The Indicator from Planet Money : NPR

SYLVIE DOUGLIS, BYLINE: NPR.

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WAILIN WONG, HOST:

Hey, Darian. How’s your week going?

DARIAN WOODS, HOST:

It’s pretty uneventful so far. I don’t know. Do you want to get lunch, and we can talk further? Maybe some…

COURTNEY THEOPHIN, BYLINE: (As scientist) Wait, Wailin…

WOODS: There’s a Korean place – whoop (ph).

THEOPHIN: (As scientist) …Darian…

WONG: Whoop.

THEOPHIN: (As scientist) Sorry, sorry, sorry – sorry to interrupt. I think you’ll want to see this.

WONG: Oh, OK.

WOODS: OK.

THEOPHIN: (As scientist) Quickly – in here.

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WONG: What is this?

WOODS: I mean, it looks like an ape wearing a striped shirt. And is that a captain’s hat?

WONG: It’s not looking so good, though. Its clothing is all ripped up. It’s making a terrible noise.

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THEOPHIN: (As scientist) We found this guy wandering the metaverse. It’s in pretty rough shape. But it’s not exactly dead. It’s in some kind of undead state.

WOODS: Ugh (ph).

WONG: Darian, do you know what I think this is? – a Bored Ape NFT.

THEOPHIN: (As scientist) An NFT? I don’t want any part of this. May God have mercy on our souls. Ugh.

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WOODS: NFTs, these pieces of digital art that inspired a wave of cryptocurrency mania over the last couple of years – you had celebrities plugging them. Prices were through the roof. But now they’ve come way down. This is THE INDICATOR FROM PLANET MONEY. I’m Darian Woods.

WONG: And I’m Wailin Wong. Today on the show, we make sense of what happened during the NFT frenzy and try to diagnose whether there is any life left in them. Plus, we meet an ape called Dr. Scum.

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WONG: Our guide to NFTs is Zeke Faux. He’s an investigative reporter at Bloomberg who has a new book out where he went deep into the world of crypto, and you can probably tell where he landed from his book title. It’s called “Number Go Up: Inside Crypto’s Wild Rise And Staggering Fall.” And one crypto asset that’s had a very dramatic arc is the NFT.

ZEKE FAUX: You’re probably picturing, like, some sort of weird cartoon that you heard was worth tons of money.

WOODS: It’s always good to recap how NFTs work, so here we go. First you have the blockchain. This is, like, big public spreadsheets that record how much crypto people own. That crypto could be bitcoin, or it could be ethereum. Or it could be an NFT.

WONG: NFT stands for nonfungible token. It’s essentially a unit of data, and that data can point to a digital image of a cartoon cat. It can point to a GIF or even a song. For example, an unreleased Whitney Houston recording was made into an NFT. But it’s not the image or audio file itself that’s stored on this public spreadsheet. What gets stored is proof of ownership.

FAUX: You’re buying a receipt. And that receipt lives on the blockchain, where it will be stored forever in this decentralized network.

WOODS: Some of the earliest NFT collections to catch on were like digital trading cards of cartoon-like characters. One of these collections was called CryptoPunks. They were these pixelated heads that made for a nice profile photo on social media, if that was the kind of thing you were into. But they soon became more than that.

FAUX: They became tradable just like dogecoin. It was just, like, another kind of thing you could gamble on. And the value of these CryptoPunks really shot up.

WONG: Zeke says CryptoPunk NFTs went from under a thousand dollars apiece in 2020 to a five-figure price tag in 2021. And it was also in early 2021 that a group of NFT creators launched a new collection called the Bored Ape Yacht Club. These were 10,000 cartoon portraits of apes wearing different outfits.

WOODS: Just six months after the Bored Apes made their debut, the auction house Sotheby’s sold a rare ape with gold fur, and this one went for over $3 million.

WONG: Fueling this frenzy were celebrities. Stars from NBA player Steph Curry to Justin Bieber and Paris Hilton were spending 6 to 7 figures on Bored Apes and sharing their NFTs on social media. There started to be talk that Bored Apes could even be licensed for film and television projects.

WOODS: Zeke says another part of the appeal of NFTs was that acquiring one granted you entry into an exclusive community of fellow owners. And last year, Zeke saw there was a festival taking place in New York called Ape Fest.

FAUX: I wanted a Bored Ape so I could go to Ape Fest.

WONG: You know, for research purposes – but owning a Bored Ape was the price of admission, and Zeke could not afford one. At that time, these NFTs were going for 300- to $500,000.

WOODS: But the same creators behind Bored Apes had released other NFTs called Mutant Apes. They were less cute than the classic apes, and they had these melty-looking faces. But they were cheaper.

FAUX: So I got Mutant Ape No. 8,272. He’s an orange ape. His face is kind of melty, and he’s wearing a turtleneck sweater made of maggots.

WONG: Gross.

FAUX: And he’s smoking a pipe.

WONG: I’m sorry, did you say a sweater made out of maggots? ‘Cause that’s disgusting.

FAUX: It was. And this was the cheapest one available. I paid $20,680.27 for this Mutant Ape.

WONG: That’s a lot of money, Zeke.

FAUX: I felt like maybe something really cool happens at Ape Fest. And if I join the Ape community, I’m going to see something – some sort of benefit of NFTs that I can’t even imagine right now.

WONG: So Zeke named his Mutant Ape Dr. Scum, and he took his picture of Dr. Scum to the pier in downtown Manhattan, where Ape Fest was being held.

WOODS: And Zeke says, at this party, the music was pumping, alcohol was flowing. And not just alcohol – people were taking ketamine and mushrooms. It was a star-studded affair. Snoop Dogg performed.

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UNIDENTIFIED MUSICAL ARTIST: (Rapping) ApeCoin (ph) – if you got your ApeCoin…

WOODS: Amy Schumer did a stand-up comedy set.

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AMY SCHUMER: And they say, Amy, what’s your target audience? And I say, they need to own six-figure NFTs, and that is who I will perform for.

(CHEERING)

WONG: But for Zeke, things took a turn. He thought his fellow Ape Fest attendees would think Dr. Scum was cool. But it turns out the more grotesque an ape looks, the less valuable it is. So that made Dr. Scum the loser of Ape Fest.

FAUX: I would meet – like, pimply teenagers would pull up their Ape and be like, my Ape’s worth a million dollars. Your Ape’s, like, the floor ape. It’s a floor mutant. That’s a big insult.

WOODS: A floor mutant – ouch. After Ape Fest, Zeke sold Dr. Scum. He ended up losing about $2,000 on his Mutant Ape, with roughly half of that in transaction fees.

WONG: So Zeke didn’t take that much of a loss on his NFT, but others who bought into the craze did. Last year, a California law firm filed a class-action suit against the creators of the Bored Ape Yacht Club, along with a host of celebrities like Justin Bieber and Paris Hilton. The suit alleged that these stars hyped NFTs in a misleading way, causing investors to lose money.

WOODS: Today, prices for Bored Apes are down about 70% from a year ago, and one group of blockchain enthusiasts recently analyzed over 70,000 NFT collections. They found that 95% of those collections are worthless. They’re valued at nothing.

WONG: And this is actually the future that the NFT artist Beeple predicted when he talked to THE INDICATOR in 2021.

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MIKE WINKELMANN: I actually believe it is a bubble, to be quite honest. I think you’re going to see a mad rush of people come to this space. And a lot of the stuff that people are putting – making into NFTs is junk, and that stuff will not hold its value.

WONG: Beeple, you might remember, sold an NFT for a record-breaking $69 million. That happened just after he came on our show.

WOODS: You heard it here on THE INDICATOR first, folks – not investment advice.

WONG: (Laughter) I still can’t believe you landed Beeple – Beeple.

WOODS: And stepping back, I can see, you know, NFTs are this way of making digital art scarce – or at least the link to that digital art. And that has applications in the world. And I can see, for maybe the most elite artists, NFTs can be a tool for that.

WONG: Yeah, especially if you think about people making digital art, it is pretty easy to right-click copy a piece of digital art, right? But then, with something like an NFT, you can prove ownership, which will be important if you’re trying to actually track down who owns this thing and not a replica.

WOODS: Yeah. And there are so many scammy or kind of just pumped-up NFTs out there, and I definitely think that that is the majority. That 95% figure does not surprise me at all, but I wouldn’t rule them as dead completely right now.

WONG: Right. And there’s other potential applications, like maybe being able to pay out royalties on artist work, so this technology could find its way into applications that are more practical than just this wave of speculation we saw earlier.

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WONG: Thanks to Courtney Theophin for playing our scientist and Finn (ph) the dog for playing our ailing Bored Ape. This episode was produced by Cooper Katz McKim with engineering by Hans Copeland and Cena Loffredo. It was fact-checked by Sierra Juarez. Our editor is Kate Concannon, and THE INDICATOR is a production of NPR.

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