May 01, 2024 | Read Online

Byron Gilliam

Brought to you by:

"An original artist is unable to copy. So he has only to copy in order to be original."

- Jean Cocteau

Happy 10th Birthday, NFTs

The most expensive single work of art ever sold was probably a fake.

Purchased for $10,000 from an unwitting seller at a New Orleans estate sale in 2005, Salvator Mundi, a portrait of Jesus painted around 1500, was initially attributed to Leonardo da Vinci.

With that exalted provenance established, the witting buyer then sold his lucky find on to the Saudi Crown Prince Mohammed bin Salman (MBS) for a $450 million windfall.

Four years later, however, the Museo Nacional del Prado declared Salvator Mundi "not an original da Vinci" — the painting is now thought to have been the work of one of da Vinci's students.

MBS is probably not too bothered by the unrealized financial loss the painting must now represent, although he did seem a little embarrassed to have bought a fake (I might not sleep easy if I was the one that sold it to him).

But every buyer of fine art wants to know for sure whose art it is they're buying — and crypto, of course, fixes this.

Establishing provenance was the inspiration behind the first ever non-fungible token, Quantum, which was minted on the Namecoin blockchain (an early fork of Bitcoin) on May 2, 2014.

"I had an idea to use blockchain technology to create indelible provenance and ownership of digital images of this kind," Quantum's creator, Kevin McCoy, later explained.

McCoy wanted to ensure he could prove ownership of the original Quantum, just in case someone someday decided it might be valuable.

As it happens, someone did.

Like a would-be da Vinci rediscovered in New Orleans, McCoy's Quantum, which no one noticed when it was created in 2014, was rediscovered in the NFT boom of 2020/21.

In putting the piece up for auction in 2021, Sotheby's emphasized its historic significance: "If blockchains stand as the Gutenberg Bible of the 21st century, then how do we prize the first of these records? In my view, Quantum will always be the most art-historically important work in the history of NFTs."

Because it was the first NFT, Sotheby's argued that Quantum belongs in a "pantheon of firsts" alongside Pablo Picasso's Les Demoiselles, Kazimir Malevich's Black Square and Marcel Duchamp's Fountain — each of which can be thought of as the "genesis block" of a new artistic era (cubist, abstract, and conceptual art, respectively).

"These prime movers occupy a singular position in art history. They came first," Sotheby's explained.

"Kevin McCoy's Quantum is such a work. Minted on 2nd May 2014 21:27:34, or more precisely Namecoin Block 174923, the NFT era quietly dawned."

That bolded time and date is Sotheby's emphasis, not mine — and, yet, in their long, breathless write-up, it somehow goes unmentioned that the NFT being auctioned was minted 2,583 days later, on May 28, 2021.

On a different blockchain.

Why would that NFT — not at all the first of its kind — have any value?

The explanation appears to be found (unbolded) in Sotheby's formal description of the piece: "Originally minted on May 3, 2014 on Namecoin blockchain, and preserved on a token minted on May 28, 2021 by the artist."

"Preserved" is doing a lot of work here.

McCoy himself put so little value on his creation that he subsequently let his ownership of it expire (that's a thing on Namecoin, where ownership has to be periodically renewed).

Even after it occurred to the artist that Quantum might belong in the pantheon alongside works by Picasso, Malevich and Duchamp, he didn't bother to reclaim it (that's also a thing on Namecoin — anyone can claim an expired NFT).

Instead, he "moved" Quantum to Ethereum.

Except that "moving" is evidently not a thing on Namecoin, because the original is still there.

Instead, McCoy simply created a copy of his original work, presumably because he assumed an NFT on Namecoin (an $8 million blockchain) would sell for less than an NFT on Ethereum (a $350 billion blockchain).

He assumed right, it sold for $1.4 million — but he had to go to court to keep it.

Just before the Ethereum version of Quantum was sold at auction, the Namecoin version was claimed by an unrelated entity (Free Holdings Inc.), which then contested McCoy's right to claim that his version represents the original, as the Sotheby's writeup so emphatically did.

This put McCoy in the awkward position of arguing in court that the NFT on Ethereum was different from the one on Namecoin, while simultaneously arguing in the Sotheby's auction that it was the same as the one on Namecoin.

Weirdly, he won both arguments.

In court, the judge agreed that the two NFTs were different — and at auction, the buyer (implicitly) agreed that the two NFTs were the same.

Which is to say, McCoy won the right to sell the NFT because it was the one he minted in 2021, and he sold it for $1.4 million because it was the one minted in 2014.

I'm happy for him!

I'm happy for us, too, because turning oddball thought experiments like this into consequential, real-life disputes is what makes crypto fun and interesting.

I'm not, however, happy for the new owner of the Ethereum-Quantum NFT, because it seems obvious to me that he owns a copy, not the original — and I don't see how that makes it any better of a deal than MBS got with his imitation da Vinci.

Like MBS, he might not care — perhaps he even thinks the original really is "preserved" on Ethereum and not just copied.

(Maybe because he agrees with Cocteau that an artist cannot copy?)

But collectors of digital art probably should care — because this might be why NFTs, still unsure about their purpose, are feeling less than celebratory on their 10th birthday.

― Byron Gilliam

Brought to you by:

Shardeum is an autoscaling EVM-based layer-1 blockchain that provides low gas fees forever while maintaining true decentralization and solid security.

With 2 million community members strong, Shardeum recognizes the importance of community. Join them in shaping the future of Web3 by contributing to a free, public report on Web3 usability.

Weigh in Now

Vitalik Buterin talks ways to make zk proofs more efficient — Read
Fed holds interest rates, markets hardly react — Read
Eminem's new crypto ad fails to capture the moment, lets it slip — Read
Tether just obliterated its former net profit record for a single quarter — Read
BlackRock doubles down on tokenization via investment in Securitize — Read

The Rising Tide of Digital Asset Adoption in Asia

Join this webinar to learn from some of the top builders, investors, and market makers in crypto about what's fueling the growth and trajectory of digital asset adoption in Asia.

Building the Perfect Crypto Portfolio

In this episode, Santi & Jason talk with Avi and Ro about the current state of the crypto market cycle in both private and liquid markets. They discuss Avi's "bearish" outlook driven by diminishing ETF inflows and stablecoin market caps, Ro's perspective on crywpto venture investing, and how this cycle compares to the last one. The conversation dives into the Solana IOUs auction, the upcoming Ethereum ETF catalyst, and the (un)productive nature of assets like Eigen Layer's restaking product and Bitcoin DeFi. Avi and Ro also outline their framework for crypto portfolio construction and the key indicators they watch. The episode concludes with their 12-month price predictions for BTC, ETH and SOL.

Watch or listen to Empire on YouTube, Spotify or Apple.

Aave Labs @aave

Introducing Aave 2030

May 1, 2024

214 Likes 50 Retweets 11 Replies

Jack Farley @JackFarley96

Fed statement was a WHOPPER.

Changes in red. Very unusually large number of new words, most of which were devoted to the Fed's decision to taper its Quantitative Tightening (QT). Fed will be reducing its balance sheet by a smaller amount starting in June.