Jonathan Perkins of Portland runs one of the leading online marketplaces for non-fungible tokens, the digital collectibles fueling a new financial craze and a social change in the way people place value on what they buy.
Many dismiss it as a bubble, but his company SuperRare said Tuesday that it drew a $9 million round of venture capital from billionaire investors including Dallas Mavericks owner Mark Cuban. The tokens, known as NFTs, exploded in popularity in February, when Christie’s Auction House sold a digital collage by the artist Beeple for a record $69.3 million.
NFTs have been around since 2015, but their move into the mainstream by Christie’s helped skyrocket trading volume in the top three NFT markets from $12 million in December to $342 million in February, according to DappRadar’s industry report. NFTs can include sports videos, digital coupons and visual art like a collaboration between Canadian disc jockey Deadmau5 and augmented reality artist Sutu.
“It’s global news if an artwork sells for that much,” Perkins, the chief product officer of SuperRare, said of the Christie’s sale. “That really poured gasoline on the thing.”
Perkins, 38, grew up in Penobscot and attended George Stevens Academy in Blue Hill before heading to California, where he received a digital media degree from San Francisco State University. He then went to New York, where he worked as a software developer before starting SuperRare in 2017 out of a coffee shop in Brooklyn with his cousins, John and Charles Crain. He then returned to live in Maine, where he has family.
SuperRare is a marketplace where collectors can buy, sell or trade digital art. NFTs have a unique code associated with an object that certifies someone as its sole owner, creating rarity on the internet. While others can view an artwork, sports highlight or other digital object, there is only one owner. That rarity makes some NFTs, like the Beeple mosaic, so pricey.
Digital art is a new medium in the global market for all types of art, which was $67 billion in 2018, according to Statista. Perkins sees digital art as a sustainable business that is following activities such as ordering taxis, buying clothes and shopping for homes online.
When digitized, those markets typically become bigger, he said. Digital art is also more accessible, he said, because anyone with an internet connection can become a collector, which he sees as a huge opportunity.
“Even if we were to capture a couple percent of the market, it’s still a multi-million-dollar business,” Perkins said.
Buyers currently must use a cryptocurrency to purchase NFT art on SuperRare’s marketplace, which runs on a network called Ethereum. The network uses blockchain technology, which stores information in a way that is difficult to change or hack.
However, blockchain networks have drawn criticism from environmentalists because they employ people who compete to “mine” cryptocurrency to validate it. That involves performing huge numbers of calculations in each mining location and using a lot of electricity.
The annual power consumption of Bitcoin, the most popular cryptocurrency, is comparable to that of the Philippines, according to Digiconomist. Perkins said Ethereum is readying a new technology that spreads out the validation to any user with a minimum cryptocurrency balance, a process that would be less energy-intensive.
SuperRare, ranked as the world’s fourth-largest NFT marketplace by ItsBlockchain, saw sales rise from $8,000 per month last year to $27 million in March. It sold its highest priced artwork, an animated GIF by artist XCOPY, for $1.7 million last week. The company has more than 1,000 artists and 3,000 active collectors on its marketplace, Perkins said. It has 20 employees scattered around the world, and may double that in the next year with the new investment.
For a first-time sale of a piece of art, SuperRare gets a 3 percent transaction fee from the buyer and a 15 percent commission from the sale, while the artist gets 85 percent. On secondary sales, the buyer gets 90 percent and the artist gets a 10-percent royalty. In March, that meant the $27 million in sales transactions brought $3 million into the company.
Paying so much to have nothing tangible confounds those who question whether NFTs are a fad. Former Christie’s auctioneer Charles Allsopp told the BBC that “the idea of buying something which isn’t there is just strange.”
Cuban, the celebrity investor, calls it a matter of perspective. In a January blog post, he said “old schoolers” think something has to be tangible to have value, but they are slowly seeing that is not always the case.
“They begrudgingly realized there was value in digital music over CDs,” he wrote. “The new generation that has grown up in a digital world has known their entire lives that what has been of greatest value to them has been digital.”
The Singaporean crypto-investor who bought the Beeple piece said he would have paid even more because it represents 13 years of everyday work. Beeple’s digital collage contains 5,000 unique works created in 5,000 days.
The investor, Vignesh Sundaresan, known as Metakovan, founded Metapurse, the world’s largest NFT fund. He said the Beeple digital collage is the most valuable piece of art for this generation and is worth $1 billion.
“Techniques are replicable and skill is surpassable, but the only thing you can’t hack digitally is time,” he said of his purchase.
But even Beeple, whose real name is Mike Windelmann, thinks the market is overheated. The day before the record-breaking Christie’s sale, he told the BBC that “we could be in that bubble right now.”
Perkins agreed, saying the digital art market is overhyped, and the NFTs from YouTube stars and celebrities that are hot now won’t necessarily have lasting value. But he thinks authentic artists and those trading great moments in sports like the NBA’s Top Shot videos will have lasting value.
Dapper Labs, the company behind the NBA’s Top Shot videos of the best basketball moments, said Tuesday that it had raised $305 million from investors including basketball legend Michael Jordan. Top Shot made up almost 70 percent of NFT transaction volume in February.
In February, a man named Jesse Schwarz paid $208,000 for the most expensive video moment of a massive LeBron James dunk against the Sacramento Kings. That same clip is on YouTube to watch free, but Schwarz owns the moment and he bragged about it on Instagram.
“Dropped $208K on a video of @kingjames dunking. If you swipe to the end you can watch it (for free),” he wrote.