NFTs: Blockchain-based non-fungible tokens

I figured since this particular segment of the crypto market has blown up so much lately, it was deserving of its own thread.

NFTs have mainly taken off in the form of digital art/collectibles, with lots of prominent people and artists getting involved including Mark Cuban, Gary Vaynerchuck, and Chamath Palihapitiya. The vast majority of the traction in this sector has happened on Ethereum.

We've seen enormous prices and lots of popularity for cryptopunks (which was the canonical ERC-721 token on Ethereum), NBA Topshots which are built on a blockchain called Flow, Hashmasks, and some others. We've seen the price of the $SOCKS token, representing 1 of 500 limited edition pair of socks created by Uniswap, reach over $60,000. You can redeem the token for an actual pair of socks. We've seen a similar trend among certain real-world art and trading cards (from vintage baseball to modern NBA to Pokemon and everything else).

(currently $61,500, was ~$3-5k a few months ago-- all whole $SOCKS owners also received 1,000 $UNI airdrop in the Uniswap token launch, currently worth $21,000. This has become valuable for a few reasons in my opinion: speculation about future airdrops, privilege related to guarded launches such as those using Proof of Governance [Saddle, Float], as well as an NFT/DeFi status symbol)

Cryptopunks

Hashmasks

Some common criticisms:
(1) NFTs take no effort to create and so can't be worth a lot: Andy Warhol proved this wrong a long time ago.

(2) Right-click savers: can't be worth anything because I can just screenshot it: this is among the dumbest criticisms because your right-click save is worth no more than the photograph you took of the Mona Lisa while you were in Paris or the poster your mom bought you to hang on your wall while you were a kid.

A more reasonable criticism is that it's easy to self-deal. Without identity linked to blockchain, nothing stops anyone from selling an NFT to another address they also control to make it look like the price is appreciating.

I've always been more middle of the spectrum, where I see some pluses and minuses. I'm still there but I do find what's going on now fascinating. The coolest part of digital collectibles is it allows creators to reach a global audience on a completely neutral platform without rent-seeking middlemen.

Outside of collectibles, NFTs have lots of other applications.
-insurance policies (see Nexus Mutual)
-mortgages (which can then be packaged into MBS -- this of course requires a lot more to happen on the regulation side, and is now just a hypothetical possiblity. There is some progress on tokenizing real estate investments, though)
-Unstoppable domains like ENS (Ethereum Name Service) -- allows anyone to purchase a human-readable Ethereum address that maps the hex address to the readable address. I could buy twoshae.eth and point it at my 0x[whatever] address to allow my friends to send me money in a similar way to how they'd send me an email.
-in-game items (think outfits in Fortnite)

Decade+ bull market with especially strong performance from crypto is fueling a massive run in the prices of these pieces of blockchain history.

The bull case for collectibles is something like:
-younger generations love everything digital, digital = can't damage it
-famous creators see the advantage, start doing more digital offerings, social flywheel gets going. after all, all collectibles/art have this idea. lots of very talented artists can't sell their work for much, while others develop cult-like fame (like Banksy) and sell for insane amounts, even for prints (!!).

Lots of the most valuable art like Picasso's or Pollock's are (1) very rare (2) tied to some cultural and/or artistic phenomenon that makes everyone want the same stuff. Other stuff it's unclear why people flock to it, but artists like Banksy, Alec Monopoly, and Peter Tunney are able to sell their work for $$$$. Art and collectibles are a highly social thing, and I suspect that if blockchain ends up being as big of a shift as the bulls think it will be, owning these pieces of blockchain history will be highly coveted, especially by crypto whales who got unspeakably rich from this paradigm shift.

I also talked about NFTX already in the alt thread (Brag: this was 10 days ago and it has 5x'd since.) which, coupled with what I said about original/canonical things + social trends sums up my thesis on these things. Note, all of these things are highly speculative and IMO likely to perform terribly in a greater macroeconomic downturn, like very very high beta stocks. Careful investing.

Hope that got the ball rolling, interested to hear how others are viewing the space and what their investment theses are. PS: Please no right-click savers or "eAsY tO pRoDuCe InFiNiTe AmOuNtS" people as they've already been addressed.

Disclosure: own some but not all of the crypto-based things talked about here.