Where An Online Collectible is Worth $69 Million

Using V-bucks, Fortnite players accumulate the skins that make look alike video characters more unique. One thousand V-bucks could cost close to $9.99.

Below, you are looking at a rare skin:

Similar and yet very different, another online collectible moved far beyond $10 skins.

Online Collectible Markets

a Beeple

Starting in 2007, Max Winkelmann, who calls himself Beeple, posted a picture a day. Combined, they became (shown as our featured image) Everydays–the First 500 Days.

This is one of those pictures:

When asked to imagine an auction, most of us have a similar image of a stage, a podium, a person with a gavel asking for bids. Quite different, the Beeple auction took place online. On February 25, the bidding opened at $100. Within eight minutes, the price ascended to $1 million. By the last hour on March 11, the price moved from $14 million, to $22 million, to $27 million, $35 million, $50 million, and then $60.25 million when the final (imaginary) hammer hit. Because of assorted fees, the final price was $69,346,250. To receive the collage (I am not sure what to call it), the new owner needed no secure delivery plan. All they needed was a non-fungible token (NFT).

a Top Shot

Days earlier, in a somewhat similar online transaction, a video of LeBron James was sold for $208,000. Called a Top Shot, it recorded one moment in sports history. USA Today tells us that the clip showed LeBron dunking “all over” the Sacramento Kings’s forward Nemanja Bjelica. As the new owners, an investment group received a non-fungible token.

Like the Beeple, online collectible activity for Top Shots is soaring:

Non-Fungible Tokens

NFTs exist totally online. But unlike cryptocurrencies, they cannot be exchanged for each other. One bitcoin is identical to another as a commodity (or currency, whatever it is) while every NFT is unique. The token half of NFT is a deed. The deed is recorded with vital information about the online item. It identifies its owner, when it was created, sold, to whom.

By establishing the validity of an NFT through a digital deed that is recorded in blockchain (an online ledger), property rights can be preserved and thereby viably transferred.

Our Bottom Line: Markets

Trading online collectible commodities reminds us that a market is a process. As long as you have price determined by freely functioning supply and demand, and clearly defined property rights, markets do their job. Whether it’s a $10 Fortnite skin or a $69 million Beeple (or the first Tweet from Jim Dorsey that will reputedly be auctioned as an online collectible), markets are just establishing an equilibrium price and quantity.

Returning to our title, where do we that whopping and completely irrational $69 million?

The market.

My sources and more: NFTs have been popping up everywhere in the news. While the big story was the Beeple, WSJ recently defined NFT and then focused on Top Shot moments, They also looked at the market for LeBron James as did USA Today. (I thank my grandson Mason for explaining v-bucks and skins to me and inspiring this post.)