NFT Collectors Snatch Up “Rug Pull” Art for $65k in Auction
If you follow the Defiant YouTube channel you’ll probably have spotted me doing some very unusual experiments around NFT ownership and digital art. It’s over an hour’s worth of content across the two videos but the TLDR is this —I had an itch to scratch, my best friend Simon Wan is a fantastic IRL artist …
If you follow the Defiant YouTube channel you’ll probably have spotted me doing some very unusual experiments around NFT ownership and digital art. It’s over an hour’s worth of content across the two videos but the TLDR is this —I had an itch to scratch, my best friend Simon Wan is a fantastic IRL artist and we decided it was time to put our own stamp on the digital art space.
We had two questions we wanted to address: firstly, the experience of owning an NFT is no different from simply viewing the jpeg/gif version; secondly, once you own an NFT the juice kind of goes away, how can you keep the experience of owning it alive and exciting? We also wanted to frame a question around NFT art and whether it’s all just bs. Do people really care about the ‘art’ or is it just another crypto game? Could we design a piece that would pose that question and, crucially, would anyone go for it?
The Rug Pull
And that is how we came up with the Rug Pull – inspired by the defining meme of the DeFi summer – just yesterday a fake Deriswap token pulled off yet another rug so it’s still very much with us.
There are 12 NFTs – identical in every single way EXCEPT one of them contains a bitcoin. The owner of the NFT can ‘break open’ their piece and discover whether theirs is the owner of the BTC. At all times the status of the NFTs (opened/not opened) is displayed publicly on a website. So, the moment the owner knows, the whole world knows.
Game Theory Maze
If the owner is indeed the lucky new owner of a bitcoin all the other NFTs are instantly revealed NOT to have it and the piece takes on its final form. By opening the NFT the owner can in theory rug all the other owners but they’re more likely to rug themselves. If Bitcoin is worth $5k maybe it’s not that tempting. But what if it’s $30k? Or $50k? Or $100k? An opened NFT with no BTC is without a doubt going to be worth a lot less than the unopened ones which should gain in value as they become rarer.
It’s a carefully balanced game theory maze designed to steer owners towards the outcome that represents the best interests of the whole group. And the best outcome is for nobody to open the NFTs. Even though the Bitcoin is highly desirable it is more desirable for it to remain undiscovered. And this forces the attention onto the artist and the art itself. So we are constantly evaluating and re-evaluating the art component of the piece as the price of Bitcoin fluctuates. This mirrors the way the whole market is a slave to Bitcoin’s price movements.
There’s another component here which is that we can consider each owner as a node in a network. The nodes need to achieve consensus in order to realize the best outcome. But there can always be malicious actors. NFTs can be freely traded and who’s to say that a new owner will be as fair-minded as the previous one. For an owner the best way to ensure you don’t get rugged is to own all the NFTs which creates interesting secondary-market dynamics as the pieces change hands.
Bomb Under the Table
As I was designing the piece I kept returning to Hitchcock’s theory of the bomb under the table. The idea that tension is built by knowing that something ‘might’ happen, that the bomb might go off. So this sense that any moment one of the other owners could decide to open their NFT and be successful rendering yours suddenly worth a great deal less. An owner bent on acquiring all of them takes on successively greater risk as they near their goal.https://www.youtube-nocookie.com/embed/CFO0152cmN0?rel=0&autoplay=0&showinfo=0
The auction took place yesterday on the Memecoin platform. I was fortunate to encounter Jordan Lyall when making the Meme video a few months back and when I came up with this idea he was the first person I pitched it to. At the time Bitcoin was $11k. By the time we hit the auction it was over $19k so the whole piece had appreciated by eight thousand dollars before it had even been sold!
Along with ET and Farmer from the Meme team we designed a mechanic that would allow us to seed the winner of the Bitcoin without us ever knowing who it was. Unfortunately, the specifics of that will need to remain secret because the team don’t want to expose the project to any risk, however small, of being hacked. But it’s ingenious and, as far as we know, never been done before.
The BTC embedded in the collection came from me and was partly funded by the coins that were stolen from my ETH wallet in the now infamous Rug Pull episode of the Defiant. When it came to the auction itself we were already above 1BTC in bids after six hours so I could breathe a sigh of relief and wait for the final action. We had added one final kicker to the auction which was that the top bidder would receive the physical art created by Simon Wan.
The auction was extended by over an hour as the top two bidders slugged it out for the art but in the end the top bid was 35.01 MEME ($7,422). The whole collection went for 307.13 MEME ($65,122).
There was one final piece to the puzzle though. I had brought together a group of complete unknowns through my mini transmedia story experiment and the final test was to see if this group could self-organize to bid for one of the NFTs as a group, with the goal of fractionalising the piece and making it possible for smaller players to still take part. In the end that group successfully acquired #77 and in so doing became a voice to advocate for the ‘art’ of the collection.
At some point in the future the price of Bitcoin will inevitably place so much pressure on at least some of the owners that they will want to pass it on or look inside. It would be nice to believe that art is enough but our experience in blockchain has shown that this is probably rose-tinted optimism. Our goal with this is to mitigate that by foregrounding the art and incentivizing the owners to become genuine patrons.
Fear and Trepidation
To date nobody has opened any of the NFTs. The overriding sentiment is fear. The owners are scared: “I’m worried I’m going to open it by mistake but I also know some of these other owners and one of them is just a straight-up gambler!” one of them said.
And that was entirely the point, there’s a bomb under the table, they are feeling an emotion connected to this art – it’s fear and trepidation and that’s exactly what we wanted them to feel, it’s what we promised. Job done. And yes, we’re already planning the next one.
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