British artist Damien Hirst launched an experiment a year ago: He sold 10,000 unique dot paintings from The Currency collection for $2,000 each as a painting, or NFT. According to Hirst’s tweet from the end of July, 5,149 buyers opted for the physical work and 4,851 for the digital one. Starting September 9th, one spurned painting after another will go up in flames every day. Meanwhile, the NFTs are sold on the OpenSea marketplace for around 5.6 Ether or 9400 euros, the real paintings in auction houses for around 30,000 euros. Although NFT buyers are currently making a profit with this controversial project, painting owners are significantly more so.
In addition, the majority decided against the NFT. Buyer confidence seems to be waning. A non-fungible token is a type of proof of ownership for a digital asset. In this way, a JPEG that can be copied indefinitely becomes unique in a way. NFTs originated in 2017 in the blockchain game CryptoKitties. As a result, a market was formed around art and scrap that tried to tokenize almost everything: from artworks in JPEG format to color shades.
Even arch-capitalist tech companies are now distancing themselves from technology. Microsoft released a statement on the Minecraft Blog in late July stating, “Integrations of NFTs into Minecraft are generally not something we will support or allow.” The blog entry explains the decision by saying that the Minecraft community should be able to access all content, but NFTs are a means of creating “lack and exclusion”. This puts them in conflict with the spirit of Minecraft.
To ensure that Minecraft players have a “safe and inclusive” experience, blockchain technology is not allowed. That was clear. NFTs have made a comeback to online gaming after CryptoKitties, but they are no longer desired.
Reddit sells “Collectible Avatars” but avoids the term NFTs. The collecting pictures are confusingly similar to real NFTs. They are based on the Polygon blockchain. You can buy them with conventional currencies, NFTs only with ether at horrendous additional costs. However, the Reddit community is not amused: “Smells like nft spirit” is the comment with the most reactions under the announcement on Reddit.
Lots of supply, little demand
Well-known freelance artists such as Damien Hirst or Johann König and successful photographers earn money with NFTs in a serious way. Crypto newcomers like the Bored Ape Yacht Club (BAYC) and the CryptoPunks have also offered stable-value NFT works. The volume of BAYC grew from 5,199 ethers in July 2021 (9.7 million euros at the time) to 15,409 ethers (currently 25.8 million euros) a year later. The project owes its growth to celebrity supporters such as Jimmy Fallon, Eminem, Madonna and Justin Bieber, without whom BAYC’s monkey pictures are just monkey pictures.
In addition to these well-known representatives, two groups of NFT providers in particular have stood out. One group tries to copy the successes of BAYC by modifying the concept with sloths, Godzillas, penguins or little bears – similar to how Bored Apes are a variant of the CryptoKitties. Buyers have assumed the “next big thing” in ever new collections of this kind, and invested comparatively small amounts, but often only acquired pixel garbage. With “sweeping”, users buy up remaining stocks of collections cheaply in the hope of increasing demand – with dubious success, because there is always a new collection that makes the one just swept forgotten.
The second group of NFT providers tries to convert well-known branded products into digital money with elaborate advertising campaigns. Disney sells everything from the cartoon princess to Bart Simpson to Darth Vader and Spiderman as digital trading cards. Even buyers of these pictures can rarely hope for an increase in value, because they simply lack the marketing budget to advertise their resale offer with which Disney & Co. caught them. New material is constantly arriving to compete with interest on the used market.
The operators of the OpenSea portal also feel that the wind is changing. They cut 20 percent of their staff in mid-July. “The reality is that we have achieved an unprecedented combination of crypto winter and macroeconomic instability,” OpenSea CEO Devin Finzer wrote on Twitter.
Kryptowinter doesn’t sound good at all to NFT collectors’ ears. NFTs are based on the Ethereum blockchain and are therefore inextricably linked to the cryptocurrency ether. Their course fell from over 4000 to 1000 euros in the meantime and seems to be stabilizing around 1800 euros for the time being. The Bitcoin course is currently bobbing at around 23,000 euros; At the end of 2021 it was almost 60,000 euros.
News is piling up about exits from major players: Tesla has sold more than 75 percent of its Bitcoin reserves at a loss. In January 2021, Tesla bought $1.5 billion worth of Bitcoin. Those who trade on such a scale have a huge impact on the price of a currency that has nothing more to show for it than the trust of its followers.
The result: downsizing wherever you look. Crypto rental company BlockFi has laid off 20 percent of its people and is offering the remaining employees severance pay if they leave voluntarily. The Celsius rental company is bankrupt. The crypto exchange Gemini has reduced its staff by ten percent for a second time. Blockchain.com has laid off 25 percent of its employees.
Blockchain currencies have not emerged as a stabilizing rock away from traditional banks and public companies. Instead, they react even more sensitively to crises such as the Ukraine war because they lack tangible equivalents. Retail investors who rely on NFTs lose money due to price fluctuations, even if the NFT prices themselves remain stable.
The fall in prices is accompanied by horror reports about hacked exchanges, phishing attacks and fraud within the operating companies themselves. An excerpt from the list of incidents reported in July 2022: The founder of the cryptocurrency platform My Big Coin is being charged with stealing customer deposits worth six million US dollars. Dollar convicted, a former Coinbase employee, on two counts each of computer fraud. Crypto firm Hypernet shut down shortly after allegations of fraud.
In South Korea, police are conducting raids on the operators of seven crypto exchanges. The FBI’s cyber department warns of crypto investment apps that have stolen almost 43 million US dollars. An NFT collector lost 100 ether (about 150,000 euros) in fun bidding. Hackers attacked NFT service Premint and stole 314 NFTs; the NFT platform Omni was relieved of 1.4 million US dollars in an attack. Almost two billion US dollars were stolen with hacks against blockchain platforms in the first half of 2022 alone.
Dramatic price swings, an oversupply of NFTs, and a scene that’s attracting scammers like wasps to a raw cutlet in the sun—all alienating buyers who could have smelled the big bucks a year ago. For a long time, the market was designed for limitless growth. Now he’s shrinking himself back to health. And with it, the prices for so many animal pictures are shrinking.
In c’t 18/2022 we bring Windows and Linux together and explain how you can use both systems hand in hand on one computer. We also focus on used hardware, because it’s as easy on the wallet as it is on the environment – at least a little. You can find these and many other topics in the current issue of c’t.