If you follow the crypto Twitter-sphere you may have come across a recent drama that started with a comment by a well-known analyst and commentator known as Cobie. Famous for his upfront understanding of all things crypto, on his UpOnly podcast he has interviewed the likes of Vitalik Buterin, Justin Sun and Michael Saylor.
Cobie set off ongoing social media back and forth when he stated that NFTs “are altcoins with pictures.” Notably, one of the most influential proponents in favor of NFTs and metaverse development, who goes by the pseudonym Punk6529, agreed with Cobie, remarking in response that the altcoin/picture combination “is a feature, not a bug.”
Are NFTs Really Altcoins with Pictures?
NFTs, like altcoins, are crypto tokens. The difference with an NFT is that it is a unique token (non-fungible), rather than an interchangeable token (fungible ). In the real world, a concert ticket is non-fungible: you can’t exchange it for any other concert ticket, since it links to a particular artist or performance. A dollar bill, on the other hand, is fungible, in that you can exchange it for any other dollar bill.
But, so what if an NFT is a unique token, why should that make it valuable, and why should it not still be interchangeable with other items in the same class? They might be uniquely identifiable, but (if we’re working on Ethereum) they’re all still just ERC-721 tokens on the Ethereum blockchain.
What often gives a particular token special value is that it has been linked with a particular piece of art or design, created by a particular person, or within a particular collection. And, what’s more, even within one collection, some tokens will be more valuable because the image they’re linked to contains rare traits, meaning that some images are more valuable than others.
If Bored Ape Yacht Club had called itself 10,000 ERC-721 Tokens and linked its NFTs to empty files containing no images, then it would not have become a famous project. Not only are NFTs altcoins with pictures, but in fact, being altcoins with pictures is intrinsic to their worth: the token would not be valuable without the images, but equally, there are collections in which the artwork would never have acquired fame and an enormous price tag had it not been attached to NFTs.
Although altcoins with pictures sound dismissive, that description encapsulates how NFTs behave, and NFTs are interesting partly because of the novelty and potential of unique digital items becoming tokenized, ownable and instantly tradable.
Sudoswap Treats NFTs Like DeFi
An NFT trading platform called Sudoswap is growing in popularity and could alter the ways in which NFTs are bought and sold. The Sudoswap marketplace operates more like an automated market maker DeFi protocol than an art auction, with NFT pools to create increased liquidity, and the capacity to trade along customizable price curves.
In the Sudoswap ecosystem, NFTs are treated as if they are altcoins, and if we’re realistic about it, don’t many NFT buyers behave as though NFTs are akin to fungible, but niche and low-supply, altcoins?
There is an expression in NFT trading known as sweeping the floor. The floor refers to the floor price, which is the lowest price at which any NFT in a particular collection is being sold, meaning that the floor price is the cheapest possible entry point to a collection. To sweep the floor then means to buy a large number of the lowest-priced items in a collection.
In this case, the buyer simply wants every asset that is listed cheaply and doesn’t seem particularly interested in the artwork or its ostensibly non-fungible nature. It’s also likely that they are not planning to keep hold of all those items forever, and are buying with future selling profits in mind.
Returning to Sudoswap, one more feature it has introduced is the removal of royalties. Usually, when an NFT is traded on secondary markets, a percentage of the trade goes to the original creator of the NFT. This has been highly rewarding for some artists, who, in traditional formats, would only profit from the original sale of an item.
Sudoswap bypassing the royalties mechanism benefits traders (in the short-term, at least), but is harmful to artists, who no longer gain financially from secondary sales.
This lack of regard for royalties also shifts NFTs a little further into the fungible assets (or altcoins with pictures) category, by deprioritizing artists’ rewards in favor of market liquidity and frictionless trade.
Art as an Asset Is Nothing New
To assess whether NFTs are assets or art we can be a little equivocal. Yes, they are crypto tokens (check the T part of NFT for confirmation), while what makes them non-fungible in a humanly intuitive sense is, basically, the pictures.
A protocol like Sudoswap revolves around the facility to treat NFTs like altcoin-esque assets, but without the art and design, there would have been no explosion of interest in NFTs.
There are dynamic artistic communities, organizations and movements establishing themselves around NFT technology, and the medium itself has acted as a catalyst, setting off new aesthetic waves, and acting as an amplifying conduit for outsider creative energies.
A better approach to the question of how NFTs should be classified, might be to refer back to the traditional art world and ask, are the artistic objects we find there not also assets?
Although it might sound coldly philistine, there is no question that there are people who have used artwork as physical tokens to both transfer and store wealth, regardless of whether or not they like, or even look at, the images on the canvas.
NFTs can be used however you like, as art or an asset, picture or coin, depending on your mindset. They are, compared to previous artistic media, flexible, easily exchanged and category-resistant (not to mention very new), and from that sense of digital plasticity stems the confusion as to how we should think of them.
