the new non-fungible token collection from Linkin Park frontman Mike Shinoda. I had sorted the collection by price and was scanning the first page of results – a small cross-section of a horde 5,000 strong. Designed for mass appeal with an edge of transgression, like the music for which their platinum-selling creator is famous, the Ziggurats were JPEGs, digital avatars, each one a tokenised and tradeable asset backed by the Tezos blockchain. The common ones were going for a couple of hundred dollars apiece, the rarest for thousands. The collection had sold out in just half an hour, earlier that day, and was on its way to racking up, in the first 24 hours, more than $500,000 in sales on the secondary market. I’d managed to grab six Ziggurats in the initial drop. Almost immediately I resold three of them, covering the costs of all six and making an instant $120 profit. In the three months I had spent living and breathing NFTs, it was a rare easy win.
A “non-fungible token”, if you don’t know – and millions of people do know, today, who didn’t know a year ago – is a digital item that is provably unique and the ownership of which can be verified on a public blockchain. The acronym, NFT, has come to stand for a whole fertile realm of cutting-edge creative expression, shysterism, and speculative finance. Or, as Bloomberg Businessweek put it, “a bottomless rabbit hole of innovation and intellectual intrigue”.
I bought my first NFTs in February 2021 but didn’t really dive in until August, at the tail end of a bull market. Lured by stories of overnight fortunes, and with years of crypto knowledge to draw on – I had published a narrative history of Bitcoin in 2017 – I was nonetheless unprepared for the heady brew of art and optimism I found. Independent artists who might otherwise have been siloed or silenced in countries like Indonesia, Malaysia, Turkey and Cuba had found a global market for their work. Large NFT collections boasted roadmaps, community managers, business partnerships and marketing – ostensibly art projects, they operated like a cross between technology startups and private members’ clubs. The latter aspect was occasionally explicit in the name, as with Bored Ape Yacht Club – a collection of 10,000 cartoon apes, launched in April 2021, which now sell for over $300,000 apiece. Among collectors and creators alike, the universal motto was WAGMI: we’re all gonna make it.
Among those riches, in my first weeks, I was Augustus Gloop in Wonka’s factory, grabbing fat handfuls of whatever looked delectable. NFTs give you permission to be a kid again – an appeal so seductive that within three months, having created a new, pseudonymous Twitter account to take part in it all, I had gained 1,000 followers, joined the board of curators for an organization which invests in NFTs and brainstormed a major piece of the roadmap for one of the hottest projects of the day. In a small way, I had become a tastemaker. No one was more surprised than me.
I had also made – and lost – tens of thousands of dollars. My life had become an endless round of Discord channels and drop announcements; the chronic stress of keeping up with it all was eating me alive. My wife struggled to understand my new obsession. I had raided my savings and destroyed my peace of mind, and for what? For JPEGs?
The optimistic gloss on NFTs is that they represent a paradigm shift for the art world on at least three fronts: First, by undergirding digital art with permissionless, open-source software and offering it to a global marketplace, they democratise art collecting; second, by allowing artists to bake a royalty percentage into each piece they sell, NFTs enrich artists with passive income from secondary sales, obviating the need for Patreon; third, and most crucially, NFTs represent real and verifiable ownership of unique assets online.
Ecoutez. Whereas dollars, pounds and cryptocurrencies are fungible – one pound note is as good as any other – art isn’t: Only ‘Starry Night’ by Vincent van Gogh is ‘Starry Night’, and god help the curator who tries to swap it out for another painted canvas. By marrying art images to digital tokens – binding them together on a blockchain which tracks their provenance – NFTs make it possible for art to be both digital (thus nonphysical, easily shareable and transportable, with near-zero storage or maintenance costs) and rare.
Understandably, this is a head trip for most. The sceptic’s argument is that most NFTs today take the form of JPEGs – image files that can be endlessly right-click saved or screenshotted – and that anyone buying or, god forbid, “investing” in them is a complete fool, a charlatan or both. But here is where the Luddites and sceptics get it wrong. Copying a JPEG conveys no true ownership, hence no intellectual property, no membership rights, no street cred – just as having a perfect digital copy of the new Thom Yorke album on your hard drive doesn’t fool anyone into thinking you produced the music or that you deserve a dime in royalties. Screenshot all you want, say the NFT culturati: Only one digital wallet will ever hold the real version, the original, like a vault holding a set of master tapes.
NFTs run the gamut from low-effort artwork that sells for a few bucks – the digital equivalent of a street artist’s doodle – to iconic pieces that go for millions. To understand the craze for high-end NFTs, especially collectibles, it helps to think of them as luxury goods. Or more accurately, Veblen goods. Named for economist Thorstein Veblen, who coined the term “conspicuous consumption” in his 1899 book The Theory of the Leisure Class, Veblen goods are status symbols, their distinguishing feature being that demand for them rises as their price rises, and falls as their price falls: exactly the opposite of how pricing works for normal goods. The more desired they are, the more desirable they become. Whatever their quality of workmanship – and it’s often superb – when you buy a Veblen good, what you’re buying, first and foremost, is exclusivity, determined partly by price and partly by scarcity.
It would have been unthinkable without the pandemic, that lust for rare digital goods. The feverish hunt for what was new and next at the intersection of art and commerce, the sudden certainty that a JPEG, backed by public proof of its rarity and rightful ownership, could serve as the ultimate 21st-century flex, a cross between a Picasso and a Patek Philippe. Oh, the movement was there in its infancy before the global spread of Covid, the germ of an idea with its own viral payload, but without mass lockdowns and the extremely online habits they spawned, the idea of NFTs might never have gone mainstream. At least not in this decade.
But the pandemic did happen. And so, instead of a slow maturation, NFTs got a massive hit of growth serum. For an untold number of digital natives, NFTs, not sports cars or fancy watches, are now the favoured form of status display. Young men – and they are mostly men, though their pseudonyms and silly avatars make it impossible to know for sure – congregate in chat rooms and Twitter threads, peacocking, showing off their scores. Every serious collector knew the numbers: $100,000 for an iconic video clip of LeBron James, more than $1 million for a Bored Ape and the intellectual property rights to the same, $100 million in total NFT sales surpassed by Christie’s in September 2021. At a high enough altitude, rare digital art satisfies the age-old human desire to be, and be seen as, special: We want what others have, and we want what others can’t have. At home in our sweatpants, all of us were looking for the internet equivalent of a statement piece.
A fortunate few had already found theirs. On Twitter and the chat platform Discord they hugged their luck, amassing followers, flaunting profile pictures worth tens or even hundreds of thousands of dollars. For a while, the braggy Twitter bio of one influencer, known as Artchick, read (as I recall): “Already made it. Now just having fun.”
The fun was a major draw. Amid the grey grind of what was still, unaccountably, the Covid era, the experience of joyriding through a digital wonderland where everything was for sale offered a megadose of excitement, just as a wild weekend in Vegas can liven up a working stiff’s dull routine. In a zero-interest-rate environment, savings accounts – as banks persist in calling them – are a sick joke, which means young people today are perpetually primed to YOLO their cash reserves into the next 10X investment opportunity as their best, or only, means of building wealth. One Twitter user, a self-identified father and former Black Hawk helicopter crew chief, claimed that despite owning a Bored Ape collection worth nearly $1 million, he had less than $3,000 in his bank account.
In 2021, according to crypto-focused venture fund 1confirmation, $19.6 billion worth of NFTs were traded worldwide. Like high-stakes gamblers, we soon became inured to the amounts of money being thrown around. Coveted NFTs could sell out in seconds, so speed was prized. Second-guessing, cool calculation were liabilities. “You are preternaturally fast,” a compatriot said after one drop. It was the best compliment I had gotten in weeks. On September 19, I scored an incredible flip: Having minted an NFT from the hot new collection PRJKTNEON for $169, I resold it a few hours later for more than $5,000.
A week earlier, however, I had lost out on an even bigger score due to a website glitch. There was no consumer protection, and no way to rectify the error: Hardly anybody even felt sorry for me. “If you’re in this NFT game long enough,” said collector Jesse Altman, “it’s just impossible not to have moves and missed opportunities so bad that they make you physically sick to your stomach.” And so hedge fund guys wrote investment analyses to buttress their JPEG purchases, while pseudonymous Aristotles ginned up a philosophical framework for the risky business of speculating on digital art. “Everything is a speculation now, even living,” crypto influencer 0xAllen claimed. “There’s no separation between existence (and what you need for that) and speculation.”
It should be said that some NFT collectors really do love art, and for them the marketplace offers everything from digital paintings to strobing GIFs, comics-inflected illustrations to AI-generated abstractions. The new technologies have divided the old guard of artists and critics. “Someday there will be a Francis Bacon of NFTs,” wrote New York magazine art critic Jerry Saltz, arguing that “all the people who say NFTs can’t be art, that every one of them is bad […] are like those nostalgic old-school people who want to return to the gold standard.” Yet no less an elder statesman than Brian Eno lodged a withering critique, saying that NFTs seemed like “just a way for artists to get a little piece of the action from global capitalism, our own cute little version of financialization.” Shortly after reading Eno’s comment, however, I came across a tweet that seemed like a retort. “Why financialize art,” a user named SHL0MS asked, “when you can artify finance?”
They had a point. Through the fog of manic greed, a large unknown country hove into view. This was the “metaverse”, a digital realm the borders of which extend from “NFTwitter” to virtual worlds with names like Decentraland and The Sandbox, where plots of land are bought and sold and clubhouses designed and erected. At a time when humanity dreams of colonising Mars, here is another escapist frontier – the perfect playground for NFT early adopters, who tend to fit a certain type. Online, I was taking part in what Steve Silberman in NeuroTribes, his Samuel Johnson Prize-winning history of autism, calls a “convivial society of loners”. In lengthy Twitter threads, the deep thinkers in my new cohort plotted how to enlarge and preserve the burgeoning culture of this new domain. Even Mark Zuckerberg was bullish, changing the name of Facebook’s parent company to Meta and declaring that it had “a new North Star: to help bring the metaverse to life”. In the meantime, we had Twitter Spaces to chat in, NFT-based games to play, virtual art galleries in which to exhibit our personal collections. Every man a Tate Modern! And why not?
Immoderation, it’s worth remembering, is not exclusive to digital art. In October 2021, a Banksy painting which infamously half-shredded itself following its sale at auction was resold for $25.4 million, more than 20 times the price which the unmutilated artwork had fetched just three years before. Swiss freeports are choked with masterpieces serving as capital assets, world-class works of art which for tax reasons change hands without changing location, without officially entering the country, tokens in some billionaire’s great game. The difference, of course, is that teenagers aren’t rushing out to buy Old Masters with their spending money. Like a movie star’s good-luck story of being discovered, the quick profits some NFT buyers have made are deceptive and, in fact, have tended to obscure the reality that NFTs are the riskiest, least mature, most volatile asset class in the world.
Imagine owning a warehouse full of corn in a country where nobody uses ethanol, where the tortilla has yet to be invented, and even this picture of a worthless commodity doesn’t convey the sheer leaden dead weight that unwanted NFTs can, in a tumbleweed-blown wallet, become. An air of dogshit undesirability attends certain collections. When spirits are high and all is glittering promise, the JPEGs flow like water, but they can ice over at a moment’s notice. And there are “rug pulls”, when the artist or developers behind a project abruptly call it quits and make off with their profits, leaving collectors holding the bag. (One project “rugged” me to the tune of $2,200.) Because they are so illiquid, NFTs “should be treated as a delicacy for excess capital”, said crypto personality DonnieBigBags, who nonetheless claimed to have dropped more than $1 million on non-fungibles himself.
As fall deepened, it gradually dawned on me just how badly my NFT portfolio was doing. My digital wallet was a graveyard of failed and failing projects into which I had sunk over $40,000. I had made thousands in profit, but had reinvested it all in my growing collection. I was in afterburner mode, addicted to the adrenaline rush of drops. But now every decision seemed to be wrong. It was a mistake to sell; it was a mistake not to sell. Floors which had seemed rock-solid dropped out from under me like lifts with cut cables. The jolt was sickening. In one instance, an $8,000 asset became worthless practically overnight. What had started as a moon mission was turning out more like Journey to the Center of the Earth.
In short, the bubble popped. If before I’d been enjoying a months-long bender, juiced to the gills with dopamine, this was the merciless morning after, soaked in cortisol. “Shit got bad fast, and we are still feeling the effects,” wrote Jonathan Long, the founder of Alpha Access, a private members’ club for collectors. “Entirely fucking worthless use of my time and energy” was his verdict on a clutch of NFT projects he’d incubated, after a disastrous late-November launch. “It’s made me fucking hate NFTs, and it was self-inflicted.” Worse than doom and gloom was the attitude – prevalent among those who had already made it – that I came to think of as toxic positivity. The WAGMI ethos masked the reality that some people were losing their shirts, just as the talk of inclusion papered over the fact that some NFTs maintained sky-high prices by virtue of just how exclusive they were.
It was a rigged game. Before the Ziggurats sale, a software developer confided to me that he planned to grab 70 of them by coordinating dozens of wallets “programmatically” – using black magic to reap ill-gotten gains. This, when most buyers would each be limited to three. “Welcome to crypto,” another coder told me. “Engineers are gods and most of them are out for themselves.” By mid-November the talk was all of tax-loss harvesting and scams. Every day, spam bots and cyberthieves slid into my DMs, promoting garbage or trying to con me into giving up sensitive information so they could rob me blind. “There are two types of people holding NFTs,” said Bored Ape holder Barely Accredited, “those who have been hacked those who haven’t been hacked YET.”
Being extremely online – “Never cash out, never log off,” I joked – took another kind of toll: headaches, neck and back pain, eye strain, worsening myopia from a steady diet of screens. I was averaging more than 10 hours a day on my phone, plus laptop time. “Early Information is King. Live on Discord & Twitter,” blared the subhead of a document purporting to explain how one influencer had turned $4,000 into nearly $20,000 by flipping NFTs. Somehow the desire to support independent artists, the profit motive and the craving for an ersatz social life had gotten all mashed up together. NFTs infiltrated my dreams. There was a beating pain behind my eyes.
But even as I began to dial back my involvement, innovation was marching forward, with big business leading it by the hand. In December, Ubisoft became the first major company to debut game-playable NFTs; that same month, Nike acquired RTFKT Studios, an NFT fashion startup known for its digital footwear, and Adidas netted $23 million with an NFT drop. The real bull run, according to Artchick and others, was still to come.
Bull run? The first five days of 2022 came on like the festival of San Fermín: As though shaking off the last vestiges of the old year were all it took to change our fortunes, in less than a week OpenSea alone processed more than $1 billion of NFT sales. Suddenly the mood was festive again. Bored Apes and other top collections printed record highs. Even some of my own holdings took off. Toward the end of this bacchanal, OpenSea announced that it had closed a new, $300-million funding round, valuing the company at $13.3 billion – nearly nine times the valuation it had received just six months earlier. Other startups – such as RMRK, on the Kusama blockchain – were already working on the next generation of non-fungibles: NFTs that could own and wear other NFTs, could be nested inside each other like Russian dolls, could share revenue, could be broken into pieces and sold like fractional shares. This is a picture of the future as a huge pile of “art Legos”, a thrilling amalgam of open-source code and artistic creation. These are the building blocks of the next da Vinci’s workshop. The raw materials to furnish a global art gallery. The speculative assets of a worldwide casino.
Normies will fight these developments – some gamers deplore Ubisoft’s NFT experiment – and they will likely lose, as people always lose to an idea whose time has come. To NFT creators, the opposition’s motive is obvious. “It’s fear,” said the artist deArtifact. “Fear that they don’t understand where the world is going. And they don’t.” Others will convert, as the actress Reese Witherspoon has, telling her followers that in the near future, “every person will have a parallel digital identity. Avatars, crypto wallets, digital goods will be the norm.”
It is all happening faster than anyone expected. Well, almost anyone. One of the biggest NFT artists, XCOPY, initially tried to give away his newly minted creations for free to long-time supporters. There were few takers. “Wake me up in 2 years when it’s mainstream af,” he wrote on his blog. Roughly two years later, on December 8, 2021, the XCOPY NFT ‘Right-Click and Save As Guy’ was resold for $7.06 million.
Artwork Eleanor Taylor
This article is taken from Port issue 30. To continue reading, buy the issue or subscribe here