This is a strange moment in crypto.
Some are still debating the extent to which the entire complex is a Ponzi scheme, while at the same time many of the smartest people I know are quitting incredible jobs and going all in on Web31.
And for good reason. There are simultaneous revolutions in all kinds of fields going on right now and it's all so exciting and moving so fast it's hard to keep track.
NFTs2 confer and prove ownership backed by the strength of globally distributed crypto networks.
As is so common in Web3, this codifies and strengthens behaviour that already exists: people were already paying up for signed album prints!
The human impulse is the same, only Web3 signatures are better, as the resulting NFTs are tradable all over the world and verifiably secure in a way that a signed baseball cap simply can't be.
When future generations write their version of the 'Story of Art', this moment in time will feature heavily.
This book needs a new chapter or two
For thousands of years, with rare exceptions, a life spent making art was a life spent in poverty. Now, for the first time ever, artists are making the kind of coin that puts financiers to shame.
Earlier in the year an artist called Beeple made a digital artwork every day for 5,000 days and sold the lot as an NFT for $69 million as '"Everydays: The First 5000 Days".
Examples of Beeple's art. Beeple is still releasing one of these a day.
This seemed large at the time, but volumes have exploded on exchanges like Opensea and ImmutableX. NFTs, which use the security of crypto to confer ownership, have gone up seven-fold to over US$10 billion over the last three months alone.
New things are now possible. An artist can now sell an NFT and receive an ongoing share of future sales. In the past, a young artist might sell work for a pittance and receive no ongoing royalties as their career progressed, with all profit accruing to collectors.
Many NFTs are conventional artworks, but there has been an explosion of creative activity.
The current craze is for collections of say, punks, the cheapest of which are now priced in the hundreds of thousands of dollars. These are an extremely exclusive club right now - which of course is the point.
There are all kinds of copycats of varying quality, like Bored Ape Yacht Club, (you might pick one up for $100,000). Part of the attraction of these is their link to personal identity. These go on your twitter handle, your discord, and wherever you represent yourself on the internet.
How on earth are people paying for all of this? One way is through the ~$2.5 trillion of crypto wealth sitting on the personal balance sheets of some of the strangest and most forward-looking people on the planet. It's not surprising they are spending a small portion of that on art.
The trick to understanding all this is that art has always been ludicrous and illogical.
Why pay more for this painting than that? On the surface it looks like some mix of fashion, history, and aesthetics. But the real answer is that it has been that pricing simply comes down to what people choose to do with their wealth.
Understand that - and you understand what's going on in NFTs.
The next level, of course, is realising that NFTs enable all kinds of entirely new models such as in photography.
Stock images are terrible for everyone except a small group of gatekeepers. Firms like Adobe charge a small fortune for photo catalogues and pay photographers next to nothing.
Photography is widely plagiarised and to be honest, selling it upfront or charging commissions to anyone who makes use of an image online isn't practical in today's world.
Enter NFTs, where in a single sale you can generate vastly more than stock image sites will pay, while giving true, verifiable ownership to the purchaser.
Cath Simard for example sold one NFT of her widely copied photograph and then made it free for all to use. Everyone wins, and no doubt the value of that NFT is higher now for all the publicity.
Cath Simard's image can now be downloaded and used for free, guiltlessly
This is a vastly better way for a photographer to capture the value they create than trying to enforce copyrights, sue people left right and centre, or be used and abused by a company like Adobe.
The Web2 era of YouTube and Spotify has not been great to musicians, apart from the very most popular. Companies like Spotify pay pittances to most artists while building tens of billions of dollars of equity value, (though to be fair at least part of this is to do with rent extraction by art labels).
Less than 14,000 artists out of 8 million make more than $50,000. In other words, the vast majority can't make a living. Only 12% of industry revenue goes to musicians.
The annoying thing is that most of us love music, listen to it for significant parts of our days, and in other parts of our lives, pay much more, for less.
Some musicians are already making more out of NFTs than the paltry pennies thrown their way by Spotify.
One artist sold one NFT and made as much as ~7 million hours of Spotify streaming. RAC made more from a single NFT than ten years of album sales.
Web3 allows the coding of all kinds of different business models.
For example, artists can sell album NFTs that offer a share of future streaming revenues.
So those hip enough to find artists before they are cool can both support their development and also share in their future success.
This is the closest thing to this is equity ownership which revolutionized capital and financed the last few centuries of extraordinary progress.
The beauty of Web3, which we'll see in context after context, is the ability to code any kind of new business model. This is very much needed.
This is better than what we had before
Did these pathways exist in Web2?
Yes, but really no. Photographers, artists and designers could indeed create a page on Instagram or facebook and have access to a significant part of the global population. But they would be posting their work for free, and it was Facebook and the like who accrued the hundreds of billions of dollars of value. None of this went to the content providers. Perhaps artists could include a link to a page or something.
Apple is similarly exploitative. You can't buy books on Kindle app because Apple demands a 30% rent. In fact, Apple charges a 30% tax on all digital goods sold through their platform, as does Google Play.
It's a good thing there are now globally distributed alternatives.
Web2 companies exploited visual art for their own commercial aims, and in doing so, spammed us with advertising, of which far too much was political. And by focusing on attention and advertising, promoted increasingly radicalising and enraging (engaging) content.
The possibilities of Web3 simply didn't exist before crypto.
Why this matters
When I was younger, art and music seemed like subjects to be taken for fun. There never seemed a serious prospect of working in the space in the adult world. In 2021 going into 2022, it's hard to think of a skill set more valuable than an eye for design, understanding of colour, and the energy to create something new and exciting.
As a teenager I knew many who were obsessed with making art and music. The majority are now working in uncreative industries. At the critical moments they simply had to get a job.
Today's teenagers, digitally and increasingly cryptonative, have other options. You only need a handful of fans to make a living, and with crypto, there is now a pathway.
The result of all this is an explosion of creative energy.
Think of all the talented musicians and artists that never found an audience and ended up spending their lives doing something different. Web2 gave everyone access to an audience, but value was captured by a small number of companies.
Web3, with all its unexplored potential, and over $2 trillion of internet-native capital behind it, has enabled more people than ever to get the early financial wins necessary to spend their life making art.
And that is great news for the rest of us.
1 Web1, Web2, Web3: three stages of internet growth. Web 1.0 - connecting information and getting on the net. Web 2.0 - connecting people / social participation. Web 3.0 - use of machine learning and artificial intelligence to create more open, connected, and intelligent websites or web applications; includes decentralised apps that run on blockchain.
2 A non-fungible token is a unique and non-interchangeable datum stored on a digital ledger. NFTs can be used to represent easily reproducible items such as photos, videos, audio, and other types of digital files as unique items, and use blockchain technology to establish a verified and public proof of ownership.