Crypto art, from Foundation.app to buying stock in Beyonce
Fund the creators
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Foundation.app, where art can be alive, and which you’ll understand if you read this piece
In this piece I intend to help you understand the totally mind warping Foundation.app and crypto art more broadly, a place where you can buy memes using Ethereum powered tokens and get nothing physical in return, but also sell that meme later as it goes viral and make a profit. WUT, you say? Read on.
Let me tell you, I have absolutely no idea what the fuck I’m talking about here. That’s exactly why I think this will be valuable: I’m at that brief zenith of my swan dive into the rabbit hole of crypto for creators, still visible to everyone else on the ground floor but about to drop through the floor to the point where I overcomplicate things as much as basically everything I can find online. I also think crypto art isn’t just a way to see a corner of cyberspace that has totally left the planet; there are components of this system that will blow you away with the potential to transform the way we finance creators and fuel innovation in the future.
First, a minimum viable background
I want to get as quickly as possible to digging through the actual product, but there are a few pieces of groundwork that we need to lay down before we get there. Skip this if you’re already in deep (but not if you’ve just been pretending at dinner). In each case, I will aim for the 80% level - aka 80% of crypto wonks on Twitter would say nasty things about me if they read this:
Blockchain - for our purposes, a blockchain is a list of transactions that anyone can view and verify. It’s a technological innovation that means you don’t need a central verifying authority, like a bank. It relies on cryptography to ensure that that list of transactions is incredibly secure and reliable.
Bitcoin - Bitcoin is a system of currency built using a blockchain. It’s one of several “cryptocurrencies,” named because of the core element of cryptography in a blockchain.
source: https://www.complexitycondensed.com/p/bitcoin
Ethereum - you can think of Ethereum as a blockchain based, open source operating system for crypto applications. It provides a number of innovations around how to handle transactions, and the community of applications built on top of it are connected via Ether, Ethereum’s own cyptocurrency. See also https://whatthefuckisethereum.com/
Scarcity - one of the concepts that ends up being important for this article is scarcity. When the fed needs money, it can just print more, which leads to inflation and essentially means the value of money can be dictated by the government. You might have 1% of all dollars in circulation today but if tomorrow they issue again as much you now have .5% despite the fact that no “real” value has changed. Cryptocurrencies like Bitcoin and Ether on the other hand have a predetermined number of total coins, which prevents inflation. So if you own 1% of all Bitcoin, not only are you incredibly rich but you also know you will have 1% forever. Note that a single coin can be divided essentially infinitely (another tech enabled benefit of digital currency), so even if all the world’s value was put into Bitcoin we could all still have the same percentage we have now.
Art - hah just kidding I’m not going to try and define this, but let’s just say if there was a clean definition it would be useful for this article.
Put it all together to get Foundation.app: an ethereum-based platform to trade digital art using crypto
Ok so let’s return to that image and just to be clear, no, you didn’t accidentally accidentally eat the stash of acid you’ve been working through to pass the time during quarantine. The art is moving, man. That’s because this is digital art, meaning it can exist with all of the richness available to digital devices: GIFs, videos, even AR experiences you only experience with a headset.
Second, you’ll notice that the site is just incredibly cool. In places it’s early internet (remember the teardown of Facebook’s new social media platform E.gg), and others it has this minimalist meets cyberpunk vibe. It’s clear from the founding blog post that the team has big ambitions for the future but also draws a lot of inspiration from the chaos of the internet pioneers:
At Foundation, we think a lot about the early days of the web. The first websites were mostly simulacrums of their real-world counterparts. Newspapers went online as carbon copies of their physical editions, literally uploading scans of print pages. Businesses did the same with physical brochures. But the promise of the web was about more than digitization; it was designed to democratize. Publishing should be universally accessible. Ergo Blogger. People should be able to buy anything from anywhere, from anyone. Ergo eBay.
Very cool...but how does it work?
To explain how Foundation works, let’s start with a type of art that’s a bit easier to understand. Here we have a T shirt, sold on foundation and actually created by one of their co-founders and Head of Design, Matthew Vernon.
A shirt! A real, physical shirt. Things are feeling more concrete already. But how do you buy it? The answer is with a token (goodbye, concrete), and here we have to take a brief departure back to the definitions above. So remember that Ethereum is this operating system which has certain innovations, and that Foundation is built on top of that technology? One of the innovations is the idea of a non-fungible token (NFT, an acronym you’ll see flying around). Fungible basically means interchangeable, in the sense that any dollar bill can be traded for any other dollar bill. So non-fungible essentially means unique, and each shirt available here corresponds to a unique NFT. You buy the token and then redeem it for the shirt, at which point the token is destroyed and you get the shirt. There’s a limited number of shirts, aka they’re scarce, which recalling above sort of makes the tokens for this shirt akin to a cryptocurrency of their own. And now to bake a lot of amazing computer science innovations into a single sentence: all of those steps are enabled in a high-trust, high-efficiency way via Ethereum.
Buy low, sell high, get cryptorich
In the previous GIF you see this beautifully minimalist line graph of the price of that shirt changing over time. Technically it’s actually the value of a token changing over time. There are essentially three actions you can take on a token: buy, sell, and redeem. Buying and redeeming are described above and feel sort of like any ecommerce, but sell is quite different. Let’s say I think the demand for these tokens will increase over time, I could buy a couple of them and then wait. I could then sell them back via the same Foundation page (note the “Sell” button) and make a profit. It’s a stock market, for shirts. Importantly, the creator also gets 10% of the profit whenever a token is sold, which again is possible via the blockchain because in every transaction you have a clear record of who the creator actually is (remember that the ability for anyone to verify that full list of transactions is a core innovation in blockchain). So unlike traditional art which after the initial trade from the artist wouldn’t return them any money, no matter how many times it changes hands crypto art will always continue to pay money back to the creator. Neat.
Foundations’s pitch to artists (annotations mine)
Finally, we’re ready for crypto digital art
Most of what’s on Foundation isn’t shirts - it’s digital art as we’ve seen in those beautiful GIFs above. This is where if your brain has been barely holding itself together so far, it’s likely to give up and explode. Let’s look at this GIF you can buy, from Swedish artist Arvida Bystrom, who by all appearances is incredibly f’ing cool and living in the future:
In this case, there’s only one token (NFT) so if I bid on this and win, it’s mine. But unlike in the case of the shirt, it’s not redeemable for anything. The best analogy I can make is that it’s like you own this painting but that painting is permanently on display in a museum and that museum is the whole internet. It's part of your collection, but it’s not as if you can hang it on your wall or keep other people from duplicating it. In fact, here it is (brought to you with the power of right-click + save)!
You have to double click on the word “scarcity” to understand why this makes any sense. In a digital world, scarcity in terms of number of copies doesn’t make much sense, thanks to the essentially zero-marginal cost of duplication/distribution. But scarcity of ownership is possible and important, at least that’s what Foundation and these pioneering crypto artists are arguing. If I buy this art on Foundation I not only can’t keep it from spreading but I actually want it to spread, gaining more demand and increasing the value of being able to say “I own that, no matter if you slap some text on it and make it into a meme. And I can prove it, unequivocally via blockchain.” How much value there actually is to that sort of digital ownership and connection to the artist is totally up to the buyer, but that’s really where you have to remind yourself this is art and that statement is always how it has worked.
How far will creator markets go?
One of the reasons I wanted to talk about Foundation is that I do actually believe we’re seeing the cutting edge of what will be a massive wedge in the current financial system. Through Instagram, Substack, YouTube, TikTok, and so on we’re living in the world where personal brands can gain massive and lasting value. But while influence has moved down to the individual level, the most powerful financial systems still live somewhere high above, in boardrooms and financial towers. This is now one of the big topics in tech, and I think the pieces are coming together to power a massive breakthrough in the next few years, one that will marry the financial incentives for creatives and influencers with the impact they already have on society (see also the recent Bloomberg piece: OnlyFans Is a Billion-Dollar Media Giant Hiding in Plain Sight).
OnlyFans isn’t the only platform, and indeed there are already crypto powered OnlyFans type platforms like Roll which essentially let creators build their own currencies which their community can exchange for deeper connection ala Patreon (I might do Roll next, it’s also mind blowing but in other ways).
The thing about all of the examples so far is that they essentially treat content as the scarce entity, which as we’ve seen gets pretty complex and mind warping in the digital world. So why not tokenize the scarcest thing of all, the creator themselves? With systems like Lambda has built with ISAs there are no apparent barriers to creating a market where I can buy a stake of a creator I believe in, give them that working capital, and make money if they succeed as I envision. Imagine I put myself on Foundation, issue tokens that together correspond to 10% of my future earnings over the next five years. Perhaps they’re automatically set based on my total earning in the past year. Just like the stock market, there’s an expected y/y growth (3% on average across the US) so it would be better to have money in creator markets than to keep it in the bank.
It’s true that some fans just want the content, but any early believer of an artist knows that “consume” is not the right word for that initial relationship. You’re not buying a snack to eat and digest, you’re supporting something you believe in. Those early fans are absolutely co-creators of the initial success of an artist. That’s why that moment of “I knew Beyonce before she was famous” always feels so tragic in a way; somehow you never feel like you get the credit you deserve. So why not let those believers put some skin in the game? You could even imagine that companies could augment salaries by buying shares in their employees at or above market rate - a world in which the long term growth of an employee isn’t just a lip service priority for an employer but something that actually lifts their bottom line. YCombinator is great, but it’s still the privileged few incubating the privileged few. It’s a good next step, but it seems like we could aim even higher long-term.
As I mentioned, there’s so much about this space I don’t yet understand and I’m sure many things I’ve said here are wrong or “impossible.” But that’s the joy of hovering over this rabbit hole, able to convince myself, and perhaps you, that incredible things are coming our way. If you know someone who can help guide me downwards or who just wants to join the leap, please let me know.
-Joey
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