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How to sell a cat GIF for half a million dollars

February 26, 2021, 2:57 PM UTC

Amid the mania in bitcoin, or perhaps despite the mania, the underlying blockchain technology is still attracting fascinating new uses. The latest to take off is crypto art.

What’s that, you ask? The sculpture outside CIA headquarters with an encoded puzzle? No, this is online art that features a form of digital tagging on the blockchain to verify authenticity, allow for rapid sales, and add a few features that were hitherto almost impossible. Both the $3.5 million auction of Beeple’s art that I mentioned on Wednesday and the sale of the Nyan Cat GIF for $500,000 from Monday are examples of the new wave of crypto art.

First, a short explanation. Crypto art refers to digital works of art in any medium—pictures, photos, songs, videos, even active patterns or cartoons—saved as a computer file. The unique code of a work of art, the ones and zeros of the binary code that comprise it, is linked mathematically to a unique digital token issued from a public blockchain, usually ethereum. While the coins used for digital currencies are interchangeable (one bitcoin is equal to any other bitcoin), these art tokens are each uniquely linked to a single work of art. Thus they are called “non-fungible tokens” or NFTs.

The tokens can be bought and sold and traded online just as easily as any digital currency. A host of galleries and auction sites have sprung up to trade in NFTs. If you are curious, check out Foundation, which carried the Nyan Cat sale, or Nifty Gateway, which sold Beeple’s art.

Because tokens can have additional features, an NFT enables some pretty cool tricks. For example, an artist can establish that they are entitled to a cut of every future sale of an NFT. This is known as the creator’s reward. It’s encoded into the token so that when a sale occurs, that cut is automatically deducted and sent to the original artist’s digital wallet (remember your passwords, people!). And this enables a kind of crazy feature where bidders for an artist’s original work can offer not just money but also varying percentage cuts to the artist on future sales. Would you rather sell for $1,000 now and a 2% cut of future sales or $100 and a 15% cut?

But a looming issue potentially could undermine the whole concept. While each NFT is listed on a blockchain, in most cases, the digital work of art itself is far too large a file to be stored on the blockchain. The NFT may include the web address of where the digital artwork is being stored. But what if that site goes offline someday, a particular risk if an individual artist or small gallery is acting as the host? You don’t want to be that cutting-edge collector with a bunch of NFTs that cost millions linked to art that’s no longer available.

There are a couple of potential solutions. Some artists are using distributed networks like the Interplanetary File System to store their digital works. Like the BitTorrent network that was used to host and share pirated movie files, IPFS stores files on many different computers all over the Internet.

And some artists are creating art that can live on the blockchain. EulerBeats, a form of digital art that’s attracted Mark Cuban’s interest, are algorithms used to produce music and images. A set of unique inputs for the algo produces a unique work and can be easily stored on the blockchain.

Crypto art isn’t the only use of NFTs. The NBA and Dapper Labs created collectible video clips from games that are linked to NFTs and traded and sold online via the NBA Top Shot app. The various digital cats of the game Cryptokitties are also registered as NFTs. The annual report on the market from nonfungible.com estimates the value of all kinds of NFTs totaled $338 million last year, up from $142 million in 2019 and $41 million in 2018.

To this Gen Xer, paying millions of dollars for a digital file that can vanish in an instant seems just as acceptable as paying millions for a couple of swirls of paint on canvas or a bottle of fermented grape juice no one has yet tasted. But then there’s the fact that many of these works of digital art are just floating around the Internet for all to see—I bought it, I own it, but I’m not necessarily in control of it. That’s one aspect of crypto art that the crypto kiddies will still have to sell me on. Have a great weekend.

Aaron Pressman
@ampressman
aaron.pressman@fortune.com

NEWSWORTHY

Stumbling and bumbling. Bitcoin? Did someone say there was a bitcoin mania? It seems the leading cryptocurrency is on track to lose 20% this week, its roughest weekly patch since March. And that drop happened even after JPMorgan recommended that investors put a small portion of their investments into bitcoin. Maybe it will rally next week if Twitter decides to accept digital currency as payment for its new "super follows" features. Twitter execs disclosed on Thursday that they're considering a range of premium and subscription features, including allowing people to charge followers. Hey, about adding editable tweets—oh, never mind.

Paint the black hole blacker. Speaking of huge losses, AT&T set a deal with private equity firm TPG Capital to spin off its struggling DirecTV unit. AT&T paid $67 billion for the satellite TV service in 2015 and the spinoff values the unit at only $16 billion (though AT&T will keep the Latin American satellite TV operation and a few other assets from the original deal). AT&T retains a 70% stake in the new entity, like the creator's reward but for finance, so maybe it could do better in the future?

Staying home. On Wall Street, Airbnb did a lot better than analysts expected. The room listing service said its fourth quarter sales dropped only 22% to $859 million—analysts forecast a 33% decline. Airbnb's stock, up 24% already in 2021, gained 2% in premarket trading on Friday. Salesforce posted a narrower beat as its revenue rose 20% to $5.8 billion. Its shares, up just 4% so far this year, slipped 2% in premarket trading. HP continued to benefit from work-at-home laptop buying. Its sales rose 7% to $15.6 billion. HP's stock, already up 15% in 2021, gained 2% in premarket trading. Dell did even better sales-wise, with revenue jumping 17% to $13.8 billion. Its share price, up 9% this year, gained 3% premarket.

Wipe it down. On the privacy beat, TikTok is the latest app to get TikTokked by angry users. The still Chinese-owned app agreed to pay $92 million to settle lawsuits that it improperly collected facial scans and shared private data with outside companies.

Huddled masses yearning to breath free. The Biden administration lifted a freeze on issuing a variety of types of visas that had been imposed by the Trump administration. Tech companies may be relieved that H1-B visas are being processed but the reopening also covers green cards, temporary work visas, and many other categories.

From boss to boss whisperer. The mystery of where Amazon's third top Jeff to leave the company will end up has been solved. Jeff Bezos is becoming executive chairman and Jeff Wilke is retiring, but senior vice president Jeff Blackburn is joining VC firm Bessemer Venture Partners as a partner. The firm also said it raised $3.3 billion for its two newest investment funds.

FOOD FOR THOUGHT

He's a genius. He's crazy. He's Tesla CEO Elon Musk. Washington Post reporter Faiz Siddiqui has a deep dive into some of the problems at Tesla caused by Musk's unique management style.

Musk spent much of the past year focused on trying to demonstrate his aerospace firm’s viability to shuttle people into space on reusable rockets, all while Tesla worked to construct multiple factories and launched a new SUV. Musk also juggled the birth of a newborn son and his own personal move to Texas. He sprinkled in spontaneous public appearances in venues such as social media app Clubhouse in between his barrages of tweets. Musk became the world’s richest person in January, thanks to skyrocketing Tesla stock. In interviews with a dozen current and former Tesla employees, investors and analysts, critics pointed to a slate of questionable business moves, and even outright missteps by Tesla, as a potential symptom of the outside demands on Musk.

FOR YOUR WEEKEND READING PLEASURE

A few great long reads I came across this week:

The Beach Bum Who Beat Wall Street and Made Millions on GameStop (The Ringer)
Mike McCaskill spent years scouring the stock market and betting on long shots. Then he found the opportunity that changed his life—and helped spark the mother of all short squeezes.

How Chess.com built a streaming empire (Protocol)
Twitch users watched 18.3 million hours of chess content in January, nearly as much as they consumed throughout 2019. Last week, chess even surpassed League of Legends, Fortnite and Valorant as the most-watched gaming category.

Can Allbirds Live Up to Its $1 Billion Valuation? (Bloomberg)
The wool sneaker brand aims to widen its appeal before a possible public offering, including opening a lot more stores.

How Kaley Cuoco Soared to New Heights in ‘The Flight Attendant’ (Variety)
During 12 seasons on “The Big Bang Theory,” Kaley Cuoco became one of the highest-paid actors in the history of television — but for her 6.4 million followers on Instagram, she gives away content for free.

IN CASE YOU MISSED IT

DoorDash warns the COVID vaccine will likely slow its business By Danielle Abril

Best Buy’s incredible 2020 online sales are bad news for its store employees By Phil Wahba

The 3 winners and many losers of the FCC’s record-breaking 5G auction By Aaron Pressman

A mask-free return to the office? Intuit is considering it in highly-vaccinated Israel By Lance Lambert

Putting people first: Cisco CEO on leading through a year of unprecedented hardship By Andrew Marquardt

How Twitter, LinkedIn, and MLB are trying to fix their diversity problems By Sy Mukherjee

Corporate America’s most overpaid CEOs in 2021 By Chris Morris

(Some of these stories require a subscription to access. Thank you for supporting our journalism.)

BEFORE YOU GO

A study from Stanford's Virtual Human Interaction Lab confirms what your tired eyes are already telling you: Zoom fatigue is real. Prolonged video conferences are overly intense, inhibit walking around, and tax our brains more than face-to-face communications, the study found. But fear not, the study also includes recommendations like turning off your video camera for parts of meetings and not watching in full-screen mode. Sounds like a plan!