Given the deteriorating conditions over the last year, one would be safe to assume that many NFT holders would be eager to offload their assets and cut their losses. This would have been especially true for holders of generative artist Dmitri Cherniak's The Wrapture NFT project, a collection of 50 algorithmic art pieces made available to holders of his Eternal Pump collection that launched in December 2021.
Part social experiment, part community building exercise, holders of the project were given a set of rules that would ultimately determine their NFT's rarity and long-term value: If no one moved, listed or sold their asset for a year, the project would be capped at 50 editions and they would be free to move their art without consequence. But if one collector were to "break the rules," the remainder of the 666 editions would be released to the public for minting.
"Scarcity typically adds value to art," prominent collector Vincent Van Dough, who owns eight Wrapture NFTs, told me.
"I was hoping they would [wait]," Cherniak said. "I always rooted for it to hold." The artist also stored one of The Wrapture NFTs in his vault, meaning that he could have technically broken the rules at any point, leaving other collectors to face the repercussions.
Others were motivated to hold onto their NFTs as an unspoken commitment to the community of holders that emerged from the project. "The social experiment aspect of the project is something that I think really resonated and was an important statement for the space," said Pete Molick, who owns The Wrapture #37.
"The Wrapture/Eternal Pump Holder group has become very close over the course of the last year," said Matt Miller, owner of The Wrapture #24. "It would not only would it be unfair to my fellow collectors participating in this experiment, but it would also be a poor financial decision to flood the collection supply with 616 more outputs."
"There was a faction of people from the outside clamoring for a knight in shining armor to break the Wrapture and allow more people to collect, but ultimately it was never even a question to hold on," he added.
In early 2021, Cherniak was riding a high after the release of two successful NFT projects on the generative art platform Art Blocks – Ringers, a 1,000-edition, algorithmically generated project based on strings and pegs, and Eternal Pump, a 50-edition hand-coded animated project that nods to the culture of "pumping" up the price of an NFT project. Cherniak's work, along with the work of other artists like Art Blocks founder and Squiggles artist Erick "Snowfro" Calderon, Fidenza artist Tyler Hobbs and more, helped to revive the art style known as generative art.
"When Ringers was released in January, it helped kicked off a new wave of appreciation for generative art," Cherniak told me. "And because of that, it also became highly valued and sought after." He added that the soon-after-released Eternal Pump added to "the mania and insanity around a drop and the intense botting" that resulted in automated systems buying and selling artwork for massive profits.
By the summer and fall of 2021, the Canadian-born, New York-based artist said that generative art had "reached a new level of attention, partially due to the dollars being thrown at it." His third Art Blocks release, The Wrapture, was meant to be a "conclusion to a trilogy of projects."
"It was originally supposed to be an exploration and combination of the visual forms from my first two drops, but became more of a conceptual project and my response to my experience in the previous year," he explained.
Anyone that held an Eternal Pump NFT was invited to mint a Wrapture NFT, resulting in a tight-knit community of 37 NFT owners that held the project's future in their hands.
"In many ways, the Wrapture became a mirror to the NFT ecosystem," he said, "And it was my attempt to make a point that art, and crypto art, does not need to be flipped or sold for short-term capital gains."
The 37 holders had to abide by one simple rule to increase the scarcity (and, presumably, value) of their NFTs: Hold on for dear life, often colloquially abbreviated to HODL.
"It was a unique opportunity to be a part of the art, so to speak," said Ayybee.
This may have been an easy task in 2021 when the crypto market was booming and NFTs often yielded great returns. But the mood of 2022 gradually became less optimistic – high-profile rug pull scams tainted the NFT space, wash trading obscured trading data and the collapse of crypto ecosystem Terra, crypto lender Celsius and most recently Sam Bankman-Fried’s FTX resulted in volatility that rippled throughout the crypto space. Spooked traders left in droves.
In particular, the liquidation of Singapore-based crypto hedge fund Three Arrows Capital almost derailed The Wrapture's plan entirely. The fund had suffered major losses from deteriorating crypto conditions and was ordered to liquidate its assets in June and filed for bankruptcy in July. Three Arrows Capital had purchased dozens of high-value collectibles – including four Wrapture NFTs – through its Starry Night Capital fund, and it was unclear what would happen to those assets as the company caved in.
"There was definitely a sense of collectively holding our breath not knowing exactly how that liquidation would be handled," said Molick.
In October, liquidators began moving Starry Night Capital's multi-million dollar NFT collection into a Gnosis Safe, which requires multiple signatures to approve a transaction. Hundreds of NFTs were transferred in the process – except for the four Wraptures, which remained untouched until the project's lock period ended earlier this month.
"We were all amazed that every NFT they owned was transferred to the liquidators with the exception of the Wraptures," said Miller.
"Liquidators opted not to move the Wraptures until it was over, which means not only were they aware of the rules of the game, they decided to actively engage in the game," added Cherniak.
Over 365 days, none of the 37 Wrapture holders listed, moved or sold their NFTs. The experiment ended on December 17, capping the collection at 50 pieces and leaving holders with a sense of camaraderie and accomplishment.
Wrapture #7 was auctioned off by Cherniak on December 21, with 100% of proceeds to fund gastroesophageal cancer research at Princess Margaret Hospital in Toronto. The winning bid of 169 ETH (about $203,000) was made by crypto art fund Curated.
Several Wrapture NFTs have been transferred between wallets over the last week, though none have sold yet. At the time of writing, only one Wrapture was up for sale at 175 ETH (about $209,530), making the floor price of the project 175 ETH. The highest bid for a Wrapture NFT so far is 20 wrapped ether (wETH).
So what to make of this yearlong social experiment? Holders shared their thoughts.
"Can’t say I’m too surprised by the outcome," said Vincent Van Dough. "Art Blocks and especially Eternal Pump went on a huge run last year before The Wrapture mint, so by that point, the only people left holding were long-term collectors who didn’t seem to have a need to take profits."
Others were moved by a sense of unity and market optimism.
"I think it shows that there is a true community of passionate collectors that are unwavering despite market conditions," said Miller.
"Undoubtedly it says that generative art is here to stay and that there is continuous growth that isn't necessarily tied to what's happening in the markets," added Ayybee.
For Cherniak, the experience was a testament to the creative use cases for blockchain technology.
"Ultimately, blockchains are social coordination technologies," he said. "I think if anything, they just highlighted that NFTs and crypto don’t always need to be about the money.
