WJUSTIN METZ CHICKEN, a UK-based visual artist, and Graeme James, our designer, created the cover for The Economist for September 18, they looked back. They were inspired by Sir John Tenniel’s whimsical illustrations for “Alice’s Adventures in Wonderland”, published in 1865. The cover accompanied our leader and a briefing on decentralized finance, which examined the efforts of various organizations to create a digital economy running on blockchains. Understanding this world required immersing yourself in it. We illustrated this by sending Alice down the rabbit hole. Now The Economist go in.
We sell this cover as a “non-fungible token” (TVN), a record on the Ethereum blockchain that represents digital media. The online auction will run on Foundation, a digital art platform, from 5 p.m. BST Monday October 25 until 5 p.m. BST Tuesday October 26. Anyone can bid.
Why are we doing this? First, fundraise for a good cause. The proceeds of the sale, net of auction fees, transaction fees and net of any taxes payable *, will go to The Educational Economist Foundation (TEEF), an independent charity that works with schools and teachers to enable young people to have high-quality discussions on current affairs. TVNs allow issuers to collect royalties on future sales, while retaining a stake in the value of the work. The Economist will retain a 10% royalty interest and will allocate all future proceeds to TEEF. Second, it is an experience. We’ve always written about the potential of technology to change the world, whether it’s self-driving cars or gene therapy. TVNs, and the crypto infrastructure on which they are built, could transform finance. By hitting and selling our own TVN, we experience this firsthand.
Potential bidders will also need to delve into the world of cryptocurrencies and blockchains. As the auction will be denominated in ether (the cryptocurrency associated with the Ethereum blockchain), to bid you will need a wallet containing such tokens. The group of economists MetaMask used. It comes with a browser extension which makes it easily accessible while using other apps on the Ethereum blockchain.
Creating a portfolio is like creating a profile on a website. To finance it, we have to change conventional money into ether. The Economist funds converted using Wyre, which is integrated with the MetaMask browser extension, and performs “know your customer” username checks. This conversion is a transaction that will be verified by the Ethereum blockchain. This comes with a royalty, called “gas,” which is paid to the network of computers that maintain the blockchain. This commission is volatile. It was as low as $ 5-10 and as high as $ 70 per trade while The Economist was testing the process.
Once the wallet is configured and the browser extension installed, a bidder can visit auction page to place their bid, which should prompt a request to âsignâ the transaction through the wallet.
Creation of a TVN requires many steps. Many platforms exist. Some, like OpenSea, are open to everyone; to create a TVN on them is free. Others are more exclusive – they require invitations or access codes – and publication TVNs on them is generally more expensive. This distinction is partly due to the precise token that the platform helps creators to issue. OpenSea helps people create tokens called ERC1155. These are cheaper to create (a gas royalty is shared among many tokens), but it is more difficult to determine where they come from. Foundation, the platform The Economist uses, issues ERC721 tokens. These are considered the “gold standard” for collectibles TVNs: each is created in a single transaction, verified by the Ethereum blockchain. This comes at a price, however: the Foundation will take 15% of the proceeds of the initial sale. It will also retain a 5% royalty interest on any future sale. (Our correspondent has experimented with the creation of tokens on different sites.) **
With an invitation in hand and a wallet set up, The Economist created a profile on the Foundation. Actual typing was as easy as hitting the “Create” button, uploading a high-resolution image of the cover, adding descriptive text, and paying a gas charge of $ 98. To set up the auction, we will make another transaction and pay additional fees.
Once our TVN is sold and the tokens land in The Economistportfolio, the net proceeds will be transferred to the education foundation. Our plan is to convert our ether into conventional currency as quickly as possible, to avoid any slippage in the value of the cryptocurrency, using a broker, like Coinbase or Gemini.
We have also taken other measures. Legal and tax issues have been resolved with our business arm (more details below). The buyer will not purchase the copyright of the cover image from us. a TVN more like a license to use an image in certain limited ways. There are few fiscal guidelines published by governments regarding TVNs, which requires us to assume that we could be liable for potential sales, value added or corporate taxes. The most important of these concerns the risk of the unknown: we are not sure of knowing the identity of the buyer and the source of their funds. Others have raised the moral dilemma about carbon emissions: Should this newspaper, which proclaims the need for action to reduce carbon emissions, use technology that uses so little electricity?
Ultimately, we decided that experimenting with technology would be a useful educational tool. And the goal – to raise money for a good cause – was worth it. Happy bidding.
* The auction platform, Foundation, will retain 15% (including value added taxes) of the total winning auction as a fee for providing the auction service. There is uncertainty regarding the liability for indirect tax on NFT’s sales. The Economist will withhold 16.67% of the winning bid funds in the event that the business has to settle these debts. The result is that we expect 68.33% of the funds to be available to donate to TEEF. However, The Economist reserves the right to withhold additional funds from the proceeds in order to meet its indirect tax obligations in respect of the sale of the NFT, if it is required to pay such taxes by law in any country . The Economist also reserves the right to deduct all transaction costs associated with issuing the NFT from the ultimate funds returned to TEEF.
** To test the process on Foundation, she auctioned a personal NFT of a public domain image, from the front page of The Economist never published. It sold for around $ 3,800. It will also donate the profits to charity.
By buying the NFT, your capital is threatened. NFTs are volatile and may lose some or all of their value. NFT trading is complex. This NFT is not supervised by any regulator.