The recent surge in NFT coverage in tyhe technology and financial press was typified by the story of an early NFT auction in which an investor paid $2.9m for an NFT linked to Twitter Founder Jack Dorsey’s first ever Tweet on the platform. This, it was claimed, was an example of how new value could be created using NFTs and how investing in buying and selling NFTs would be the next big thing. The sales of NFTs have indeed grown large though the residual value, and ROI on the resale of NFTs have been much less impressive.
In the interim it has been widely reported not only that NFT exchanges have struggled with growing numbers or fraudulent issues, fake NFTs, market manipulation, price rigging and thefts (ironically specifically the issues that block chain technologies are intended to prevent) but also that a lot of the apparent liquidity in NFT markets (the number of buy/sell transactions) has been artificially (and illegally) inflated by the same parties being on both sides of the transaction in any attempt to give the impression that NFT are easily/quickly traded and that prices are going up.
In what must be considered a massive PR blow to the industry as a whole, the buyer of this famous first Tweet NFT, Sina Estavi has recently tried to sell what is probably the most famous NFT in existence for sale referring to it as the “Mona Lisa of the Digital World” for an eye-watering $48m on the OpenSea NFT exchange (asking more than 16x what he paid for it in March 2021) and was met with initially offers of only hunderds of dollars and at the time of writing a highest bid of just $6’800 – some 0.000141 of the asking price and barely 0.0023 of what he paid for it. Surely a “rug pull” of epic proportions.
Our condolensces go to Mr Estavi who had allegedly planned to donate about $25m of the expected proceeds to charity though we think he has badly mis-judged what he has purchased. While he claims this NFT is the “Mona Lisa of the Digital World” – something which would indeed be priceless, surely what he has actually bought is an NFT for a photo of the Mona Lisa which can be bought in any gift shop for a few dollars or downloaded from the Web for free.
Perhaps more correctly he bought $2.9m of attention/publicity for himself and the new NFT exchange he is launching whilst the NFT that remains behind when the news stories and buzz are forgotten actually captures very little inherent value beyond the attention and novelty they generate. Who was the second woman to fly solo across the Atlantic? The second athelete to break a 4-minute mile? No-one remembers and I suspect the the second person to own this NFT might be equally forgetable.
Perhaps NFTs are becoming a new currency of the “attention economy” joining subscribers, likes and upvotes. In any case potential investors must now surely be ultra-careful about certificates pointing to notional assets that are hard (impossible) to differentiate from the free alternatives.