Paul “Lamborghini” Kell made the news in 2018 when he paid $US38,000 for a digital artwork that anyone could already view or download.
This week, he sold the same artwork — a depiction of Homer Simpson combined with internet meme Pepe the Frog — for $US320,000.
It’s an example of the surging demand for digital artworks called NFTs, which are selling for thousands, even millions of dollars.
But why would anyone pay for online artwork they can already get for free?
The answer goes to the heart of this emerging digital economy, and opens up new avenues for artists to (finally) make more money for their work.
But first: what even are NFTs?
NFT stands for non-fungible token.
Fungible means exchangeable. A movie ticket is fungible — you can give it to anyone else to use.
A typical plane ticket, on the other hand, is non-fungible. You can’t give it to a random person waiting at the airport after you’ve decided not to jump on your plane.
So NFTs are unique collectible tokens that are permanently tied to, for instance, digital artworks and music. They cannot be separated; the token is the art.
Though NFTs have been around for years, recently the market exploded.
An animated flying cat with a pop-tart body sold for almost $US600,000 in February.
This was soon topped by a 10-second animated video of what appears to be Donald Trump collapsed on the ground in an urban park. It sold for $US6 million.
Again, these are videos you can watch for free. Right now.
So why pay good money for NFTs?
Mr Kell, who made his money as a cryptocurrency investor and lives in Denver, Colorado, where he drives a white Lamborghini, said the value of owning Homer Pepe is the “token under the picture that represents Homer Pepe”.
“You can take a picture of the picture, but you don’t have what’s under the picture.”
The total value of NFT transactions increased 300 per cent to $US250 million last year, according to a recent report.
OpenSea, a marketplace for NFTs, reported selling $US86.3 million worth in February, up from $US8 million in January.
And January had been a good month. Monthly sales were at $US1.5 million a year ago.
For some, the “stupid money” being paid for NFTs is just the latest example of a speculative bubble that will soon pop. For others, it means artists get paid.
They point to a central fact of the internet: in a digital medium where objects can endlessly be cut-and-pasted, copied and reproduced, nobody bothers to pay for the original.
For instance, music ripped from CDs and put online to download as mp3s is why musicians have been paid less for each song they release.
But with NFTs, a JPEG can be as unique as an oil painting.
Buyers pay to own the original artwork instead of having a copy.
That means that artists will get paid more for the music they create or the images they draw.
‘Paying money for JPEGs kind of blows my mind’
Serwah Attafuah, a Western Sydney artist, was one of the first Australians to sell an NFT.
Foundation, a website for buying and selling digital goods and run by a company based in New York, contacted her last year about selling one of her works as an NFT at their launch.
Through the website, her piece Voidwalker sold for $2,000.
This isn’t a bad price, but what makes the process really interesting to Ms Attafuah is that she retains 10 per cent equity in the artwork.
Every time it changes hands, she gets 10 per cent of the sale price.
At the time of sale, no-one in her circle of artists knew about NFTs. Last month, a GIF sold on the same website for $US580,000. Australian artists have since been rushing to get on the website.
“When I dropped my NFT, none of my artist friends understood it, but now all my artist friends are saying ‘how do I get onto it?’
“It feels very futuristic.”
Flume, and others, are exploring benefits
The music business is quickly taking notice of this, particularly as the lack of revenue from live music has forced a recalibration in the industry.
People involved with two separate Australian independent records labels described the NFT situation at the moment as the “wild west”.
Australian producer Flume released an NFT collaboration yesterday with Sydney visual artist Jonathan Zawada.
“It’s such early days. I’m just wanting to experiment more,” Harley Streten, aka Flume, told the ABC.
“Jonathan and I have essentially been making NFTs for years. We just didn’t have a name for them.
“We’re excited to push the boundaries of it — experimenting with the space, going beyond just audio and visuals. This feels like phase one.”
Nathan McLay, Flume’s manager and the founder of his label, Future Classic, said from initial conversations with NFT marketplaces, it seemed artists will get a cut of subsequent sale of the works, rather than just the initial one.
That is unusual in the creative world and could be a useful additional revenue stream.
But what’s also exciting is the flexibility of the technology, Mr McLay said.
“The first drop from Flume and Jonathan Zawada has a 1- to 2-minute audio piece that goes along with a visual, so it’s a new ‘piece’.
“There’s lots of potential for that to grow out into how it integrates with a live show, or merch drop, or a giveaway to fans.”
The Australian company Blockchain Music has created Rarez, a consultancy that seeks to help artists take advantage of the new technology.
It has so far facilitated about $150,000 in sales of digital art created for the DJ and producer deadmau5.
“The space has just accelerated so much that almost every artist out there is considering how they should be using NFTs and what they should do,” Sean Gardner, co-founder and CEO, told the ABC.
A collaboration between deadmau5 and the LA-based Australian designer Sutu — a 30-second animation of a golden mouse head backed by music — sold in December for 78 Ethereum, or, at the time, about $US49,000.
A new way to make ‘super-fan’ money
At the moment, Mr Gardner said, the works being sold — generally very short 3D animations with music behind them — are just the beginning of what’s possible.
“What this is going to evolve into is a way for artists to actually claw back a little of the super-fan-type revenue that they used to get from selling CDs directly to their closest fans, or selling limited-edition vinyl,” he said.
While at the moment it is artists with already established profiles benefiting, with Rarez, Gardner hopes to spread the benefits further.
Melbourne electronic producer Jacob Steele, who performs under the name Tobacco Rat, has also collaborated with Sutu. The pair produced three NFTs.
At the moment, Steele is concerned about the environmental consequences of the technology — like other cryptocurrencies, Ethereum must be generated or “mined” using a lot of computer power.
But if that can be addressed, he sees the financial benefit for artists.
“If things keep going the way they are going, it’s a great new pay packet for artists,” he said.
“You put a track on Bandcamp and sell it for $1, or you create this crazy artwork and sell it for like $5,000.”
For one buyer, it’s not about the dollar figure
The person who bought the deadmau5-Sutu collaboration, who declined to reveal their real name or location, told the ABC he didn’t know much about NFTs — or art — before a friend brought the work to his attention.
He initially just got interested “for the flip” — to resell it at a higher price — and paid “an irresponsible amount of money … for reasons that are difficult for me to articulate to my wife”.
But while he was initially drawn to the speculative nature of NFTs, he said he got “sucked in by the art” and the community that trading tokens can create.
His investment has now more than doubled in value.
But in a way not dissimilar to the philosophy behind the GameStop surge, he believes that to think of it in dollars is to obscure the deeper meaning and potential of NFTs.
“I have not sold a single piece that I have bought and I have no intention to,” the trader said.
“These things, they are almost like the keys to relationships and networks that I am using at the moment and that I find a lot of value in.”
By technology reporter James Purtill and music and pop culture reporter Paul Donoughue