Monday through Wednesday of this week (April 12 – 14), Nifty Gateway went all out on a collaboration drop between elusive artist Pak and the auction house Sotheby’s. The drop was first reported by us back in our March news roundup, here: Big Drops and Rumors – March 2021 Edition. The drop fit more into the “Performance Art” category of art vs. a work based purely on the face values of the NFTs being released. It employed a deep set of gamification approaches, which could be considered (cynically) as an approach more to optimize the revenue generated by the work itself, rather than purely as an artwork that sought to be an exploration of gamification of NFTs.
The drop, by objective measurement, was a raging success by Nifty Gateway, Sotheby’s, and Pak. Gross revenue on the drop (by our calculations) exceeded $20 Million.
~14000 Day 1 Cubes @ $500 / Cube = $7M
~4000 Day 2 Cubes @$1,000 / Cube = $4M
~5000 Day 3 Cubes @ $1,500 / Cube = $7.5M
1/1 “The Switch” @ ~$1.4M + 1/1 “The Pixel” @ ~$1.4M = $2.8M
Grand Total: $21.3M
In this article we will take an in depth analysis of the numerous gamification approaches employed during the drop, and contrast them against the “face value” of the work, or the actual unique individual pieces of art.
- The primary work itself, the “Cube” isn’t a NFT itself, but an entry ticket that determines which NFT you will receive.
- Accumulation of increasing quantities of Cubes as a mechanism for access to unique works (the redeemed Cube works).
- The Pricing of Cubes, with an unannounced/surprise increase each day of the competition.
- Competition for 1/1 “The Cube”, based on being the largest purchaser of Cubes.
- Competition to be in the top 100 of cube purchasers, yielding a gift of “Complexity”
- Equilibrium, which is a work awarded based on Pak related achievements, which are primarily geared towards hyping the drop or Pak.
- A community giveback in the form of a limited edition series of NFTs (“The Builder”). No guidance is provided on how to be considered, it is purely at the discretion of Pak.
- A concurrent announcement by Pak, on Twitter (See: Here), of a new ERC-20 token called $ASH.
- Nifty Gateway’s public declaration of the rumored “Whitelist”, and opening it to global participation.
We will break these out with some individual commentary.
#1 – The “Cube” isn’t actually a NFT
The most obvious gamified element of the whole drop, is what you actually are puchasing. Only 3 things are explicitly available for purchase: “Cubes” and the two 1/1 auction items. The cube functions purely as a $500 – $1500 entry ticket into a giveaway of 8 different artworks with limited enhanced artistic value. This aspect of the work is admittedly thought provoking, as it forces the buyer to ask, what is the right number of cubes to buy to achieve my objectives as part of the performance, but the level of thinking is comparable to counting change in a change jar and deciding how many pennies and quarters you want to keep in your pocket for a day at the fair. The depth is relatively mundane at best.
#2 – More “Cubes” means better NFTs
Instead of simply making 8 works, with increasing degrees of artistic effort and or resultant value, Pak has sidestepped any meaningful effort and just made 8 cubes that are glued together in higher quantities. We did our best to analyze the artistic direction he might have used to decide how to structure the removed cubes to equal appropriate quantities, but we couldn’t arrive to any meaningful connection. At most this work will stand as a measure of some collector’s pocket book and nothing more, to continue with the pocket change analogy. There is no direct increase of viewing pleasure of a single cube vs. a thousand cubes. The images might as well not even exist.
#3 – Unannounced / Surprise increase of “Cube” pricing
This element of the drop can be filed in the filing cabinet of dirty tricks. On day 1, cubes are $500 each. On day 2, cubes now have doubled in price. Why? Collectors seeking to win the largest sunk cost competitions will now have to play a game of chicken with each other and dig even deeper to insure their victory. Is there any artistic value here? Not really. Collectors who now maybe didn’t make the first day of the auction and only wished to buy a single Cube, for the sake of being a small time collector of a Pak work now have to pay double for the same exact piece of work. Even worse, there is now an unexpected cattle prod urging the small time collector to irrationally act quickly, or else the price might double again. In the end, Day 3, the price only increased by another $500. Why not another doubling? Why not 5x? The only explanation for the price increases was to increase the gross financial yield of the drop. In our eyes, this was less performance art, and more of a money grab. The vastly decreased number of purchases on day two contributes to our belief that the Nifty Gateway collector community felt the same way.
And lastly we must ask, what if the price on day 3 was instead lowered to $1 instead of raised? That would have been a real intriguing performance art, because then every collector would have been able to purchase the entire collection, leaving all collectors, regardless of their wealth in a similar footing, while the wealthy collectors could still compete for largest sunk price.
#4 and #5 – Competition for the largest sunk cost
This is mostly covered in #3, but we see competition for largest sunk cost as not artistic in any way, and purely a mechanism to encourage larger buyers to contribute as much as possible to the revenue of the drop.
#6 and #7 – Explicit community driven marketing approaches
Community participation in a drop is certainly not a problem in and of itself. “Equilibrium” and artists giving back to their long time supporters and influences is certainly a reputable thing to do. And the other mechanisms such as announcement of a puzzle and estimating the size of the sale are generally just fun aspects of an event to include.
Where we start to feel icky is social media posting to the biggest social media account, vs. some sort of random selection algorithm, as well as making the highest purchase of a previous Pak work, specifically from its initial marketplace. These are both heavily conflicted tit-for-tat sort of requests, that instead of contributing to the goodness of the work, they seem to be specifically designed to contribute to the goodness of the profit of the drop.
#8 – Concurrent Launch of $ASH
On April 12th, Pak tweeted about the launch of a new ERC-20 token, which claims to be a mechanism to purchase future exclusive Pak artworks by burning other artworks. The tweet and other surrounding material has the implication that purchase of “Cubes” will be a cost efficient way of acquiring future Pak works. NFT Culture Staff had some internal debates about this, and came to the ultimate conclusion that this announcement walks dangerously close to the line of being an an implied investment into future Pak deliveries.
Securities Law can be summed up as follows:
A security is an investment in a business. It can take the form of shares of stock, bonds, a package of loans or mortgages offered for sale by a financial institution or a financial instrument representing investment in a company or an international project.
That emphasized bit is the grey area where the “Performance Art” treads dangerously close to being a “Security” on the basis that you are investing in a work that will be delivered at some future date. We are confused as to how the concurrent tweet by Pak passed legal review. Our expectation is that progress on an actual release of $ASH or the ability to convert NFTs from this drop into $ASH will never materialize. We will update if things change.
#9 – Nifty Gateway Raises the curtain on the “Whitelist”
Visitors to Nifty Gateway on April 12th were greeted with a new modal, describing an approval form in order to pay via wire transfer or ACH, if the user intended to make a purchase of over $100k.
We have long heard rumors of the “Whitelist”, but had not been able to find a solid source who was able to discuss it. From what we have heard, the whitelist works as an additional payment option that shows up on the Nifty Gateway purchase confirmation page. The whitelist option allows you to enter any price (presumably up to your limit), make the purchase, and then settle up with Nifty Gateway at a later date. We were first tipped off to the Whitelist while watching bids on the Beeple Carbon drop, and hypothesizing how it was possible for someone to have >$5M of purchasing power when the options were only account balance or credit card authorization. A random tip via discord about the “Whitelist” later solidified our belief that a hidden option existed.
How is this Gamification, our astute readers ask? Well, it is our hypothesis that Nifty Gateway wanted to prime users’ collective reference points for winning the “Complexity” award (Top 100 Cube Purchasers) with some form of indication that at least $100k of “Cube” purchases would be necessary to win the award. Nifty Gateway had no discernible reason besides this to lower the curtain on the Whitelist, as anyone with the capability to fund $100k of NFTs would have already either have solved the account funding issue or would have previously already been a candidate for the whitelist.
If you’ve made it this far, you probably will conclude that NFT Culture staff sees “The Fungible” by Pak as a failure for the NFT artistic community. In the end, the work consists of 14 unique art pieces, the performance of $20M of revenue generation, and some as of yet unfulfilled promises of a solution to over printed editions of NFTs in the past. In the future, we would love to see artists spend as much time gamifying their works for the good of their supporting community, and less time optimizing them for maximization of revenue. We give Pak a little credit for obviously putting a lot of thought into the piece, but we feel that the resultant work has fallen flat. Hopefully Pak can make up for it in whatever comes next.