“Computers are useless”, exclaimed Pablo Picasso more than 50 years ago. “They can only give you answers.” No doubt it would turn in its grave when faced with the current alliance of computer programs, tech companies, and digital artists banding together to create non-fungible tokens (NFTs). It’s a rapidly changing and potentially very risky world for filmmakers, producers and others looking for new ways to raise funds, but should be approached with caution, research and a good look at recent history.
NFTs – in case you need to remind people – are digital artwork and images, often sliced into bite-sized tokens, that rely on blockchain technology to prove ownership. The explosion of interest and speculation around NFTs and the broader cryptocurrency craze that heated up over the previous decade has now dramatically imploded over the past six months, with over $2 trillion wiped out. The bursting of the digital asset and decentralized finance (DeFi) bubble has drawn acute attention, but also pain for millions of investors given that by mid-2021, more than 16% of the American population had bought into the crypto craze.
Although everyone consulted for this report had no problem with the underlying robustness of blockchain technology (essentially a digital ledger of transactions that is duplicated and distributed across an entire network of computer systems), its effectiveness depends on the use made of it. And although blockchain and cryptocurrency are two distinct technologies, they are intrinsically linked. Cryptocurrency works through the blockchain, as it is also a decentralized digital system, but designed for and enabling the trading of digital or virtual currencies.
Among the many crypto skeptics is BlackRock founder Larry Fink, who in 2017 joked that “Bitcoin just shows you how much demand for money laundering exists in the world.”
Digital asset evangelists such as Silicon Valley mogul Marc Andreessen, head of backing for several crypto start-ups, have made a famous revisionist claim that “every failed dot-com idea would work now.” The latest economic bubble burst does not confirm Andreessen’s theory, as the cryptography that was underlying the financial constructs, not to mention currencies, fell like dominoes never to see the digital light again.
Things can get shady even when currencies are built to create stability, as in the case of TerraUSD and Luna. Terra had a value pegged at $1, which in theory would not fall below, being held at that level by its sister coin Luna. If the Terra price rose above $1, investors could withdraw Luna coins from circulation (a practice called burning) in exchange for new TerraUSD coins, bringing the cost down to $1. Luna’s price, as coins became increasingly scarce, was supposed to increase.
However, the system only works if Luna has real value. For a period following its launch in 2019, its price skyrocketed, in part due to an aggressive offer to pay 20% interest on savings held using the currency, taking it to a high of $120. in April. But when the crash hit, investors started withdrawing their money to cover losses elsewhere…and Luna crashed. This set off a “death spiral”, as people turned Terra into Luna, causing Luna’s price to soar. Each redemption round simply saw Luna sink lower and lower. In just a few weeks, the value of the Luna coin has fallen to fractions of a dollar. The whole game was in place.
“Whatever the fate of decentralized cryptocurrencies, crypto and blockchain forms of technology are here to stay,” says Eswar Prasad, author of “The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance.” The challenge, he says, is multifaceted but requires sophisticated regulation. The catch is that “when an industry calls for regulation, it usually yearns for the legitimacy that comes with it while trying to minimize oversight. Should the biggest risk regulators take precautions? Giving the crypto industry an official imprimatur while subjecting it to light regulation.
It’s a baffling conundrum for filmmakers flirting with the market. “Let’s be honest – there’s a good reason the celebrity-driven crypto and NFT scam market has crashed,” says Oscar-winning writer-producer James Schamus. “To paraphrase Matt Damon, ‘Fortune does not favor the gullible’, which may explain why the average selling price of NFT has fallen 92% over the past six months. But that said, there are still potentially legitimate uses for some of these technologies, including perhaps digital rights management, royalty and residual tracking, and more.As with any hyper-financialized derivative, there will always be speculators, gamers and scammers to inflate markets at special-prices-for-you-certified-one-of-a-kind-digital-whatzyhoosies – but I wouldn’t dismiss the possible usefulness of these technologies just yet.
Taking Schamus’ cautious positive note one step further, diving into the terrain highlights the strong intersections between NFTs and the video game world, rather than directly to live-action movies and TV (although animation or another matter). “There is clear utility in video games because buying NFT is based on first-person emotional investment,” says Web 3.0 blogger and digital entrepreneur James K. Wight. “The clear message is that you are buying because it is fun and adds a sense of completion to the user. On the other hand, there’s nothing an NFT can do that a great video game can’t do better.
Producers have long been drawn to potential new opportunities for funding and creative products, and therein lies part of the problem. “Producers are sellers first and are desperate to find new and alternative sources of funding,” says Brian Beckmann, CFO of Arclight Films. “Therefore, they are likely to believe their own bullshit and therefore that of others.”
However, some astute growers have made it a point to kick the tires and investigate the feeding frenzy firsthand. Red and Black award-winning film producer and game developer John Giwa-Amu traveled from Wales to San Francisco to attend the Game Developers Conference earlier this spring. He had already had the less-than-exciting experience of trying to turn his debut feature, “White Little Lies,” into an NFT opportunity that “was a complete waste of time.”
“Once you get past the gold rush hype and the 20-year-old [then] millionaires, you realize that this market is very young, has suffered from huge mistakes and has a fundamental lack of understanding of the behavior of finance and risk. The key takeaway is that IPs in the form of digital webs are the tangible element behind NFTs, but the quality of that creative work really matters,” he says.
High-quality filmmakers were drawn to the opportunities, but approached the burgeoning industry cautiously enough to keep their shirts on. StudioNX, an Emmy-winning British-Canadian animation studio, felt the rush of demand when it launched “Gorecats,” combining an animated series with the launch of 1,111 NFTS at $100 per token on Magic Eden via the Solana network. The first series of NFTs sold out in 45 seconds. From that exhilarating start, founder Adam Jeffcoat hired a financial payment manager to deal with “volatility and changing values, not to mention strong finances! I see great potential, but the ups and downs have made me think that I only want part of our business involved, not all the pork. Jeffcoat points out that the key is that animated NFTs should be “supported by great storytelling, which in turn is much more engaging for people.”
Scratch the surface of game developers turned Web 3.0 entrepreneurs and there’s a slew of creative work being done that’s already redefining what the metaverse could offer us all. Developed by Tiny Rebel Games, an award-winning game and augmented reality (AR) developer, the Petaverse Network is the first cross-chain platform that has created the next generation of “immortal” pets across the metaverse. “Cool things are possible,” says co-founder Susan Cummings. “Cats do things! We can operate a cat in space and make it interesting. Petaverse’s creation of virtual pets works in games, augmented reality, virtual reality, wearables, and social media. Cummings says their pets evolve based on the nature of their specific DNA and the nature of their connection to you — a kind of reflexive animal-human dynamics if you will.
A key motivation for Cummings and his partner, Lee Cummings, was the desert of virtual pets once adored but abandoned over the years: Neopets, Tamagotchi, not to mention the 24 million Nintendogs that were bought, loved and then abandoned. that technology was constantly changing. on. “We love the idea that anyone can own it and take it with them, and it will still be relevant 30 years from now – a digital heirloom you can send to your grandkids.”
By combining games, XR and Web 3.0 and hosting the project through the Polygon platform on the Ethereum blockchain, Petaverse has set an open standard, allowing other projects to connect and create new experiences alongside the animals of virtual company. “It’s about creating an open, sharing community with an easy-to-use transportation system,” Cummings points out. This philosophy is far removed from the winner takes all the competition found in Hollywood and Silicon Valley.
But while some small shingles are finding ways to tame and use crypto and NFTs, there’s still too much volatility and questions to go mainstream in the entertainment industry, until the next big funding round. arrived.