Generative Art And Its Biggest Player: Art Blocks (+ Mr. Fox's Fund Update)
Mr. Fox breaks down the concept of Generative Art and how NFT players are making money on it through Art Blocks.
Hello all and welcome back to another email. Thankfully today is not about digital avatars which have become exhausting even for me. They have seemingly become exhausting for at least a few other players in NFT world too, as we have seen Art Blocks go on a stratospheric run over the last few weeks.
What are they and how do they work?
Art Blocks is what is known as a “generative art platform”. What that means is that they are a platform that sells art that is created right there on the spot when you go to claim it.
How does that work?
A lot of it has to do with coding. The artist will create a bunch of different variables (let’s say colour, shape, consistency of the line, etc.) and write those different variables into code. When you go to claim one of these art pieces (called minting), you are essentially pressing the randomize button on the variables and what you get is what you get. Nobody has any clue what their piece is going to look like before they mint it. This is actually the same process used in digital avatar projects when they drop for the first time.
Back to Art Blocks. They sell generative artwork, but how?
It is almost exactly like a sneaker drop or clothing drop that we’re all used to by now from companies like Supreme or Balenciaga. Art Blocks announce that a new collection will be releasing on the platform (usually every Friday) and people go to the website and mint them.
Let us look at the first-ever and most successful Art Blocks drop and collection, Chromie Squiggles, so you can get a good picture for what these are:
Yep. If you thought Apes were ridiculous, you probably think these squiggly lines are a joke. They’re not though, the cheapest one you can get goes for just under $6000 USD (and there are 10 000 of them). Yes, one of those squiggly lines. $6000.
Are all Chromie Squiggles the same?
No. Like digital avatars, some contain rarer traits than other. The three squiggles above are all “Basic”. Here is an example of a more rare Squiggle:
Where can you get Chromie Squiggles and other collections released by Art Blocks?
After all of the pieces in the collection have been claimed (minted) from the Art Blocks site, you can only buy them resale on secondary marketplaces. The secondary marketplace that hosts Art Blocks is OpenSea. Think about it as if Nike dropped 500 pairs of Jordan’s, and now the only ones you can get are on StockX.
Anything else to know about Art Blocks?
Art Blocks is the platform that releases these generative art collections, but they are not the one that creates/designs them. Artists apply to be apart of Art Blocks. If accepted/chosen, their work becomes the next collection/drop. All artists who have produced an official collection for Art Blocks like we just described also gets to release another project in the Art Blocks Playground, but Art Blocks does not consider these works as parts of their Curated Collection and they are not marketed.
How have they performed as investments?
Recently, quite well. Here is their chart for 7-day average nominal sales:
Since June 10, Art Blocks sales have climbed from an average of $400 000 USD to over $12 200 000 USD.
Why?
Ether (the currency that all things digital are priced in (this would include art and digital avatars) has continued to fall. As a general rule of thumb in NFT world, when Ether is rising NFT sales slow because why would you spend something that is growing rapidly in value? When Ether is falling, NFT sales pick up because why would you hold something that is decreasing rapidly? When people know other people are going to spend their Ether on NFTs, projects start to really take off.
But back to Art Blocks sales. For the month of May, digital avatars were all the craze. Once people got tired of them, they moved onto digital art, and Art Blocks was the greatest recipient of this trend. It had a great month of June, but the week of July 12-19 was its second wind, with sales increasing by the same amount for the entire month of June in just one week.
How can you make money off of Art Blocks?
Minting Art Blocks as they drop is not very lucrative at all. The reason for this is because the richest holders of Ether (known as “whales” for their buying power) are able to outbid smaller investors such as ourselves as a result of what is called a “gas war”. A gas war occurs when there is a huge increase in the number of transactions occurring on the Ethereum network. Instead of waiting their turn in line, whales will pay extra to the Ethereum network to get their transaction pushed forward. The problem with gas wars is that because we as small investors do not buy in bulk, a cost of $300 in gas when we are only minting a $100 piece is very difficult to swallow as our piece then has to 4x in value for us to break even. For a whale though, a $300 gas fee when they are minting $10 000 worth of pieces is nothing because they only need an incremental appreciation in their pieces to breakeven.
So, buying a piece off of the mint is probably too expensive. What else can you do?
If you want to buy an Art Blocks piece, you should do some research into the Curated Collection on OpenSea. Try to find pieces that are undervalued and hold them.
In my opinion though, as well as Art Blocks and digital art in general has done as of late, the majority are bad investments. There are some collections that I would buy, such as Chromie Squiggles, because the fact that it is the first ever collection means it has historical value and will likely retain most of that over the long-run. But the majority of other art has zero utility. This puts it behind many other potential NFT investments that are building for utility across Web3 and The Metaverse for me.
FUND UPDATE
Thank you to everybody who expressed interest in the fund. I’m happy to announce that it seems Mr. Fox’s Fund will start with just under $100 000 in committed money. I am currently working everyday to sort out the legal infrastructure, but am hoping things can begin as soon as possible through the formation of a DAO. I will keep you guys posted.
And down the Rabbit Hole we continue.
Mr. Fox.