🚪 Exit Through the Token Shop
Over the past months, PleasrDAO✨, NounsDAO, PaperclipDAO and many others internet groups assembled upon the premise of curating NFTs and coordinating around them.
We buy JPEGs on the internet because apparently that’s what people are doing, says the NYT. DAOs are where people go to when country clubs close, according to CT.
It felt like the DAO-niverse approached an inflection point. So I sat down to record, for posterity, some unstructured thoughts on the matter.
1/5 | Software Eats Culture
1 — Anons like Peruggia — purchaser of a $7.5M alien CryptoPunk — offer a deeper glimpse into the future of online identities than 3D avatars like Lil Miqueila. Video can be faked, the blockchain cannot. NFTs are platform-less identities. A handle that no Instagram, Twitter, or nation state can ban you from using. A statement on who you align with — a ticket to be buds with Mike Tyson, Gary Vee or a bunch of goblins. A bit like soccer, but cheering indeed helps your team win the game. And winning obviously makes you cheer more.
2— People are spending billions in NFTs. OpenSea is outgrowing eBay. Bored Apes are worn by famous DJs, and Pengus stamp the cover of the New Yorker. On one hand, cash grabs abound; on the other, creators learn to design value games on top of their stories. To the smartest, financialisation is not an end, but a whole new medium for expression.
3 —This Artwork is Always on Sale was one of the first digital implementations of Harberger Taxes. EulerBeats inaugurated the notion of perpetual royalties for a music community. AvidLines pioneered a scheme to create fair derivatives and turn NFTs into working assets. Art entangling with economics. Every collection potentially doubling as a financial petri dish.
4— Sothebys already sold a piece owned by a DAO. Soon, it shall enable DAOs to bid on its auctions. The acronym, buried in 2016 and revived years later, is carving its place in the art world faster than it ever did in any "meatspace coordination" use case.
2/5 | Tenuous Lines
5— The tension between fake & true is a popular contemporary art subject. Think of Banksy’s 2010 mockumentary about a filmmaker (Mr. Brainwash) too bizarre to be famous. Or Damien Hirst’s 2017 movie about a wreck too full of riches to be true. Banksy’s genius is he doesn’t tell you “this is fake”, nor lets you conclude about “the actual truth”. Both can be the case, at the same time. Your disbelief is part of the story.
6— Value is in the eyes of the collector. Always has been. This should be no surprise to whoever’s versed in Satoshi’s coin, or the main character in Banksy’s film, or the movement that brought Hirst to fame (YBA). Some collectors exert disproportionate effect in the perceptions of others. Saatchi and Gagosian in YBA. Banksy himself in the case of Mr. Brainswash. Elon Musk in the case of Bitcoin. [insert DAO here] in the case of NFTs.
7— Art is a game of psyops. Were you shocked to find out the buyer of the $69M Beeple had sold tokens fractionalising other twenty Beeples he owned? Well, wait until you discover Damien Hirst was part of the consortium that paid $100M for a diamond-crusted skull made by… himself (and it was not the first time he "swept his own floor").
8 —Shilling fungible assets may be frowned upon as a sign of pump'n'dumping. But shilling non-fungible ones is, at most, a sign of exquisiteness. It's commonplace for meatspace collectors to be outspoken about their bets. To exhibit their pupils in known venues. To lend pieces to prominent galleries or museums. To hang their stuff on the walls of their own homes. To help develop artist branding and support experimentation.
3/5 | What’s the Schelling Point in On-chain Art?
9— NFTs that can be fully reconstructed from their trails on the blockchain are to art what bitcoin is to money. Bearer assets. Allodial art. Cultural artefacts that can live as long as the internet exists. These should outlast NFTs that are merely “tokens pointing to servers”. But, in the end, a community is necessary to “reconstruct” anything, and it’s worthless, even for a masterpiece, to survive as a fossil that no one cares about.
10— The design space is nuanced all the way down. Did minting happen through a white label contract or a custom made one? Is the media stored in a server, on IPFS/Arweave, or on-chain? Does it live on transaction data or contract data? What about the metadata? How many dependencies are needed to render the actual artwork? These choices won’t make or break a given project — but open up new conceptual pathways. Artists who recognise them stand out (look at the kind of human-machine relationship Robin Sloan entices with his Amulets series).
11 — Cryptopunks inspired wealthy owners to build a comic universe around it. Autoglyphs lured an army of coders to rediscover its instruction sets. Maybe the “Mona Lisa of the Internet Age” will be less of a static piece… and more of an idea so powerful, that it fosters perpetual reinterpretation of itself.
4/5 | Fractionalisation & Reflexivity
12— The first "exits through the token shop" were probably $WHALE and $B20. There's not enough buyers for the 100s of million-dollar Beeples in the market. So you put a big collection in a vault. Ascribe control of that vault to a contract. Mint a token to weight voting power on this contract. Set a reserve price for the whole collection — any bid above this price triggers an auction. Tokenholders can veto a bid at their will, and each veto raises the reserve price.
13— There’s a parallel to be made with the 2017 ICO boom here. Coin issuers raised billions when there was not sufficient talent to hire with all the money. Nor enough liquidity to dump into. It became common to deploy capital into other ICOs. Illiquid wealth being pledged to “refuel” the cycle and mark up gains. Chris Burniske wrote about this sort of reflexivity in 2018. It's a blessing on the way up, and a curse on the way down.
14 — Fractionalisation can be dangerously reflexive. But can also provide the “emotional attachment” component of NFTs, without the illiquidity constraints. Collecting in a clan is as fun (and profitable) as collecting alone. Think millions of fans cheering for a Cristiano Ronaldo whose fractions they own; now swap Cristiano by an alien Punk, or any sort of “Metaverse hero” competing in the e-sports Olympics of 2040.
5/5 | WTF is a Museum For?
15— What is the societal purpose of museums? Preserving a national history? Inspiring inventors? Educating private citizens so they’d contribute more back to society? Helping people coalesce around a shared culture? "Juicing returns from an asset class that's exceptionally illiquid"? All of the above?
16— Museums can have a staggering bottom line. The Met's listed assets are valued at over U$ 100 billion. Unrestricted revenue (revenue except subsidies, endowment, etc) is paltry in comparison, at ~$100M (~0.1%) in 2019. MASP, the largest museum in Brazil, has a collection worth over U$ 2 billion, and made ~U$2M (~0.1%) in revenue in 2019. A museum is like a pool with billionaire TVL but tiny volumes.
17 — Exhibitions are museums’ primary product, but these are really just a formal term for assorted objects and stories. Museums hold artwork that carries potential energy, and spark discussion around it. They send out press releases. They get robbed, then rescue back the masterpieces. Mint prints. Sell souvenirs. Museums are content distributors. Deepeningly so in the digital age.
18— Almost all museums you’ve been to are either philanthropically maintained or funded by the state. Gift selling, licensing and art trades account for a tiny fraction of revenues. By design, museums are more of a culture depository than a culture repository (as in Git). "Art DAOs" can be less dependent and more inventive — treating intellectual property a little more like Fortnite, less like the Louvre.
19— FingerprintsDAO recently remixed its large Autoglyph collection into derivative (NFT artworks. The 512 resulting pieces generated trade volumes of ~U$6M in 15 days (~U$70k in fees for the DAO). Annualised, that’s on par with the revenue made by the largest museum in Brazil in 2019.
20— There's this old question in crypto: "What should be the premium of a protocol, vs. a company that 'does the same'"? If art is a trillionaire asset class turning ~$70–100B in yearly volume, how big of a market should art DAOs aim to grab? Does the concept of a billion dollar art DAO sound so crazy, after all?