Jason Bailey: Why collect art?
Richard Kim: First and foremost, it’s the participation in a community process. For me, art was always one of those things you could buy and hang on your wall. And that’s cool. But it’s something maybe I’d do when I’m 50, not something I would do in my 30s. Having community as the creation layer of content, as well as the commerce engine of this thing that, at its extremes, is like a cult, is very familiar to the millennial and Gen Z generations — the symbiotic combination of art with market.
I was talking about generative art recently to the director of a major art institution, and he said: “That’s market. That’s not art.” I thought that was such an interesting comment, and somewhat disingenuous to be frank, because the existing contemporary art market is very much “market,” they just don’t want to admit it. At least the crypto guys are being honest about it.
As you know, I’m not a big fan of the PFP. But communities can create their own art. And, if we adopt an old-guard mentality, I think we’re likely to miss a lot of what makes the next wave interesting. Fxhash was initially belittled by a lot of the collecting community precisely because it had no curation layer. But for me, that was the upside. There was no approval, and no gatekeeper. That was a really cool thing to see.
JB: I had something of a crisis when Art Blocks first became popular, because if we’re all going to agree before a drop that it’s going to be a hot drop, is that even really collecting? How do you distinguish between curated platforms like Art Blocks and non-curated platforms like fxhash?
RK: Art Blocks is interesting because, over time, collecting a complete set became more important than the quality of the art itself. That became something of a burden for me. I remember very distinctly the day I posted on Twitter that I was going to break my Art Blocks set. That was a good example of what you’re talking about, with crypto Twitter influencers saying: “Oh, this set is awesome...” But the price was absurd. Why would I spend $25,000, or whatever it was, on this thing that looked like a cutscene from a video game, when I could buy a car with that instead? That was the moment I realized this whole cult had become divorced from reality.
JB: It sounds like the competitive, completionist approach was maybe eroding your raw passion for art. Has collecting on fxhash restored some of that for you?
RK: My whole Tezos journey was based on the assumption that everything I collect on Tezos would have zero value. For the record, I’m an investor in Art Blocks. I still have a full curated set and I intend to have a full curated set in the future. However, there came a point when the cost became so expensive that it was no longer about playing in the sand. It was about being part of an exclusive club. The other thing I was struggling with after preaching Art Blocks to so many friends and family was that I couldn’t say in good faith: “Okay, after all that, your entry point is going to cost you $20,000. Go buy this Squiggle.” Chromie Squiggles (2020) are great. I think they’ll continue to go up. But not everyone has $20,000 lying around to buy an NFT. That’s why I reacted so well to fxhash.
The best part of it was that everyone was allowed to explore what they liked because the costs were so manageable. You didn’t have to listen to crypto Twitter influencers to tell you what to buy. The most regrettable part of collecting on Ethereum is you can’t say: “Well, if this thing goes to zero, it doesn’t matter.” Fxhash rekindled my passion for generative art — the community creation, curation, and commerce engine all in one, with a much more accessible entry point. But even I underestimated how explosively fxhash would grow.
As you know, I’m a VC. And in the first week I offered Ciphrd [the artist and creator of fxhash] some cash to scale his operations. And he had such a strong vision for how he wanted the platform to redistribute value back to its users that he felt that taking venture money from anyone, angels or otherwise, would compromise his ability to do what was right for the community. I gained a lot of respect for him in that moment.
The secondary royalties Ciphrd received from the sales of his work, RGB Elementary Cellular Automaton (2021), really allowed him to keep the platform independent for longer. By that point I had maybe 15 or 20 of them, which felt like a lot but I just wanted to continue to support him. Do I see RGBs being de facto equity in the platform itself? Absolutely. We’ve seen that already on Art Blocks with Chromie Squiggles. So that was definitely an investment. But it was almost like I was donating to the platform.
JB: Before I started ClubNFT, back when I was doing Artnome, I built the world’s largest database of complete works by 20th-century artists. And part of what I learned from that is roughly how much work artists make over the course of their careers — typically one to two thousand works. Of course, there are outliers, like Picasso or Warhol, but generally, there’s a limit to how much work artists can produce with analog media. In generative art, a single algorithm can produce upwards of 10,000 works. The ability for artists to put out large volumes of work at speed has exploded. Do you worry about artists flooding the market?
RK: There’s no one one-size-fits-all answer. You have some artists, Dmitri Cherniak is a great example, who are very thoughtful about controlling their supply after releasing a set that is widely considered grail. If you had the equivalent of [Cherniak’s] Ringers (2021) or Tyler Hobbs’s Fidenza (2021) and then that same artist released a new set every month — obviously, that would be a terrible idea from a business standpoint.
With an artist like Zancan, there will always be collectors like me who want every single thing no matter how frequently he releases. But I think that’s the exception rather than the rule. Zancan’s Garden, Monoliths (2021) is obviously the grail of fxhash, trading at levels that aren’t cheap even by ETH standards. The question is how you follow up a set like that with something a wider audience can participate in without detracting from the grail status of the original. I think it’s a really tricky balance, which Zancan has managed appropriately. But it’s also very hard for individual artists to produce the equivalent of ten Fidenzas. As more money flows into this space, the first question people are going to ask is: “Where is my money safe?”
Broadly speaking, there remains a restricted number of blue chips — works by Manoloide, Tyler Hobbs, DEAFBEEF, or anything that Curated is collecting. I feel that such things will only continue to go up in value. I also think that fxhash will support a set of grails that will continue to trade very well. The important thing to watch is the user base, which is one macro concern I have when I look at things like Moonbirds. There’s simply not enough capital in NFT land to support projects with 30 ETH floors multiplied by 10,000. I also don’t think there’s enough capital on Tezos to support a lot of primary issuance grails like we’ve seen in the ETH space. But that’ll be interesting to watch. Right now, fxhash feels good: The user base is expanding, and the work is still cheap enough to buy on secondary, flip and make money, with those profits being recycled back in. It also has lazier players like me who can’t be bothered to mint anything and just buy on the secondary market. It feels like a healthy balance.
JB: How do you feel about flippers?
RK: I have no issue with flippers at all — they’re just playing the game. And if you create a game where flippers can profit, you can’t complain when they do. Of course, there are ways to avoid the flipper game by creating more efficient auction mechanisms. I love what platforms like Feral File are doing with innovative mechanisms like the treasury-style Dutch auction. I want to see that from more platforms. The trouble is, whenever you change the rules, you’re removing a guaranteed source of profit from certain people who are liable to complain. I think we should focus on creating an auction construct which is efficient. On the other hand, if the primary market is more efficient, you’re going to see fewer secondary sales.
I don’t subscribe to the view that flipping is a bad thing, partly because this art form is not pure art. It’s a strange combination of community, cult, Robin Hood, slot machine, status game all in one. To me, this combination of art and market is what makes it great. But if you’ve invited in “unsavory elements,” it’s your own damn fault. So fix it.
JB: There are people who are trying to preserve art collecting as a genteel activity. But I like that you acknowledge it for what it is, which is a creative, gamified, and social activity. If I’m planning to spend above a certain amount on an NFT, then I ask a whole different set of questions because it’s going in my investment bucket. But if I’m buying under a certain amount, I can just do it for fun, and I don’t worry if a work’s value goes straight to zero. Can you break down your collecting process for us?
RK: I think a lot of it is based on feeling, which you can’t have unless you’ve collected a certain amount already. I don’t do the thing that a lot of artists do, which is to look at the code. But then part of the beauty of community collecting is that many people share their opinions in Discord. For me the question is: “Have I seen this aesthetic before?”
There’s a lot of stuff in my fxhash portfolio that I probably wouldn’t collect in the same quantity any more. At the time, it looked really cool, and if I’d been an alien visiting earth, I would think it was highly valuable. But now one encounters the same aesthetic in the work of multiple artists, which isn’t so cool. The thing I’ve changed in my approach is that, these days, I might only collect up to three pieces from generative art projects that I like. This is partly because I’m not interested in selling. If I were flipping then I would need more. My primary motivation now is to collect what I haven’t seen before and to support artists who are making significant steps forward, like KRANKARTA’s recent drop. I know you’re the same. If anything, you exit too early in general, in my view, although it seems like your timing of late has been better with the pieces you have sold.
JB: I am the undisputed king of paper hands. The way I look at it, if I have a steady flow of money to keep spending on art, that’s what makes me happy. Because I got in early, for me an XCOPY four years ago was no different than a no-name on fxhash is to a lot of collectors today. Those works by XCOPY, Robbie Barrat, and Hackatao that I sold too early, I had bought for only $10.
You’re never more helpful to an artist than when no one else is buying their stuff. Sarah Zucker is pretty well-known now, and I’d always liked her work, I just didn’t have any money at the time because I hadn’t sold anything. When I finally bought a bunch of her work on SuperRare, everyone started piling in, which was fun and rewarding emotionally, socially and financially.
JB: How do you protect your collection?
RK: Given the state of red alert across the market, I never mint anything on my vault [cold] wallet, ever. But it’s not simply a hardware wallet issue, the UX and UI is just not good enough.
People don’t know what they’re signing permissions for, which is really scary — one bad signature can take away everything you’ve taken several years to build up. I’m very close to revoking all permissions.
JB: We’re currently working on this NFT protection course at ClubNFT and I’m realizing that it’s like Russian roulette. If I have two beers, or whatever, and click something that looks like the real thing — there goes everything I’ve got. Having a second wallet is key to protection. Security is clearly an issue we need to address, but there are also a lot of spurious arguments used to dismiss NFTs. What is the most ridiculous argument that you’ve encountered?
RK: I think the idea that NFTs aren’t real is probably the most ridiculous argument. Because it reflects a generational disconnect. As a gaming investor, this is something I see every day — older generations who don’t understand why kids are spending all their money on Roblox and Fortnite skins. But if you’re 12 years old and all your friends are online, and you’re spending 100% of your time online with people you’ve never met in person, how is a Roblox skin any less real than the clothes you’re wearing IRL…?
JB: What’s more important: the art or the chain?
RK: I wrote a long article recently, called “Warm Crypto,” arguing that the things that made crypto succeed were trustlessness and good decentralization. These are very important primitives if you’re trying to build a financial system that’s not controlled by anyone. But if you’re trying to create community currency where you give people the right to earn a living for all their passions and engagement then, actually, you don’t need trustlessness and decentralization, you need top-down centralization of great content and great community, and then interoperability between what were previously closed-loop content ecosystems. The chain obviously needs to continue operating, but so long as it does it’s much more about the content.
JB: Is the token the art or a receipt that points to the art?
RK: I’m a big collector of on-chain art. But that doesn’t mean that off-chain art is bad. It’s just a different category of asset.
JB: And finally, what would be your advice for new collectors?
RK: My advice today is very clear. Start on Tezos and buy whatever you like — the more the better. The only trouble is getting onto Tezos and opening a wallet in the first place. That continues to be the biggest issue in the NFT space. If you ask me where I’m going to spend my next three to six months, it’s actually more with the incumbents than the startups because I think the incumbents have a crucial role to play in leveraging their distribution to allow for mass onboarding into crypto and, by extension, crypto art.
A lot of people who would never have collected on Tezos a year ago have come over simply because they’re sick of seeing all this damn good art and not being a part of it. That has really democratized the NFT space.
Richard Kim is General Partner at Galaxy Interactive and a Managing Director at Galaxy Digital. His experience spans investing, trading, law, finance, management and strategy. Prior to joining Galaxy Digital, he was COO of Global Foreign Exchange and Emerging Markets Trading at Goldman Sachs from 2015 to 2018. From 2012 to 2015, he worked at J.P. Morgan, where he was Co-COO of Global Foreign Exchange and Emerging Markets Trading, and prior to that was the COO of J.P. Morgan’s electronic trading franchise for FX/EM. From 2010 to 2012, he worked as a derivatives and regulation attorney at J.P. Morgan. From 2007 to 2010, he worked as an attorney in Cleary Gottlieb’s financial products and markets group. He also served as an adjunct professor at New York Law School. He earned his J.D. from Columbia Law School in 2007 and studied philosophy and economics at the University of Washington, from which he graduated magna cum laude and Phi Beta Kappa in 2004 at the age of 18.
Jason Bailey is the creator of the art and tech blog Artnome.com and founder of GreenNFTs and ClubNFT where he serves as CEO.