NFT Roundup #14: Million-dollar sales on Solana; NFTs and IP; NFTs and music; Digital escargot; NFT liquidity
Buy the rumor, sell the news
This is a curated newsletter, covering news stories about NFTs. The NFT market is moving rapidly, and this is an attempt to provide some means of keeping up with its developments. Your curator is Dave Friedman.
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Today’s newsletter explores Solana and NFTs. For a long but accessible introduction to Solana, consider reading Packy McCormick’s essay.
A handy reference to understand Solana relative to other blockchains is this:
Blockchain advisory firm Moonrock Capital purchased one of the Degenerate Ape Academy NFTs for 5,980 SOL on Saturday, worth $1.1 million.
Moonrock bought Degen Ape #7225, a scarred zombie version of an ape with a halo, a gold tooth and a brain in its mouth. The ape is the 13th rarest in the collection, according to HowRare.is. The firm also picked up the 18th rarest SolPunk — a Solana-themed version of CryptoPunks — for 1,388 SOL ($260,000).
There have previously been sales on Solana for amounts that would now be worth more than a million dollars, such as Degen Ape #1674, which was sold for 7,000 SOL. But this appears to be the first sale worth more than a million dollars at the time of purchase.
A million-dollar purchase is admittedly an arbitrary measurement by which to measure the success of an NFT marketplace. Nonetheless, Moonrock Capital recently paid seven digits for an NFT residing on Solana.
Unfortunately, the price of any given NFT tells us little about overall sales volume. And the evidence is that sales volume on Solana has been, like that on Ethereum, declining as of late. Decrypt reports:
On both Ethereum and Solana, anecdotal evidence suggests that select NFTs from top collections are still fetching significant sums. However, entry-level (or floor) prices are dropping, even for popular projects, while less in-demand or lower-quality projects are losing momentum and contributing to the sizable dip in overall trading volume.
Money is easy to make when everyone wants a piece of the action and the hype is at its highest. But once the amateurs leave, bad assets decline in price and overall trading volume declines as well. This is a real problem both for NFT creators and for the marketplaces that facilitate their trade.
One of the biggest risks to a marketplace like OpenSea is that the demand for art-based NFTs will all but disappear. There are other categories of NFTs out there which provide more utility and perhaps more enduring value than art-based NFTs, but their share of the market is very small.
Solana is, like Ethereum, and Bitcoin before them, a great technological achievement. But great technology does not by itself sustain or create demand. Both NFT creators and the marketplaces that facilitate their sale will have to understand where demand originates from, how value is sustained or increased over time, and how to diversify away from art-based NFTs.
Art, of course is not itself the problem. The problem is that art by itself provides no utility other than bragging rights for the owner of the art. For every person who owns a Picasso, there are thousands of people who own art deemed by the market to have no value other than sentimental. And—that’s fine. The art market understands this, and it is focused on a very few artists whose value has been proven over the passage of time.
However, technology startups have significant growth expectations baked into them by venture capitalists. This suggests that no NFT marketplace can sustain itself on the vicissitudes of the subjective valuation of art.
The artist behind Fidenza has called out a Solana-based NFT project for copying his work.
With Etheruem gas prices reaching extreme highs, NFT collectors are moving to other, cheaper blockchains to continue their hobby. One of them is Solana, which has seen an increasing number of NFT creators launch collections in recent weeks. However, as the NFT space expands to ever more ecosystems, a new trend of copycat projects seems to be emerging.
The latest in a series of rip-off projects is SolBlocks, which announced its plan to launch its own unique collection of algorithmically-generated NFT artworks based on Fidenza creator Tyler Hobbs’ codebase Tuesday.
One of the more interesting questions surrounding NFTs is that of intellectual property. I’m not a lawyer, so I won’t offer any legal analysis. I will just note this:
An artist creates a piece of art.
She decides to create an NFT on a blockchain and link that NFT to the piece of art.
The piece of art, say a JPEG, exists outside of the blockchain, and is not connected to the NFT itself by anything other than a reference, typically a file link, embedded in the NFT’s smart contract.
Given all of this, who owns the copyrights to the art? Who owns the cash flows associated with secondary sales of the NFT? In theory you could encode all of these details, and more, into the NFT’s smart contract. But are those claims enforceable in a court?
I’ve no idea about the answer to any of these questions, and I have no doubt that a lot of litigation will arise from these (and other) questions. A very quick Google search returns this exploration of the question of IP and NFTs.
Music streaming platform Audius is launching its Solana NFT integration after the high-speed blockchain clocked $60 million in collectible transactions in the last week.
The initial integration features Solana wallet Phantom and will unlock a new feature for Audius Silver Tier profiles, allowing its more than six million users to begin showcasing Solana SPL NFT collectibles alongside Ethereum’s ERC-20 NFT collectibles such as Crypto Punks, Bored Ape Yacht Club, Cool Cats or Hashmasks.
Roneil Rumburg – co-founder and CEO of Audius – explained the lack of a robust NFT discovery layer in Solana was the reason behind the move.
Music is an interesting area for NFTs. Musician 3Lau (apparently pronounced “Blaw”), launched Royal, which allows fans to invest in their favorite musicians by buying a cash-flowing NFT. The idea is that any cash that the musician generates from his music will be paid to the fans who financed the musician’s music.
As with other kinds of NFTs, whether they are art-based NFTs or ticket-based NFTs, there are a lot of these platforms popping up, each promising their own spin on their particular niche. While this is exciting for consumers, it is also clear that not all of these marketplaces will survive.
Snailana are collectible computer-generated NFTs stored on the Solana Blockchain, the collection consists of 6,174 unique Snails with distinguishable traits that have landed on planet earth. These snails require transportation towards the Solana Chain Planet. By minting one (or more) everyone will own a unique Snail with evidence of ownership recorded on the Solana Blockchain.
If Bored Apes and modern day pet rocks can be NFTs, why not snails? I don’t really understand the appeal of snails, whether of the biological or digital kind, but some people clearly love their escargot. Why not memorialize it digitally? The world is large, and one man’s trash is another man’s treasure.
More seriously, there is something interesting here, which is this: it sounds like Snailana is trying to build its own virtual ecosystem of digital biology. What I mean by this: imagine you create a set of digital animals that exist on a blockchain. And, through their code, you imbue them with certain characteristics. Maybe they interact with the real world through oracles. Maybe they spawn new NFTs after a real-world event triggers them to do so.
Does all of this sound crazy to you? Maybe it is, maybe it’s not. I’d focus less on the animal being represented (“Snails are gross!”) and more on the possibilities that this kind of NFT creates.
The SOL/USD exchange rate almost reached $200 on Tuesday as investors continued to treat Solana as a long-term competitor to Ethereum, the world’s leading smart contracts platform.
More bullish evidence came on Monday after Sam Bankman-Fried, CEO of crypto derivatives platform FTX, announced Solana’s integration into FTX’s upcoming nonfungible token (NFT) marketplace.
On Monday, Bankman-Fried revealed that the new marketplace would enable NFT creators and owners to trade their digital arts cross-chain using Solana and Ethereum. The platform would also make it possible to trade NFT collections from rivaling marketplace OpenSea on FTX.
The NFT marketplace went live on Monday and is hosted by FTX.US, a United States-regulated cryptocurrency exchange backed by FTX. That enables United States users to mint and trade NFTs via FTX.
Exchange rates tell us a lot of useful information about relative demand. If the SOL/USD exchange rate increases, then we know that people are using USD to buy SOL. Conversely, if the exchange rate decreases we know that there is less demand for SOL.
So we can read this as a bet on future demand for Solana-based transactions. And, as the quote above tells us, that is indeed what is happening. Crypto-derivatives trading platform FTX is launching an NFT trading facility, and that facility will support Solana.
A big issue with NFTs is that they aren’t very liquid. Secondary liquidity is a big concern, but no one seems to have found a solution to it yet. FTX is among the biggest players in the crypto trading market, so their integration of NFTs, whether on Solana or a different blockchain, may go a long way to increasing NFT liquidity. Increased liquidity could unlock surprising new possibilities for NFTs.