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The NFTs market has generated over $23 billion in trading volume in 2021, up $100 million in 2010. Clearly, NFTs have captured the imagination of investors. However, in the midst of this craze for NFTs, some NFT advocates are destroying real-world assets like artworks and diamonds to create and spread NFTs. Read on to understand why that's happening.
Non-fungible tokens or NFTs have taken the world by storm. The market generated over $23 billion in trading volume in 2021, with the number of active wallets trading in NFTs shooting up from 5,000 at the start of the year to about 140,000 at the year’s end. The market volume for NFTs in 2010 only stood at $100 million in comparison.
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But while the craze around NFTs continues to grow, some NFT advocates are destroying real-world assets in the process to create and spread NFTs.
What is happening to physical assets?
An emerging trend in the crypto world is the practice of ‘burning’ or destroying real-world assets before recreating them as NFTs. The first such sabotage was done by Burnt Finance, a crypto start-up. The company literally burned a print artwork by Banksy, the pseudonymous England-based street artist, political activist and film director.
The company had acquired the artwork in an auction and then burned the same in a video live-streamed from a park in New York. They then proceeded to sell it for nearly $400,000, double the price of the physical art piece.
Ironically the piece, ‘Morons’, itself critiques the art market. Depicting an auctioneer at Christie's, it is accompanied by the words, “I can’t believe you morons actually buy this."
Burnt Finance went on to raise nearly $11 million over a couple of rounds of funding.
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After that, an owner of a drawing from Jean-Michel Basquiat, the American neo-expressionist artist, auctioned an NFT of the drawing. He added a proviso that the new owner could choose to destroy the original upon purchase of the NFT. Thankfully, the artist’s estate intervened by informing that the owner had no legal standing to create derivative works like that and the owner did not own the copyright.
More such ‘stunts’, as Ossian Ward who is an author and art critic, called the ‘Morons’ event, have taken place. Natasha Che, founder of the audiobook platform MySoundWise, bought and destroyed a $5,000 worth diamond and sold its NFT for $17,600.
Recently, NFT collector Soban Saqib bought a rare copy of Frank Herber’s science fiction classic Dune for $2.9 million. The copy was reportedly the same one that convinced Hollywood to turn it into a screenplay. But Saqib didn’t buy the copy for himself but on behalf of SpiceDAO, a group of crypto enthusiasts.
The group had been planning to make the book public, create an animated series on it, and support derivative works based on the book. While those plans are still in progress, they have been hampered by the fact that the group bought a single rare copy and not a copyright for the book.
One of the alternative plans that emerged is the idea to upload the book in its entirety on the Ethereum blockchain, the underlying technology for NFTs, and then to destroy the book. It is estimated that the total project will cost well over $22 million as it will take 18 ETH ($56,000) in transaction fees to upload each page on the blockchain. The entire set will be sold for a profit of $13 million, reportedly.
However, due to backlash and negative response, the creator of the project has stated that the book is not on track to be burned even if the other parts of the project continues. “It says (optional) in the proposal and so far the sentiment is quite negative, so I don't think you need to worry about the book,” stated Xatarrer, the creator of the proposal.
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Why are physical assets being destroyed?
The reason behind the destruction of the physical assets is different for each one. In the case of Xatarrer and the Dune copy, it was simply an “incredible marketing stunt” as per Xatarrer himself. NFTs are quickly becoming a way to make huge money for individuals across the world, and stunts like destroying the original creation not only create hype around the NFT listing but also bring it more media attention. The fact that the original artwork will not be available physically is also a factor.
But crypto advocates like Che have a different stand.
“If you make an NFT of a real diamond, and the diamond itself gets destroyed in a fire tomorrow, you still have the same asset. Because the token still exists and is in limited supply just as before. Nothing has changed. What NFT is doing to the concept of asset, few understand,” Che had tweeted.
Such individuals are calling NFTs revolutionary in the way that they are transforming the concept of assets and ownership of such assets.
Whether they’re right or wrong is something only the future will tell.
(Edited by : Thomas Abraham)
First Published: Jan 21, 2022 1:41 PM IST