This is the Monday Medley, a newsletter that goes out, you guessed it, every Monday. I republish it here for sharing and referencing, but if you'd like to sign up you can do so right here:
I had a great podcast interview come out last week with Andrew Barry from OnDeck, all about how I learned marketing, entrepreneurship, and other things useful to my very odd career. This was fun too since it's a bunch of topics I don't normally talk about in podcasts.
Alright, on to the Medley!
💰 The Beeple "First 5,000 Days" piece sold for $69,000,000 last week. Naturally, that's raising a lot of eyebrows around what exactly the purchaser really bought.
🎨 Obviously the buyer doesn’t own the original art in any traditional sense. Here, look, I can paste it right here:
🖼 This is the first problem with the ownership debate around NFTs (intro for the unfamiliar). Obviously you don’t own the artwork the same way you might own an original Picasso. You can’t destroy it, you can’t modify it, you don’t really control it in any special way.
⛓ But that’s the thing with NFTs, you’re not buying the art. You’re buying the NFT. The NFT is not the art. It’s a few lines of codes that includes a reference to the art, but that’s it. The art doesn’t even live in the NFT since it would be way too much data to put on the Ethereum blockchain. All the NFT has is a link to where the art is!
❓ I could actually go make another NFT of the exact same piece of art right now, and no one could really stop me. But it wouldn’t be worth anything. Why not?
✍🏼 Well, for one, it wouldn’t have an authentic origin. It's extremely easy to verify whether an NFT came from Beeple or not. In fact it's significantly easier to do this with NFT art than with “real world” art since everything on the Ethereum blockchain is legible. All Beeple would have to do is tweet the public address he's signing his art from, and anything of his that's signed by any other address we'd know is fake.
👕 Origin as the source of value is nothing new. Kanye West can sell a t-shirt for $120 because he’s Kanye West. Imagine how much he could sell the white t-shirt he wore on stage for a show? Belle Delphine’s bathwater is sold out at $50 (NSFW site). It doesn’t matter that we can buy a t-shirt for $5 or make our own dirty bathwater. Origin matters.
🎓 Another analogy here might be a college degree. Tuition at Carnegie Mellon is $57,119 per year. At the end of four years, you receive a piece of paper. Is that piece of paper worth $228,476? You could just photoshop your name into this one and call it a day:
👨🎓 But it’s not the piece of paper, it’s the origin of the paper and what it tells people. It tells people you spent 4 years, and enough money to save 65 lives from malaria, learning… something. Hopefully. And therefore they should pay you more than the otherwise indistinguishable student a few miles away.
👌 The price of a degree is not about knowledge, or about the friends you made along the way. Those could be had for far less money. It’s about signaling. Signaling you were competitive and affluent enough to attend this institution, and control your binge drinking sufficiently well to not get kicked out in four years.
💲 The college degree exists somewhere on the spectrum between “utility” and “signaling,” which based on the price, we can typically put closer and closer to signaling.
💵 The $5 t-shirt is pure utility. The Kanye t-shirt is almost entirely signaling. Everything we buy, and own, falls somewhere on this utility to signaling spectrum.
🤔 So where are NFTs right now?
🌷 NFTs are fascinating in part because they take the utility to signaling ratio to the extreme. There has never been something so valuable that’s so utterly useless. Tulips you could at least plant. There is effectively zero utility to owning NFTs that are on the market right now, besides speculation about their future value.
📈 So beyond speculation, why are they valuable? Signaling. There are some 240,000 single wallets with over $1m USD in Bitcoin. If you suddenly came into a few milly, you’d wanna show off too. NFTs are a fun new way to signal wealth, taste, and how early you are in the crypto economy. If you buy into the idea that NFTs will set a new standard for digital rights management and digital ownership, buying some now is kind of like buying some BTC back in 2013 or registering a 3-letter domain name in the early days of the web.
⚪️ So is it a bubble? I doubt it. NFTs are getting lots of press, but the market is comparably miniscule. The art market is worth ~67 billion dollars. The NFT market only hit 338 million in 2020. Maybe it’ll hit a couple billion this year. That’s still pretty small in the grand scheme of things, especially considering Bitcoin’s market cap is over 1 trillion. If there were a Beeple-sized, $69m sale every single day for a year, the NFT market would still be only $25b, or 2.5% of the Bitcoin market.
😯 While I don't think it's a bubble, I think there are some much more interesting use cases for NFTs that aren't being done yet. Some that will take them beyond mere signaling, and give them some new forms of utility that weren't previously possible online.
💹 Once we start seeing more of those use cases arrive, the market will just continue to grow.
Other reading on NFTs
📝 Chris Dixon wrote a good essay on "NFTs and 1,000 True Fans," though I think he's being a little too generous with statements like this:
The logic of blockchains is once you purchase an NFT it is yours to fully control, just like when you buy books or sneakers in the real world.
👉 Alex Danco had a good newsletter touching on NFTs too, in which he makes a good point that NFTs have provided a Schelling Point around which many more people can suddenly discuss crypto and blockchain technology. Even if these current forms of NFTs don't retain value, their success in bringing more people into working in crypto is a huge step forward.
🤪 Twitter has been on fire with funny stimulus checks tweets this week. Here are a few favorites:
💉 Last but not least, check out this great campaign in Norway for a more useful take on drug education. I think approaches like this are far more helpful than what most educators and parents seem to do in the US, which is blatantly lie about the risks of benefits of different substances.
As always, if you're enjoying the Medley, I'd love it if you shared it with a friend or two. You can send them here to sign up. I try to make it one of the best emails you get each week, and I hope you're enjoying it.
And should you come across anything interesting this week, send it my way! I love finding new things to read through members of this newsletter.
Have a great week,