The Definite Guide to Art Blocks (Part 2)
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When I wrote my previous letter on Art Blocks I absolutely did not expect to be writing about AB again a couple of months later. Yet here we are. If you haven’t read the first letter, I highly recommend doing so, as I will be assuming a certain level of knowledge for this one.
The last 3 months have been absolutely absurd for all things Art Blocks. I don’t think anyone expected things to blow up as much as they have. Hell, I wrote an entire Letter yelling about how much I love and believe in AB and how strongly I felt about it being a good place to park some money and what has happened has still exceeded even my wildest imagination.
In this Letter I’m going to look at what has happened but more importantly, try and comprehend why it has happened. Then I will attempt the impossible and try to think about where all this is headed next and what role we might expect AB playing over the coming weeks, months, and years.
I’m also going to try and give some advice for people looking to make their first purchase of an Art Blocks NFT, since I know how daunting and overwhelming it can be. I probably get 5-10 people a week asking me for advice on what they should buy so I’d like to offer some general advice at the end for those looking to dip their toes in the AB water.
That’s basically what many Art Blocks collectors have been feeling lately. What. Also: “how?”, and, “wtf?!?!”. I wrote this on June 30th:
…many of us are in the NFT world at least in part for financial reasons, and so if it is monetary value that you are looking for, you would be hard pressed to find better value than buying and holding a piece of Art Blocks art.
I’m not sure how to say “I told you so” without saying “I told you so”, but perhaps looking at the numbers will highlight just how absurd the prices have gotten since I first wrote about them. Stats don’t lie. I posted this table of prices in my previous AB post:
Now let me just update that a little bit with the current prices for comparison..
$1,000 invested into ABC (Art Blocks Curated) would, on average, have returned $15,480. It has been an insane few months. It’s crazy to think that less than 3 months ago you could have picked up a Fidenza for 6 ETH or a Chromie Squiggle for 1 ETH. If you went back a month further you could have gotten a Fidenza for 0.5 ETH or a Squiggle for 0.2 ETH. To use a technical phrase - things have gone bonkers, truly, truly, truly bonkers.
What is even more crazy is that I think this is still just the beginning for Art Blocks.
This is probably the toughest question to answer, and the one most people want the answer to. Why is Art Blocks doing so well. Why Art Blocks and not xxxx or yyyy project (even other generative art projects). Why do I think Art Blocks pieces are going to continue to rise in price/value, even after such a meteoric increase as we’ve seen? I’m going to try and break it down and give a few different reasons why I think these things - but if I had to sum it up in one word, it would be: branding.
Art Blocks is no longer “just” an NFT platform or project. It has become a brand. Not just any brand either - it has become the defacto “go to” place/brand for high quality generative art NFTs on the Ethereum Blockchain. Stumble into any conversation on Twitter where people are arguing over what is construed a ‘blue chip’ NFT and almost every person will include Art Blocks at the top of the list, along with Crypto Punks, Autoglyphs, and probably the Bored Ape Yacht Club. When a project is considered blue chip it becomes a self fulfilling/reinforcing prophecy. Everyone thinks AB is blue chip, so more people buy AB. More people buy AB, thus further solidifying its place and brand as “here to stay”.
Once someone buys a piece of AB art they are very often going to share their purchase with others. A buyer is not just a buyer. They now have a vested interest in the success of the brand. If AB does well financially, their investment does well. If AB does well socially, their investment in terms of social currency and status does well. The buyer is now a promoter, marketer, advocate. The more people that enter the ecosystem, the more advocates there are, the stronger the brand becomes, then more people enter the ecosystem, the more advocates there are, the stronger the brand becomes…
There have been more people entering the ecosystem, and this is unlikely to slow down any time soon.
As the entire NFT space grows, and I think there’s no denying that the space is growing at an insane speed right now, more people will eventually set their eyes upon Art Blocks. Whether they look at it as purely an investment vehicle or they are coming from the perspective of being an avid art collector and wanting to expand their collection to include generative art, there will be new money wanting to get a piece of the growing AB pie. As demand continues to rise, the price for the existing collections with fixed supplies is extremely likely, to my mind, to continue to go up. There will only ever be 999 Fidenzas, but as long as the AB brand continues to do well, the amount of people that want a Fidenza is only ever going to go up. And despite what everyone says every week, there’s never going to be “the next Fidenza”.
There’s also never going to be the next Chromie Squiggle, or the next Ringers, or Archetype, or Democracity, or Pathfinders, or Ode to Roy, or Brushpops, and so on. There will be many more Art Blocks drops in the future - but to quote something I read earlier today on the history of digital antiquities:
There is no limit to the supply of tokenized assets that will emerge in the future, but there is an iron-clad hard cap on the scarcity of those in the past - @WhiteRabbit1111
They are in fact referring to NFTs that pre-date Art Blocks and if you are interested in reading more about the history of NFTs dating back many years then this Medium article on the topic is excellent. It’s outside the scope of this post, though. I am contending that Art Blocks is a movement and asset class in and of itself, and the very early pieces from Art Blocks’ History will continue to rise in value as time goes on.
Something I have been thinking a lot about over the last few months is the idea of investing from the perspective of aligning your incentives with that of influential investors. I think this is amplified in a space as nascent as NFTs. A lot of the success of a project is, for better or worse, dependent on “the right people” talking it up on social media. Punks Comics would likely have been a successful project regardless, but would it have been as successful as it has been without Beanie consistently talking about how great it is on Twitter for the last 4 months? Probably not. He invested big into the project, and then he spent a lot of his time and attention ensuring that his investment grew as large as it could - providing value to himself and all that believed in/followed him into it.
I think the same could be said for many of the largest investors into Art Blocks. Over the last couple of months we have seen a few ‘whales’ enter the AB arena paying enormous sums of money for certain pieces. Three that come to mind are Vincent Van Dough, Punk 6529, and Zhu Su from the investment group Three Arrows Capital. They have all spent many millions on AB. They are all incredibly smart individuals and respected by many other incredibly smart individuals. Did they buy pieces of AB art out of the goodness of their hearts? No (or at least, not entirely). They’ve made significant investments, and they are going to want to protect their investments.
Probably a lot of why they invested in the first place is because they saw a lot of what I am talking about happening - the brand of Art Blocks was becoming huge and unlikely to slow down any time soon. They could very easily just sit back and let the market do its thing and their investments are probably gonna do just fine, but they all have large audiences, they all love their AB art and investments, and they probably aren’t going to stop talking about them.
In fact, they are even going so far as to set up a fund dedicated to educating people about NFTs and increasing exposure for Artists and art work. They understand that the best way to protect their investments is to help grow the entire space. A rising tide lifts all ships.
They’ve recently invested big into Art Blocks. Many of the crypto and NFT OGs have been invested big into Art Blocks for months. I’m invested big into Art Blocks. I’m willing to be such an outspoken (unofficial) advocate for them because I believe in them so much, but of course, because I too, wish to protect my investment(s). So perhaps let’s talk about why I believe in them so much in the first place, and why I have invested and continue to invest so much in them.
My AB Journey
The art is awesome, but, I would be lying if I said I first got into Art Blocks for the art. I did not. I’ve never been a particularly artsy person, and when I first found out about AB it was essentially via friend saying “hey this project seems cool, you should mint some, you will probably be able to sell them for a few x in a few months”. Aka, I came for the money. I didn’t look too much into the platform or projects at first, I just minted, got some NFTs, tried to sell them, realized nobody was (at the time) very interested in them, and chalked it up to a loss.
I had joined the AB discord but I didn’t really engage with the community at all at this point, I just used it to get the announcements for upcoming projects. The next announcement I saw was for Algobots by Stina Jones. I missed out on minting it because it sold out very quickly, especially for those days. They were immediately trading for a premium on secondary and so I went “huh, maybe I should give AB another go”. Perhaps I could mint next weeks curated drop and flip it for a nice profit. Maybe not though, it might not be as good as this one - these Algobots are really cute! Maybe there’ll never be another drop as cool as this one. Damn, I can’t believe I missed them! Oh, if only I knew…
Next week was Elementals by Michael Connolly. I minted one. I really liked it. It looked great to me. I didn’t really want to sell it. Huh. Maybe I might like art after all… Around this time my friend Jaime was also on a similar journey and he missed the Elementals drop and was really bummed about it. I might have really liked the stuff, but he freaking loved it. “Elementals are so great, I can’t believe I missed them, oh man I wish I had one, you’re so lucky Roy, dammit, blah blah blah.” Eventually I think I sold him my one for what I paid since he loved mine specifically so god damn much, and then I bought another one on secondary for cheaper (prices had dropped) since I didn’t want to be Elementals-less.
My journey was starting to go from “just here for the money” to “largely here for the money, but also some of this art is pretty cool…” - the next drop was Subscapes by Matt DesLauriers. By this point I was starting to get a little active in the AB discord and was enjoying chatting with other collectors. It seemed as though the community was mega excited for this drop. I was too, they looked great! I thought, you know what would be a great way to have my cake and eat it too? I’ll create a second wallet and mint two. That way I can sell/flip one and recoup my investment, and hold on to the other. That’s basically exactly what I did. At the time when I sold my Subscape I thought “wow, I can’t believe someone just paid me 0.75 ETH for that!! That’s insane”. Clearly the buyer thought it was worth that much (likely more), and while I couldn’t see it at the time, clearly they were right. The floor for Subscapes is now almost 40 ETH.
From that point on I was more or less hooked. The next drop Watercolor Dreams seemed very cool to me, Bubble Blobby was like an amazing lava lamp, and AlgoRhythms just blew my freaking mind. I was minting them and instead of being astonished by the fact that someone would pay me 4x mint like they did with Subscapes, I started to become astonished that people weren’t snapping these up on secondary. I have minted every (Curated) drop since.
Somewhere along the road it stopped being just about the money. That was pretty early on. Then somewhere a little further down the line it stopped being even mostly about the money. If that were the case I would have sold both of my Subscapes for an immediate and significant profit, but I liked them so much, I wanted to keep one. To collect it. Add it to this new thing I had going on - “an art collection”. Who am I? How did this happen? It just.. did. I became an art collector. I enjoy collecting art, I enjoy looking at my art, and I enjoy imagining what my future house will be like with some of my art hung in it. I enjoy talking about art with fellow collectors. I enjoy looking forward to what new art is going to be dropped on Art Blocks. I am, miraculously, appreciating art. The most important part of this whole story? I am not alone.
I have spoken to so many people over the last few months that have shared the same type of journey and had similar thoughts and paths from “not particularly caring about art” to “hey! turns out I do like art after all!” - it’s quite remarkable to see.
I honestly think we’re at the beginning of an artistic and cultural revolution, and Art Blocks is at the god damn heart of it all. Of course, it’s insane to think that it’s just Art Blocks at the heart. It’s all of it - this whole NFT movement. CryptoPunks started it all, CryptoKitties had their role to play, as did curio cards, ether rocks, avastars, mooncats, rarepepes, lost robbies, hashmasks, apes, of course autoglyphs, and oh. so. many. more.
NFTs are changing the world. They are exciting the world. Everyone in the crypto space thought that it would be DeFi (decentralized finance) that would get “the masses” into crypto. That turned out to be wrong, because at the end of the day, DeFi isn’t fun or exciting to most people. Yes it’s absolutely freaking fascinating and exciting to us finance and tech nerds, but to most people? Hey friend, did you know you could auto-compound some ERC-20 tokens getting an APR of 125.65% by ZZzzzzzzZZzzZZzzz SNOOZE FEST. Boring. Unexciting. Lame. Not. Cool.
NFTs are cool. The fact that we’re so early and that people are quite literally making life changing money by investing in the space early just makes it all the more cool, fun and exciting. Of course, it also makes it dangerous. You can’t make enormous returns without taking on some amount of risk. I personally think the risk/reward ratio is so heavily skewed at the moment that it’s worth taking a considerable amount of calculated risk in return for the potential massive upside.
More on Branding
I spoke about branding earlier. Within the Art Blocks brand, there are many smaller brands. The main three being Curated, Playground, and Factory. They are the sections that projects are broken up into based on certain criteria and perhaps it’s not quite accurate to call them brands, but I think it’s a fair to say that a lot of people think of Curated as the ‘premier’ side of AB with PG/Factory being ‘less prestigious’. This is not to say there isn’t fantastic art in those two areas - there is. They simply haven’t passed muster with the curation board, and their supply isn’t as closely controlled as it is with Curated pieces.
Further breaking down the ‘brandedness’ of things, you could consider individual collections or artists to be brands. I don’t mean to reduce an artist to a brand in any sort of diminutive sort of way, but I think that an artist, their work, and the value the market puts on them, has long been considered to be a brand, and will likely continue to be thought of that way. There’s value in a piece of art simply because it’s a Warhol, a Hirst, a Picasso, a Koons, a Rizzolli, a Hobbs. That value is there because they have created a body of work that the market has deemed valuable.
It is interesting to note that in almost every other arena, a piece of artwork by an artist is referred to by the name of the artist. Yet with Art Blocks, rarely does someone say “I’m in the market for a Hobbs”, they say “I’m in the market for a Fidenza”. That’s just how the market and community has decided to talk about things, and I think it only adds to the branding of the work itself - albeit perhaps taking away from the branding/credit to the artist (if only a little). Even in other NFT spaces, the brand is the artist. A Beeple, an XCOPY. I’m not really sure where I’m going with this - other than to note that it’s noteworthy, and perhaps there’s an added layer of branding that increases the visibility of Art Blocks pieces.
You’re not just buying a Fidenza; you’re not just buying a Hobbs; you’re not just buying an Art Block.
You’re buying a piece of Art Blocks art, from the project Fidenza, by the artist Tyler Hobbs. Branding within branding within branding. A babushka doll of branding, if you will. As the perceived value of one goes up, the perceived value of all goes up. The success of Fidenza was great for the success of Art Blocks and every other AB project.
New brands are being created as new artists and projects drop, and old brands are being reinforced as existing artists release new projects on the platform. The ecosystem is expanding; it is strengthening. And it is still just the beginning.
Let’s talk about supply for a moment. I have seen a lot of “complaints” over the last month by people saying that AB is ‘flooding the market’, that they’re diluting their brand, that they’re destroying the value of existing collections. I personally think this is all a bit ludicrous. I don’t believe they have been significantly increasing the rate at which new projects drop. If you go back a few months, there were still several drops happening per week. The massive difference is that a few months ago the demand wasn’t as high as it is now, so when new non-curated projects were released, they wouldn’t immediately mint out.
This is almost unfathomable to imagine to someone that has only been around the AB scene for the last couple of months, but it really was a different era back then in the good old days of forever ago aka June 2021 (lol). As more people have found NFTs, and as more people have found Art Blocks, demand has understandable risen. When people found that there were still projects open to mint, they eventually sold out, and every subsequent dropped has more or less sold out incredibly quickly.
Despite the increased demand, Art Blocks still only releases one new Curated drop per week (at most). Often it is one every two weeks. They are not flooding the market with supply for Curated pieces. The rate at which Playground/Factory drops occur might be slightly higher than in the past (I haven’t checked), but not significantly so.
As absurd as this might sound, I don’t think what’s happening lately is oversupply. It’s freaking overdemand.
Overdemand, really? Is that a thing? Well, it might be. The parabolic trajectory the prices have taken over the last few months has naturally attracted all sorts of people looking to get a taste of that action. They see people buying a piece of AB art and flipping it a week later for 5x. They see people minting something and selling it for 2x immediately, and in some cases, 10x within a few days. This is all a part of the price discovery nature of the secondary market; sometimes people are going to be willing to pay a lot more for a piece of art than what someone paid only a few days earlier.
The issue is that if you have a dozen people willing to pay 10x and grant ‘the flipper’ a successful result, but have 300 people trying to be that flipper, you are going to end up with a lot of disappointed people holding a piece of art they were hoping to flip. When they didn’t find a buyer, they start to panic a little. They didn’t want to actually buy and hold this art, they were just in it for the money. They were me 6 months ago. Many of them will continue to undercut the floor, dropping their listing price, until they exit the market taking a significant loss and having a sour taste in their mouths about Art Blocks.
This is unfortunate. It is also unavoidable, and inevitable. It’s the circle of life. Every time there’s a bull run in the AB market, new people are attracted. Many of them will come for a short while, either make some money or lose some money, and leave. Some, however, will stay. Some will turn into art collectors. This is one way that the community grows.
Another, more optimistic view, is that there are some people who come for the art. They appreciate the artists, the artwork, the code, the technology. They are fascinated by it and are more than happy to pay a few thousand, or a few hundred thousand dollars, for some incredible pieces of art. They were already art collectors, but they now become Art Blocks collectors. This is another way the community grows.
There are other ways the community grows too. There are fans of Art Blocks. People that read posts like this one, that have been following the scene for a while, that have been lurking in the discord, but who can’t quite afford to buy a piece. They might be saving up; they might just be fans. Regardless, they are 100% part of the growing community.
This is perhaps a topic/idea worthy of a letter of its own since so much of the NFT space seems to be run on this concept. Supply and demand is all well and good, and in most instances you can count on the market following the fundamental law of demand - but there’s a case to be made that as supply goes up.. price can also go up.
A Veblen good is a type of luxury good for which the demand for a good increases as the price increases, in apparent contradiction of the law of demand, resulting in an upward-sloping demand curve. The higher prices of Veblen goods may make them desirable as a status symbol in the practices of conspicuous consumption and conspicuous leisure. A product may be a Veblen good because it is a positional good, something few others can own - https://en.wikipedia.org/wiki/Veblen_good
Something I have repeated over and over throughout this letter is the idea of branding. Within the brand of Art Blocks, there are many sub-brands, within sub-brands, within sub-brands. The most luxury of these could be considered Veblen goods.
So which are the most luxury? I would contend that anything ABC (Art Blocks Curated) is likely already, but will almost certainly in the future, be considered luxury. The fact that supply is increasing at the rate of roughly 1,000 new pieces every 1-2 weeks (at the current pace) is not detracting from this.
Within ABC, certain projects are going to be considered more prestigious. Fidenza. Ringers. Elevated Deconstruction. You could break it down further and say within those projects, certain specific pieces or grails are the most prestigious. These are the ones that really attract the big bucks. The two highest selling pieces of Art Blocks are already getting into borderline priceless territory.
There are prestigious items not in the Curated collection too. The most obvious example is The Eternal Pump by Dmitri Cherniak. This collection of only 50 pieces is extraordinarily exclusive. There is currently only one for sale, the listing price: 1,500 ETH. A less obvious example is Dino Pals by Hideo Takahashi. There are only 100 of them and, “despite” being a Factory project have become a luxury item to own and owning one makes you part of a very exclusive club. There’s only 14 for sale, the cheapest is 55 ETH.
There is going to continue to be amazing new projects on Art Blocks. The supply is going to continue to go up. In spite of this, or perhaps even because of this, the price of certain collections is going to continue to go up.
Art from Art Blocks Curated is a Veblen Good.
How to get started with Art Blocks
Probably the single most asked question I get in the NFT space these days is how someone might get their foot in the door with Art Blocks. It’s a large ecosystem, it’s confusing, the prices are high, and a lot of people don’t know where to begin. For starters, and to reiterate: read my first post on the topic.
Next up I think the you should really ask yourself: why do I want to spend a significant amount of money on some art? Really think about it. If it’s just because you see all the cool kids on Twitter talking about it, that’s probably not a good reason. If it’s because you’d love for it to 10x in a few weeks, then that’s probably not a great reason. If you just straight up love the look of the art and want to hang it on your wall (physical or metaverse) and don’t mind if the price drops / can afford to spend the money on art - then that’s a pretty good reason. If you share my conviction in the long term prospects of Art Blocks and the power in the brand, and want to invest in the future of Art Blocks - then that might be a pretty damn good reason.
I have always said that the golden rule of Art Blocks is: buy what you like (and can afford). This is all well and good but it’s ignoring the elephant in the room: some people simply aren’t artistic and don’t care at all about art, but they still want to invest in the future of the platform/movement. That’s fine - break the golden rule. Make your own golden rule. This is the Blockchain, I mean, there are no rules, really.
Okay, so presuming you’ve thought about it and decided yes, you would like to buy some Art Blocks. Where to start? You have two main options. To try mint from the website when a new project is released, or to buy from the secondary market. Each have their pros and cons.
Next part Art Blocks Part 3
Previous part Art Blocks Part 1
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Article 2 - Inside the mind of a NFT collector
This is the second Article where I share one of my public wallets to provide insights on how I approach buying NFT artwork.
Article 1 - Inside the mind of a NFT collector
Welcome to the first article in the series!