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The launch of a digital art department at upscale auction house Christies was precisely as well-publicized as its eventual shuttering was devoid of fanfare. On March 11, 2021, Christies made history as the first major auction house to sell art in the form of a non-fungible token (NFT). Digital artist Beeple managed to offload his massive mosaic, Everydays: The First 5000 Days, for a whopping $69 million, generating hundreds of astonished headlines and getting those three letters, NFT, in front of untold scads of early-adopter eyeballs. It was the sale heard ’round the world, a starter pistol kicking off the NFT gold rush. Cut to last month, when Christies quietly closed its digital art department. It was as if the moment when NFTs briefly became the molten core of culture, tech, and commerce had never happened at allas if the vague memory of surly apes with unconscionable price tags had just been a fever dream. There may be a lesson, however, in examining how quickly the hype cooled on NFTsespecially considering what the market has evolved into in the years since. Here comes the boom For those who may have forgottenor never bothered to learnNFTs are unique digital certificates stored on a blockchain, proving ownership or authenticity for an array of items, including art. Unlike the typical crypto asset, where each Bitcoin or Ethereum is identical and equal, these tokens are not interchangeable. Hence, they aresay it with menon-fungible. Though the first-ever NFTa short, looping generative animation called Quantumwas created in 2014, the technology only started making waves a few years later, with the arrival of CryptoKitties. Minted on the Ethereum blockchain, CryptoKitties were playfully animated feline NFTs, designed not only to collect and trade, but also to breed new kitties with inherited traits, lending them a gamified aspect that proved to be a game-changer. We saw all the craziness going on at that time with ICOs [initial coin offerings] and we said, ‘Hey, look, not everything has to be a coin, recalls Roham Gharegozlou, CEO and cofounder of Dapper Labs, the pioneering NFT company behind CryptoKitties and other digital collectibles. CryptoKitties was the first time we showed that crypto could be a lot more than just currency, and it attracted the attention of a lot of people who saw the potential of digital ownership as applied to these massive, billion-fan communities like the NBA, the NFL or Disney. By the time the notorious Beeple auction took place, Dapper had collaborations in the works with all three companies, and had already launched NBA Top Shot, turning video clips from NBA games into NFTs. One such moment, a gnarly LeBron James dunk from February 2021, went for $208,000, a headline-worthy sum that preceded the art worlds own NFT coming-out party by about three weeks. It was official: NFTs were the Next Big Thing. Soon enough, fashion houses, entertainment companies, and more major brands wanted in. As did the speculative set. Among the names most associated with NFTs is Bored Ape Yacht Club (BAYC). Launched in April 2021 by the four pseudonymous founders of Yuga Labs, the project consisted of 10,000 singular cartoon apes, stylized to evoke esoteric personality types. On the surface, the apes were similar to CryptoKitties, but unlike that venture, Yuga marketed BYAC as an exclusive club. Those willing to pay prices that started art $190 in the early days received promises of perks like merch drops and a private Discord, along with access to special events. They also got to feel like they shared space on an ever-unfurling red carpet with celebrities like Justin Bieber and Serena Williams, who started touting their newfound Apes as status symbols. As consumer interest in NFTs soared, so did the value of Ethereum and the tokens on its blockchain. The prices of some Bored Apes skyrocketed from hundreds of dollars to hundreds of thousands in a matter of months. Green-eyed investors started tracking their value like stocks. By the end of 2021, the trading volume of NFTs altogether reportedly surpassed $13 billion. Id been looking into these kinds of things for years, and then suddenly my barista was asking about NFTs, says Merav Ozair, an expert on responsible innovation and the founder of Emerging Technologies Mastery, a Web3 consultancy shop. Everyone wanted to know about it and how they could benefit from it. People from every industry suddenly came to me with questions, and then I understood this had become much more than it was supposed to be. Omar Kholief, a curator, professor, and author of the book Internet_Art: From the Birth of the Web to the Rise of NFTs, had a similar experience during the NFT feeding frenzy of 2021. It was not surprising that [the Beeple sale] would make news. What shook me, however, was the vast speculation around this sale, and the number of start-ups professing to be specialists in NFTs all of a sudden, who wanted to enlist my knowledge, labor and support, Kholief says. I was being offered jobs by company after companyand today, well, none of them exist. Things fall apart At their mainstream peak, NFTs were everywhere and could seemingly be anything. Rock band Kings of Leon released an NFT album. Reese Witherspoons production company Hello Sunshine made a deal to adapt NFTs into movies and TV shows. (To date, no Hello Sunshine NFT adaptations have seen the light of day.) Author Neil Strauss released a book as an NFT, and an NFT of New York Times writer Kevin Rooses column about NFTs sold for $560,000. The cumulative effect of so much all-in hype from high places was that anyone tuned into pop culture at the time might have strted to feel like a schmuck for not diving in, wallet first. Of course, many holdouts eventually saw their hesitancy validated, once it turned out these digital assets were not as sturdy an investment at the time as the loudest hype-peddlers portrayed them. Everyone jumped on the bandwagon, causing market saturation supremely quickly, as well as confusion and boredom, Kholief says. Because the mouthpieces at the front of the companies had not a clue what an NFT actually was. When the Federal Reserve started hiking interest rates in March 2022 to fight pandemic inflation, it lowered investor confidence in crypto. Prices of tokens fell sharply as more hikes followed, alongside geopolitical chaos including a then-new war between Russia and Ukraine. A major downturn in the crypto market had begun, one that would peak with the November 2022 crash of FTX. By that point, NFT trading volume for the year had collapsed by 97%. And where were the celebrities whod proudly and quite publicly shown off their Bored Apes? By December 2022, when most BYAC tokens were worth a fraction of what their owners paid for them, several bold-face names were listed in a class action lawsuit against Yuga Labs. Snoop Dogg, Madonna, Post Malone, and many others were alleged to have participated in a scheme to artificially increase the interest in and price of Bored Ape NFTs without disclosing the nature, source, and amount of any compensation paid, directly or indirectly, in exchange for the endorsement. Even before the lawsuit, which was dismissed on October 1, though, celebrities had pumped the brakes on their NFT enthusiasm. As quickly as the decibel-shattering hype had begun, it was over. It had already started to wind down, but after FTX, people decided they werent touching this space anymore, says Ozair. They figured, Maybe all these NFTs are just a scam. In it for the long term The NFT market collapsed for many reasons, but chief among them were excessive hype and rapid expansion. It was definitely too much too soon, Dapper Labs Gharegozlou says of peak NFT hype. Because crypto is this odd industry where, even though the technology was immature for many years, there was opportunity to make money, so that brought a rush of people in, whereas with most new technologies, people leave them alone until they’re a lot more mature. What had started as a new frontier in digital ownership quickly got conflated with a faddish money-printing machine. As the dust settled in 2023, it became clear that just because an image was digital and unique didnt make it inherently valuableand also that maybe Starbucks didnt need an NFT program, something the company finally conceded in early 2024. So, what might the NFT market look like in maturity? Over time, a smaller, more pragmatic set of use cases has emerged among collectors and various fandoms. Gaming companies are figuring out how to better integrate NFTs in their open worlds, and fashion brands like Louis Vuitton are tying (wildly expensive) physical garments to their NFTs. Meanwhile, regulatory changes like this years GENIUS Act are helping to firm up cryptos infrastructure, making the waters safer for consumers. NFTs now trade in smaller volumes, to more niche audiences, with the speculative crowd mostly having moved on to things like meme coins. Dapper Labs had found success with NBA Top Shot and NFL All Day prior to peak NFT hype, but the company only unveiled its Disney collaboration, Disney Pinnacle, in November 2023a year after the bottom fell out of the market, when people were reassessing NFTs. The turn in public opinion apparently had an impact on the companys efforts to launch a new venture. It sort of reset expectations, Gharegozlou says. We had to approach things from a very cautious standpoint, because we wanted our customers as well as our partnersin the case of Disneyto know that we’re in this for the long term. The team at Dapper Labs moved thoughtfully and slowly as it created a line of collectible digital pins for various Disney IP, free from the speculative craze that enveloped previous projects. Disney Pinnacle seems focused on serving fans reasonably priced collectibles, while inspiring deep-pocked collectors to bid tens of thousands on limited drops. (NBA Top Shot also still produces NFTs that occasionally fetch six figures on the market.) As the Disney fandom embraces Pinnacle, Disney+ has harnessed these digital pins as a perk for subscribers. Its a hint of how a more grounded, practical market for NFTs might play out in the future. What can the NFT boom tell us about AI? As NFTs settle into their niche within the greater crypto ecosystem, its important to remember what happened when they were previously in the global spotlight. Silicon Valley, after all, appears to be making similar mistakes with artificial intelligence. While many have compared the AI craze to the dot-com bubble, it also closely resembles the NFT boom. At their 2021 height, NFTs thrived on novelty over utility. They were a shiny new concept that could not maintain mass interest when the hype died down. A similar phenomenon now plagues AI. Nearly three years after Chat GPTs arrival, the incorporation of AI in any product or service is still meant to signal valueeven if, in practice, most shoehorned-in AI components tend to just make consumers want to opt out. The market is now willing to bet billions on, say, an energy real estate investment trust, seemingly because AI is involved at all, rather than because its involved in a particularly useful or innovative way. Beyond prizing novelty over utility, the executives touting AI the loudest have been over-promising what the technology can deliver. Instead of emphasizing the practical use cases of today, they are claiming AI will cure cancer tomorrow, for starters. There is a lot of overpromising, Ozair says.When Sam Altman says GPT-5 is like having PhDs in your pocket for every discipline, that is false advertising. It doesn’t have that capability. The fact that it got a gold medal for mathematics and physics [at the Olympiad] doesn’t say anything about what it can actually do. For all the mistakes the NFT movement made that AI can learn from, though, the fact that the industry is still standing after it took such a reputational drubbing should be inspirational for those who see AI as a bubble on the brink of bursting. After falling back to Earth in 2022, the supposed end of NFTs in the mainstream might eventually just be seen as a blip. I think everything’s working out the right way, Gharegozlou says. There were speculative excesses within the industry, but I think that also was a stress test for everything to come. If the AI industry is to survive its own current phase of rapid experimentation and expansion, it would do well to heed the lessons of the last Next Big Thing.
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E-Commerce
A group of U.S. officials want to know why London’s FTSE Russell, a top financial services firm, chose to include the underperforming Trump Media & Technology Group (TMTG) in one of its most high-profile indexes. Their concern stems, in part, from the fact that analysts generally do not view TMTG, which owns the presidents social media platform Truth, as particularly stable. Trading under the symbol DJT, shares are down 38% year to date and currently trade at about $17.50. Last fiscal year, the company reported a net loss of $400.9 million And in the most recent quarter, it reported a loss of $20 million. The Russell 3000 tracks the performance of the 3,000-largest publicly traded companies in the United States. While investors can’t buy the index directly, several ETFs or index funds include the Russell 3000. Signed by Vermont State Treasurer Mike Pieciak, fiscal leaders from New York, Massachusetts, Rhode Island, Connecticut, and Maryland, as well as the comptroller of New York City, the letter expresses concern about TMTGs inclusion in the Russell 3000, which occurred last year. The drop in the company’s share price, negligible revenues and risks that come with the stock are among the issues they raise. “The Russell 3000 is one of the most influential benchmarks in U.S. capital markets, with approximately $10.6 trillion in assets,” the officials write. “Its credibility depends on consistent, transparent, and rigorous standards that ensure its companies reflect the U.S. equity market and meet the expectations of institutional investors and public stewards alike. The continued presence of TMTG in the index raises troubling questions on both financial and governance grounds, as well as on the integrity of the benchmark itself.” London’s FTSE Russell nor TMTG responded to a request for comment at the time of publication. Pieciak’s signature on the letter is notable. Vermont’s Republican Gov. Phil Scott has urged leaders in his state to take a less confrontational posture with the White House. (Notably, Scott rejected two requests this summer to send the Vermont national guard to Washington, D.C., as part of Trump’s federal takeover of the nation’s capital.) In their letter, the officials have asked FTSE Russell to explain TMTG’s inclusion in the Russell 3000. They’ve also asked for an assessment of how the group accounts for the company’s risks and detail on any safeguards in place to ensure that future index picks demonstrate sound market fundamentals. Noting that “two of the last three Trump financial ventures have resulted in significant investor losses,” the letter expresses concerns that people investing in Russell 3000 tracking indexes might not realize they’re buying shares in TMTG. An evolving list The Russell 3000 is an evolving list of companies. On the last Friday of each June, the list is reconstituted to reflect changes in the U.S. equity market. Companies are evaluated to determine where they lie along the investment spectrum from value to growth stocks. FTSE typically looks at the market capitalization of the stock as a bellwether for inclusion. TMTG currently has a market cap of $4.87 billion. That ranks the stock 3099th among publicly traded companies, as of 10 a.m. ET Tuesday. In June of this year, when the list was last reconstituted, shares were about $3.50 higher than they are now, which likely put TMTG within the top 3,000, which could explain its inclusion. In January, on the final day of trading before the presidential inauguration, TMTG boasted a market cap of $8.68 billion as investors flocked to the company before Trump’s second term began.
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E-Commerce
Deloitte Australia will partially refund the 440,000 Australian dollars ($290,000) paid by the Australian government for a report that was littered with apparent AI-generated errors, including a fabricated quote from a federal court judgment and references to nonexistent academic research papers. The financial services firms report to the Department of Employment and Workplace Relations was originally published on the department’s website in July. A revised version was published Friday after Chris Rudge, a Sydney University researcher of health and welfare law, said he alerted the media that the report was full of fabricated references. Deloitte had reviewed the 237-page report and confirmed some footnotes and references were incorrect, the department said in a statement Tuesday. Deloitte had agreed to repay the final instalment under its contract, the department said. The amount will be made public after the refund is reimbursed. Asked to comment on the reports inaccuracies, Deloitte told The Associated Press in a statement the matter has been resolved directly with the client. Deloitte did not respond when asked if the errors were generated by AI. A tendency for generative AI systems to fabricate information is known as hallucination. The report reviewed departmental IT systems use of automated penalties in Australia’s welfare system. The department said the substance of the report had been maintained and there were no changes to its recommendations. The revised version included a disclosure that a generative AI language system, Azure OpenAI, was used in writing the report. Quotes attributed to a federal court judge were removed, as well as references to nonexistent reports attributed to law and software engineering experts. Rudge said he found up to 20 errors in the first version of the report. The first error that jumped out at him wrongly stated that Lisa Burton Crawford, a Sydney University professor of public and constitutional law, had written a nonexistent book with a title suggesting it was outside her field of expertise. I instantaneously knew it was either hallucinated by AI or the worlds best kept secret because Id never heard of the book and it sounded preposterous, Rudge said. Work by his academic colleagues had been used as tokens of legitimacy, cited by the reports authors but not read, Rudge said, adding that he considered misquoting a judge was a more serious error in a report that was effectively an audit of the departments legal compliance. Theyve totally misquoted a court case then made up a quotation from a judge and I thought, well hang on: thats actually a bit bigger than academics egos. Thats about misstating the law to the Australian government in a report that they rely on. So I thought it was important to stand up for diligence, Rudge said. Senator Barbara Pocock, the Australian Greens partys spokesperson on the public sector, said Deloitte should refund the entire AU$440,000 ($290,000). Deloitte misused AI and used it very inappropriately: misquoted a judge, used references that are non-existent,” Pocock told Australian Broadcasting Corp. “I mean, the kinds of things that a first-year university student would be in deep trouble for. Rod McGuirk, Associated Press
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