NFTs – non-fungible tokens – have taken over the crypto craze in the past year, with high-end punters forking out millions on a single digital asset. In part two of the Herald's series on cryptocurrency, Jane Phare finds out why Kiwi digital natives are spending up large on ape avatars, bunny rabbits and artwork they can't hang on the wall.
The jury's still out on the "why" of NFTs. Why would anyone pay the equivalent of US$1.3 million for a rock gif? Sure, there were only 100 released ... but a Jpeg of a cartoon rock? Or pay thousands for an NFT avatar ape or rabbit?
Much of the NFT mania doesn't make a lot of sense. But mainstream investors started to take notice last year when auction houses like Christie's in London began selling NFTs for millions of dollars and trading in digital collectibles hit US$10 billion (NZ$14.6b), up from virtually nothing in 2020.
At 39, former All Blacks star Dan Carter is coming at it a little late. How he wishes, he says wistfully, that NFTs were about when he was at the peak of his career.
"Imagine playing a test match and then going into the changing room and doing a video and speaking about the experience you just had on the rugby field. But only your NFT holders had access to that."
Carter, who retired from professional rugby in February last year, has been on a steep learning curve since first hearing about NFTs a year ago. He's joined a group of entrepreneurs to form NFT online studio Glorious which targets the high end of the market, specialising in art, sport and music. The company has already signed up musicians such as Six60, Crowded House and Nathan Haines.
"Our focus is the masterpiece," Carter says.
Glorious will launch its first NFT at the end of this month, a digital artwork by New Zealand artist Reuben Paterson that will evolve over time to include work by other artists. Known as the Glorious Founding Membership (GFM) artwork, the NFT will sell for 0.75ETH (the crypto currency used on the Ethereum blockchain) currently worth about US$2400.
Glorious co-founder and CEO Tim Harper says the company is working with Samsung, which produces a variety of TV surrounds that look like art frames, so that high-resolution NFTs can be displayed to look like framed paintings.
"You can change the NFT on your screen depending on your mood."
The company has collaborated with New Zealand artists including Karl Maughan, Dick Frizzell, Lisa Reihana and Heather Straka. In early February Glorious will release a limited edition of 10 NFTs of Rita Angus' iconic landscape "Cass", which hangs in the Christchurch Art Gallery. Nine of the Cass NFTs will each be priced at 2ETH and the first in the series will be presented in a 65" Samsung frame and auctioned at the International Art Centre in Auckland.
Rita Angus' great-nephew, jazz musician and associate professor of music at the City University of New York Dr Quentin Angus, has created an original composition to go with the NFT of his great aunt's painting.
"So all of a sudden, you have this beautiful work (of art) on your screen, and then when you click play, there's this new sort of experience that comes with it because the music will be there," Harper says.
But not all NFTs will be beautiful enough to be displayed in the living room. Some of them just seem silly to crypto outsiders like the Secret Pineapple Society, a club of 8888 pineapple avatars on the Theta blockchain.
And the Degenerate Ape Academy with its membership of 100,000 NFT apes. Its mission statement says; "The academy was founded on the principles of friendship making, crayon eating and absolute unregulated, deplorable, degenerate behaviour."
It was a bit of a "piss take", says Kiwi NFT ape owner Sohrab "Maple" Rez.
"Degen ape" was a term tossed around the crypto world referring to investors who were a little reckless, maybe had all their net wealth in crypto, didn't take life too seriously.
But then it got a little more serious causing Rez to give up his career as a professional poker player in Melbourne and return to Auckland late last year. He now invests full-time in cryptocurrency and NFTs, including FLUF World, a collection of 10,000 unique 3D rabbits created by Kiwi tech company Non-Fungible Labs. FLUF World rabbits originally sold for a few hundred dollars and now sell for thousands.
Rez is one of 15 "apes" elected to the Degen Ape student council which votes on changes, investments and projects, including those for charity.
"We're like a decentralised autonomous organisation."
What started as a bit of a joke on the Solana blockchain is now fetching big money, with major billboards appearing in Hong Kong and Degen Apes sold at Christie's. They've even made American heiress Paris Hilton her own customised NFT ape.
Hilton breathlessly tells interviewers she dreams about NFTs every night. Truly.
"NFTs have literally taken over my entire mind and soul."
Last year she sold a cartoon-style drawing of her cat Munchkin as an NFT on the Ethereum platform for 40 "ether", (ETH) which was then worth US$17,000, to raise money for charity. Five months later 40 ETH is worth US$152,000.
The NFT craze has been fuelled by a string of famous faces who not only invest in NFTs but take to social media to gush about them. And what better way to encourage digital Fomo Sapiens to jump on the blockchain bandwagon and fork out dollars for something that they can't touch. In March this year digital artist Beeple (aka Michael Winkelmann) sold an NFT montage of his work at Christie's for an astonishing US$69m.
Collins Dictionary made NFT its word of the year for 2021 but try explaining it to anyone over the age of 30 and the response is likely to be, "What? Why?" But young digi-natives know, rushing in their thousands to buy, or in some cases create, NFTs mostly on the cryptocurrency Ethereum blockchain.
Kiwi NFT company Veve.me got in early, negotiating the digital rights to NFT collectibles including Spider-Man, Mickey Mouse, Batman and Star Wars. The company now has 1.3 million registered users, building on a fan base that already existed.
Tech entrepreneur, crypto proponent and founder of capital venture business Fantail Ventures Jonty Kelt acknowledges that some of the transactions in the NFT world are a little nuts.
"Everyone's talking about NFTs in the digital space. Prices are crazy."
But he thinks it's a result of the enormous level of experimentation and innovation happening. He predicts that much of the over-priced hype will simply evaporate when there's a draw-down in the market, as there is sure to be. When that happens, the rock gif might crash but quality projects such as fine artwork won't.
"Those artists and their fan bases are not going to go away."
Look back in the rear-view mirror in five years' time and the NFT crash, when it comes, will be seen as a blip.
"That is the story of the technology industry."
He sees NFTs as a "massive on-ramp" for new users in the crypto world. They might not have been too interested in investing in digital currency but now they will need to buy crypto like Ethereum in order to buy NFTs, whether it be a Spider-Man collectible or an artwork.
Kelt has "done well" out of cryptocurrency and says he isn't an NFT collector, but has bought some just so he understands how different blockchain applications work.
"The only way to understand it is to do it."
NFTs: so what are they?
NFTs (non-fungible tokens) are little more than data stored on a digital ledger, the blockchain, that gives the NFT owner exclusive rights to a digital asset. It could be artwork, music, video clips, fashion, avatars, brands, GIFs, memes, tweets, real estate, video game skins, images of physical objects or people, even pornography - collectibles in a virtual world. Artists and owners can embed royalties in perpetuity with the help of "smart contracts".
Some NFTs give membership to online clubs, giving owners exclusive rights and rewards. And it gives them digital bragging rights on their smartphones. "Wanna see my latest NFT?"
American pop singer Katy Perry launched her first series of NFTs last month, featuring content from her "Play" residency in Las Vegas which runs until early March this year. Rappers Snoop Dogg and Eminem, too, have launched a range of NFT collectibles.
The Bored Ape Yacht Club minted and sold 10,000 NFT apes within 12 hours and boasts high-profile members including rappers Snoop Dogg and Lil Baby, and NBA star Steph Curry. Last year a set of the ape NFTs sold for US$24.4m at Sotheby's. Having a Bored Ape avatar on your social media profile is a little like flashing Louis Vuitton luggage at the airport, a sign that you've made it.
It was the idea of tapping into an existing fan base and building an online community, or club, that first piqued Carter's interest.
"We have people that follow us throughout our careers and all of a sudden you can get this new platform to be able to give access to your fans or your super fans."
Carter, who already has a strong following on social media, is still developing his own line of NFTs. Those "super fans" will become part of a digital community with access to Carter including photo and video career highlights narrated by him.
"For example if I'm watching an All Black test match live, I could talk about the first half directly only to my NFT holders, or I might offer a giveaway to come watch an All Black test match with me in person."
He views NFTs as a way for athletes to not only earn income during their career but for years afterwards. With Glorious, Carter will act as a conduit to develop NFTs for other high-profile sportspeople. He sees the tokens as the digital version of the basketball cards he collected as a youngster. Curious about NFTs, he bought a digital collectible Steph Curry NBA Top Shot moment and started getting offers from collectors wanting to buy it from him.
And watching his two oldest sons, aged 6 and 8, absorbed in a digital world playing games like Minecraft on their iPads got his attention.
"If I ask my eldest son if he'd prefer the latest adidas hoodie or if he'd prefer a Fortnite skin he'd say the digital asset."
It is technology that is here to stay, he says. Fast forward five or 10 years and people will no longer be asking why would you want to own a jPeg. Carter is also keen on being involved in the philanthropic side of NFTs, whereby royalties in a smart contract can be shared in perpetuity with a charity.
Harper, too, sees the possibilities for charities. He and Murray Thom – one of the other Glorious co-founders – raised more than $500,000 for the Salvation Army with the Offering, a selection of 12 hymns recorded by Kiwi musicians including the likes of Dave Dobbyn, Stan Walker and Sol3 Mio, linked to 12 paintings by New Zealand artists. They auctioned off the artworks and streaming revenue and donated all the proceeds.
"Imagine if NFTs had been around when we'd done the Offering. That way the Salvation Army could have had a perpetual income from the artwork and soundtrack NFTs."
Using NFTs to raise money for needy communities
Auckland health tech entrepreneur John Mamea-Wilson has co-founded social enterprise NFT company Digital Nation with the aim of earning income for first-nation artists and their communities.
He very soon worked out that celebrity endorsement and social media were key to success when it came to unknown artists. Mamea-Wilson launched the programme in South Australia after forming close links with the indigenous community while his company, Seki.ai, was installing virtual health technology that can be used in remote areas.
His software development partner, Brian Pham, was already involved with the technology as part of a group who pitched the idea to the NBA more than two years ago to obtain the rights to release NBA Top Shots highlights video clips as NFTs. Back then no one really understood what they were.
Now he and Pham, a Melbourne-based Vietnamese refugee, are working with indigenous artists to create NFTs of their work. Their first project was with a 14-year-old Aboriginal girl who painted 30 pieces of artwork. Each piece was created as 100 NFTs – 3000 non-fungible tokens all up.
They enlisted the help of NBA Brooklyn Nets star Patty Mills who is of Aboriginal/Torres Strait descent. We'll give you one of these NFTs if you make some noise about this artist on social media, was the deal.
"You're creating hype and then people want a piece of it," Mamea-Wilson says. It worked. Pretty soon other NBA and Australian celebrities were buying the NFTs. Initially the tokens sold for A$70 (NZ$74). Half of that money went to the artist, 20 per cent to her community and 30 per cent back to Digital Nation which is 51 per cent owned by indigenous people.
In November two of the NFTs changed hands and the artist made an additional $12,000.
"Every time one of those NFTs changes hands, she will get income for the rest of her life."
Big organisations like Telstra, the AFL and NRL support indigenous art.
"They are big fans of buying and displaying aboriginal art digitally on a screen in their board rooms."
And as word spreads on social media, Digital Nation is starting to get approaches from agents for the likes of actors Cate Blanchett and Hugh Jackman wanting to know about the next release of indigenous NFTs.
By March next year Mamea-Wilson wants Digital Nation to be working with Māori and Pacific artists in South Auckland, and rural Māori.
"There's so much talent in this country. It's not about Charles Goldie. It's about the artists and what their communities need."