By Benjamin Nobel, 4/16/2021
In a recent discussion with one of my fellow CPV Price Guide collaborators about the broad market for collectibles, I made an off-hand mention of “NFTs” … and the response was: What are NFTs, is that something I should know about? With this post, I will explain what NFTs are, and why I believe there is a good chance we may see them become part of the future of the comic book collecting hobby in some form.
To begin the explanation, I want to first start with “cryptocurrencies” for background. The main one everyone has heard of by now is, of course, Bitcoin. Within every article about Bitcoin, it seems they always want to include some kind of picture, and usually it is something similar to the picture at right, i.e. a visual of an actual coin — which is quite funny when you stop to think about it, because it isn’t like you can buy a Bitcoin, then pick up the phone, call some number, and say “I’d like you to send me my Bitcoin now, here is my mailing address.” No, these “coins” are actually entirely virtual, they exist only in the realm of zeros and ones, and, there is nothing “behind” them — no country, no government, no economy, and no tangible attribute whatsoever is backing these virtual coins.
So if they exist only in a virtual realm, aren’t backed by anything, and when it comes to something you can touch or hold in your hands these are basically “nothingness,” then why do they have value? As I write these words, one Bitcoin costs in excess of sixty thousand US dollars. Clearly that’s not nothing; in fact, if you multiply all of the bitcoins there are, by today’s per-coin price, you get a total market value of… I swear I’m not making this up… 1.2 TRILLION dollars (yes, that’s Trillion with a ‘T’).
To put some perspective on this, a quick thought experiment: would you rather own all the bitcoins, or would you rather own all of the company ExxonMobil? At current prices for bitcoin, and current trading prices for ExxonMobil shares, you could actually own five ExxonMobil’s in this thought experiment, not just one. In other words, if I held out two hands for you to choose from, and in one of them was all the bitcoins and in the other hand was five ExxonMobil’s, then based on the current market values Mr. Market is saying that those two hands, those two hypothetical choices, are equal.
How is it possible that something with zero “inherent value” can be worth this much? One answer I see a lot is, “it has value because everybody agrees it has value” (but that’s not a very satisfying explanation). The best explanation I can give as to why Bitcoin (and any of the myriad others that came on its heels) has any value is: (1) there is nothing that prevents it from having value, and, (2) people are allowed to trade it. The rest just boils down to supply versus demand… And while there may be restricted supply of coins within each coin type, there is no limit on how many types of coins there can be — the successful introduction of new ones kind of all comes down to “brand marketing” and how capable the creators of a new coin type are at drumming up demand for it.
[Sometimes the building of a brand can even start as a joke: apparently the “DogeCoin” coin type was created AS A JOKE based on a “meme” that was circulating at the time… And today, the current market value of that coin type, multiplied by all of the coins outstanding for that coin type, is now 34 BILLION dollars today (Billion with a ‘B’)… that’s right, it went from a joke to a market value greater than that of the Clorox company.]
As basic as this supply-versus-demand and “we’re allowed to trade it” explanation sounds to explain what is happening to these cryptocurrency values, we must remember that while today it feels like we have practically unlimited freedoms about what types of assets we can own, the past is filled with counter-examples; for instance, individuals weren’t always allowed to freely own gold in this country:
While hard to imagine today, back in 1933, “Executive Order 6102” had made it a criminal offense for U.S. citizens to own or trade gold, albeit with exceptions for collectibles and jewelry. These prohibitions would only begin to be relaxed decades later in 1964, and then by 1975 we were once again free to own and trade gold to our hearts’ content. So it is probably something that people take for granted that the trading of cryptocurrencies is allowed by our government; if the government ever came to decide that it is bad for us or bad for the country or bad for the planet then the government could easily step in with regulations and/or restrictions.
But absent any restrictions, right now there is unlimited freedom in buying and selling all of this “nothingness,” AND there is no limit to the number of new cryptocurrency types that can enter the market. In fact, some years back I half-jokingly shared the following idea with some friends: what if we introduced new cryptocurrencies to correlate with the top 1st comic book character appearances — a coin for Action Comics #1 as the first appearance of Superman, a coin for Amazing Fantasy #15 a the first appearance of Spider-Man, etc. etc., and we limit the number of coins for each appearance relative to the actual scarcity of the actual comic book.
This idea was met with three reactions: (1) who on Earth would pay real money to own one of your coins when they are not backed by anything? (2) Since anybody can introduce new cryptocurrencies, what would stop a potential “competitor” from saying, “no no, don’t buy those coins for the 1st appearance of Superman from Ben, buy these coins, from me.” (3) Would it even be legal given that these characters are owned by someone else?
And that third point is the real deal-killer isn’t it — for anyone to take a comic book “coin” seriously, for everyone to agree that it is legit, it would really have to be issued and backed by Marvel/DC/etc. The actual creator/owner of the character, the artwork, etc., is really the only one who could legitimately sell “coins” tied to such characters or artwork and stories about those characters.
Artwork: in the old days it was all done on paper or canvas, but nowadays, there are actually a lot of artists who do their artistic work completely digitally, i.e. they are creating their art on the computer… So in these cases the “original” artwork isn’t on a physical piece of paper; rather, it is saved in a file somewhere.
What if there was a way for an artist to sell their digitally-native artwork, as a coin — i.e. since it is possible to create an unlimited number of new cryptocurrencies, suppose a new “cryptocurrency” was created but instead of having many coins, that new currency just had one coin… And suppose that the actual original artist is the one who makes the initial sale of that coin, and does so in a way that legitimately transfers ownership, such as an auction via a legitimate auction house like a Sotheby’s or a Christie’s?
The scenario I’ve just described above, is basically what an “NFT” is… NFT stands for “Non-Fungible Token” and I think the best way to wrap your head around it is that it is basically using the same underlying “blockchain” (“digital ledger”) technology that powers cryptocurrencies, but applying it to single coins/tokens — the “non-fungible” part of the name just means “this token is unique, it is not interchangeable with any other coin.” And then from there, the whole world just needs to agree that “this particular token/coin — this ‘unique serial number’ in essence — represents ‘X'” and voila, ‘X’ can be a piece of digital artwork, a video clip, even a tweet!
[Right now, many of the NFTs making the news are traded on platforms that are “piggybacking” off of the “Etherium” (“ETH”) blockchain (to buy one of these NFTs, much like if you enter a casino you’d turn your cash into chips before sitting down at a table, in this case you’d turn your cash into Ether and then buy/sell NFTs with the prices denominated in Ether); another cryptocurrency blockchain being used is “Flow.”]
And as you either guessed by now, or actually saw in the news, last month the very first NFT representing a piece of “digital artwork” to be auctioned by a major auction house, was sold by Christie’s… it was this work, by the artist Mike Winkelmann who goes online by the name of “Beeple” and the opening bid was one hundred dollars:
Before the idea of selling digital artwork via NFTs came about, the best this artist had ever done was to sell a print of his work and the most he had ever achieved selling a print was $100. And on March 11th, after the NFT auction ended, news outlets would report the results. If you haven’t seen this news before today, then before I tell you the number, I’d like you to wager a guess first… Do you think it fetched more or less than 50 grand? What about a quarter million dollars? More? Or less? Half a million? A million? Five million? Ten million?
Nope, those guesses were all too low. The NFT for the above digital piece of art auctioned, at Christie’s, for SIXTY NINE MILLION DOLLARS (that’s Million with an ‘M’). That marks the third highest amount ever paid for a piece of art by a living artist.
With a result like that, suddenly everyone who owns anything digital is now thinking about what could potentially be monetized, using NFTs. The CEO of Twitter auctioned off the first tweet … and it went for $2.9 million. The NBA is now selling “video highlights” as NFTs, calling the platform “Top Shots.” Eli Manning just announced he is launching a line of football NFTs. Mark Cuban is reportedly thinking about turning Dallas Mavericks tickets into NFTs. Even the New York Stock Exchange is getting involved — would you like to own “the first-ever trade” of, say, Spotify? Soon you can.
But what I find particularly interesting about NFTs, especially as it relates to comics, is that the technology has a built-in way for the original seller to earn royalties on any and all future sales of those NFTs. The seller can decide to charge a percentage of all future secondary sales.
Let’s stop to think about that for a moment, as it relates to comic books. Suppose that tomorrow Marvel creates a new character and sells 50,000 printed copies of the comic that contains that character’s first appearance. The new character becomes popular, and that comic starts to rise in value… $20, $40, then $60 per copy in marketplace trading. Who currently benefits from those sales at higher prices? For one thing, the collectors who bought the book when it was first released can profit if they sell. Comic shops that reserved some copies for their back issues stash can profit. Then there are the trading platforms — e.g. under the basic eBay account, eBay charges sellers 10% of the value of any collectibles sold on their platform. But where is Marvel’s share of those future comic book collectible sales? Sure, they benefit from the increased popularity, but when it comes to profiting off of the original 50,000 copies, where is the money for Marvel? Nowhere, that’s where!
But with the idea of NFTs and royalties on those NFTs, if I was an executive at Marvel or DC, I’d be practically salivating over the future potential: Suppose instead of selling 50,000 printed copies of a new issue, Marvel decided this particular comic was not going to exist as a printed issue, just as a digital one, and it was going to be 50,000 coins/tokens (or perhaps even a split; perhaps 25,000 tokens and 25,000 printed copies — there are no rules here whatsoever, the rules can be invented). [I realize this idea of a purely-digital collectible comic book sold via NFTs is a very scary thought for anyone whose business is based on selling physical copies of new issue comic books]. And now suppose a 5% royalty was placed on future trades of those newly-issued NFTs.
Think about the additional franchise value this could potentially build over the years: the royalties on each new NFT are basically a new asset that would add to the total value of the business. Can you imagine if, hypothetically, Action Comics #1 had been issued as an NFT instead of a comic book, and that you could own a 5% royalty on any future sales of Action Comics #1? What would you pay to own such a royalty? In this hypothetical suppose you would have earned $162,500 from this single recent $3.25 million sale alone … so based on this, probably you’d have been willing to pay way more than $162,500 to own that royalty interest on not just the active sale but any and all future resales of the collectible, right? In actual reality, Action Comics #1 of course already exists as a printed comic so this is purely a wild hypothetical, but it does illustrate the idea: if the publisher had a way to earn a royalty on all future sales of a given comic book issue in the collectibles market, that royalty has a ton of value.
And that is the main reason I think we could see NFTs become part of the future comic collecting landscape in some way shape or form… It is just too lucrative a concept for comic book creators to ignore, from small creators who might view NFTs as an alternative to raising funds for their creations on Kickstarter (how about making it digital-only and selling a fixed number of NFTs instead?), to the executives at Marvel, DC, Archie, etc… Whether it is the more-radical idea of entire comic book issues getting sold as NFTs, or whether it is digitally native comic book artwork getting turned into NFTs, this technological development is something that definitely has the potential to creep into our beloved hobby — and in an extreme scenario potentially even to “disrupt” it.
Can you imagine buying a comic as an NFT? What a strange world that would be: There would be no “grade” on a digital token… you wouldn’t submit such a thing to CGC, nor need to “preserve condition” in any way… it wouldn’t have a smell that brings back childhood memories… you wouldn’t need to find a place to put it / store it since it doesn’t take up any physical space… you could look at it and thumb through it but only on via a screen… you could print out and frame the cover and hang it on your wall but you could never hold the original paper in your hands because there’s no original paper anymore… It would be an entirely different collecting experience than any of us are used to…
All existing comics ever printed would still be physical comics of course — it is hard to imagine cryptocurrency-based coins/tokens ever competing directly with our beloved tangible/hold-them-in-your-hands comic books of the past. Much like my half-joking coin idea was “shot down” by friends, it is hard to envision Action Comics #1 actually existing as a crypto collectible let alone catching on (although I definitely wouldn’t rule out such a thing if DC was behind it!).
So I don’t think the sudden rise of NFTs means our hobby is suddenly headed for a major change in the short term nor are our pre-existing collections “threatened” by the new technology; but in the long term I expect that we’ll eventually see NFTs crop up — in some way shape or form — in connection with our hobby, in the future. [Or on the other hand, maybe, as many believe, all-things-crypto are part of a gigantic “bubble” that will soon pop, and that bubble-burst will in turn kill new NFT ideas before they get a chance to leave the idea phase.]
– Ben p.s. To be clear: none of this new technology changes my approach to collecting comics (and I have a very hard time envisioning myself ever buying an NFT), but I do think it is something to know about, and to keep your eye on!