Tag Archives: NFT

Creativity and NFT’s

I think by now everyone has heard of NFT’s.

NFTs (or “non-fungible tokens”) are a special kind of cryptoasset in which each token is unique — as opposed to “fungible” assets like Bitcoin and dollar bills, which are all worth exactly the same amount. Because every NFT is unique, they can be used to authenticate ownership of digital assets like artworks, recordings, and virtual real estate or pets. – Coinbase

Right now I think many people see this as a fad, and there are all kinds of tokens being created and sold for ridiculously high prices, which both make the news, and seem like a silly waste of money. But there is something here that is pretty special in two different ways. And when the dust settles and the fad-y-ness goes away, it is creatives who will benefit from these tokens.

1. Re-sale of art.

When an artist sells an original, they get the sale price and then they don’t benefit if the art is resold. Often an artist will take years to get popular (much less famous) and their early work is essentially given away compared to their later work when they become known. With NFT’s, artists can get a percentage of the resale value. The token can be tracked and if sold on an NFT market (rather than a private transaction) then the artist can keep a commission.

2. Tokens tied to real world rewards.

There is a DJ named 3LAU (Justin David Blau) who sold NFT’s of his work in an auction,

“The way 3LAU structured his auction was very cutting edge and the mechanics of the auction should be noted. There were 33 available winning slots in total for the auction. Slot #1 was the Platinum Tier, slots #2 – 6 was for the Gold Tier, and slots #7 – 33 was the Silver Tier. Each tier contained digital artwork, music, and physical goods (Vinyl) connected with the project. The winner of the Platinum Tier also won a custom song created by 3LAU with the winner’s creative direction, tokenized as a 1 of 1 NFT.” ~ Dennis Martin

In another auction, the top tier included lifetime tickets to every concert he does. And since this is an NFT that can trade hands, it can be sold if the buyer no longer wants this.

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So while you’ll read things like, A Rare CryptoPunk Ape NFT Was Sold for $10 Million USD in Ethereum, and wonder why? Or how this can be sustained? Or if this is just a fad? NFT’s will have value desired by others. Yes, there will be silly collectables selling for way too much. But there will also be the ability to play games and earn items of value that can be traded rather than just hoarded. And that is another way NFT’s will be used to trade items people will want to pay for.

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Collectables and video games aside, NFT’s will be a game changer for artists and creatives. And in a world where automation is making items better, cheaper, and faster; and where jobs themselves are becoming more automated, there will be more time and space for artists to hone their crafts as a way of making a living. NFT’s will be part of that future where artists can sell their work, provide experiences for their fans, and benefit from the resale of their work as their popularity grows.

NFT’s might seem like a fad to you, but they are here to stay, and some time in the near future you’ll end up owning one if you attend a live show, or buy a piece of art, or maybe even choose to pay for a song of artist you love to listen to.

Market volatility

Three years ago I put a little bit of money into cryptocurrency and then the market took a huge dive. It was hard to watch this ‘investment’ dive to 25-30% of what I put in. But it wasn’t like I put in more than I could afford to lose, and I didn’t panic and sell at the bottom. I held on… or as they say in crypto, HODL (a term started with the word HOLD being written with a typo, and now standing for Hold On for Dear Life).

Late last year my investment jumped back up to break even, and then soared, and I learned my first lesson about investing, and that is dollar cost averaging. If I had not put the investment in all at once, but instead had put money in monthly, I would have done so much better. The reality is that this strategy works better than 90-95% of investment strategies. So, unless investing is the thing you do, your best strategy is to put a small amount of money in every month, no matter what the market does. The volatility works to your advantage, and no one knows when the market is going to dip.

Last night was one of those dips. Wham, 20-25% down! It’s sad, but I bet many new investors lost a lot of money and sold out when they felt the pain of watching their investment sink. For me, I’ve seen this before, and my small investment is doing better than if I had put that money into an RRSP or Tax Free Savings Account. But I’ll be honest and say that for a couple years, it didn’t seem like this.

What’s interesting is that adoption of cryptocurrency is growing, the use-cases for them are incredible. Smart contracts (that cut out expensive bank and lawyer fees), back-end tracking of supply chains, and decentralized borrowing are a few places that blockchain technology are literally ‘taking over’. Also, while many people struggle with the idea of NFT’s (Non Fungible Tokens) these are revolutionary in the way an artist or creator can gain profit from the resale of their work. And the Metaverse is something that will grow and holds amazing potential… and huge profits in the multi-billion dollar gaming market.

What’s really going to change the crypto market is the speed of adoption. If you own cryptocurrency now, you are about 2-3% of the world’s population. It took about 12 years to get to this percentage. It will probably take less than 2 more to get to 5%. Three years ago I had to drive into Vancouver to put money into crypto, and because my investment was quite small, I had to pay a premium at over 5%. Now I use Netcoins, (full disclosure, that’s a referral link), and it’s a simple e-transfer, and a 1.5% premium on the purchase. Easy. And everyone has seen adds for Crypto.com, where you can buy, stake (lock in and earn interest), and even spend (with a prepay visa) crypto.

Both the interest and access have opened up dramatically, and the adoption of cryptocurrencies is about to explode. But with this comes even more volatility. With this comes the high speculation gambles and the fear selling when the market does what it did last night. And cryptocurrency is risky. It’s not a normal thing to watch the volatility of 10-25% rises and dips and think, ‘easy come, easy go’. But I enjoy looking into the projects and investing a little bit in them. I’m not planning on taking any profits out until after I retire, and I’m not putting enough in to make a difference in my day to day living and spending habits. So the volatility isn’t much more than entertainment. Though I will admit, the appeal to put a bit more money in when I see a big dip like this is pretty strong.

One thing that I fear is that a lot of younger people, with less disposable income are jumping into meme coins (popularized coins that only serve to be traded with little other purpose). These are high risk, and susceptible to ‘pump and dump‘ schemes where they simultaneously buy causing a jump in price, and get people excited to catch the ride up, then those behind the scheme dump their coins on the market taking massive profits at the top, and leaving everyone else holding the coin at a much lower value.

A 20-year old thinking long term and dollar cost averaging, will do well. A similar person seeking massive profits will end up losing their investment 4 out of 5 times, but they will know someone who was the 1 out of 5 profit-maker and think that they can do the same. Betting on short term market volatility is risky and will cause a lot of people pain. Where as, knowing that market volatility is profitable over the long term and dollar cost averaging is what smart investors do.

It’s a simple formula where risk over a shorter time can lead to greater profits but will more likely lead to greater losses, and risk over a longer time might not get the huge gains, but it will reduce the risk of loss: Invest a small amount, repeat, and HODL. The next lesson is when to take profits… I have a strategy, but I’m still trying to learn more from people a lot smarter than me.

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(Disclaimer: I’m not a financial advisor and I don’t play one on the internet… this is not financial advice.)

Power to the artist

I shared some background on NFT’s – Non Fungible Tokens – in a recent post, ‘Digital, collectable assets‘. Since then I’ve thought about them a bit more. One of the things I think is most exciting about these tokens is how they are being used by artists not just to share and profit from their digital art and music, but also how they are providing opportunities for fans to share experiences with them.

See this article: AS 3LAU MAKES $11.6M FROM NFT SALES, HIS MANAGEMENT COMPANY EYES MORE AUCTIONS FOR MORE ARTISTS

“The top NFT sold during this particular auction, which included an opportunity for the buyer to record a song with Blau, fetched $3.6m…

“At a time when artist income has been severely impacted due to the loss of touring income and other factors during the COVID-19 pandemic, NFT auctions offer an exciting opportunity to monetize new aspects of creative output and Justin [Blau] demonstrated that in a historic way this past weekend.”

But probably the most exciting thing about the sale of NFT’s is that there is a digital trail of the sale of these, and many platforms that share them give 10% of the resale value to the artist. First, if a piece of digital art sells for $1,000, the artist will get almost $850 (far more than they would normally get if they sold art in a gallery). But then here is the really exciting thing, let’s say the NFT that originally sold for $1,000 then re-sells for $5,000. The artist gets 10% of that follow up sale, or $500. This is amazing! Often, art collectors make 100% of the resale value, but now artist can share in the success of their works being resold.

These two things: selling experiences as part of the sale of a digital item, and artist profiting from the resale of their work, are empowering artists in ways that were not available to them before. We could see artists that used to struggle creating niches that allow them to move from ‘starving artist’ to career artists that make a decent living sharing their art and passion for creativity. And in doing so, artist rather than producers, agents, and galleries, will see more revenue from the works they create. This could be a new renaissance period for artists.