Hollywood's Next Hit Could Be Based on an NFT -- And You'd Never Know It

Hollywood's Next Hit Could Be Based on an NFT -- And You'd Never Know It

In 1994, True Lies was a massive hit, raking in almost $400 million at the box office. That makes sense: It starred Arnold Schwarzenegger, one of the most bankable stars in Hollywood history, and was helmed by James Cameron, fresh off directing Terminator 2.

But how many people watched La Totale, the French movie it was based on?

That's the question on John Wick creator Derek Kolstad's mind. In between writing Netflix's upcoming Splinter Cell show, Kolstad is penning an eight-episode anime show, based on Forgotten Runes Wizard's Cult.

If you've never heard of Forgotten Runes, that's probably because you don't spend your nights surfing NFT marketplace OpenSea. It's an NFT collection that launched last July and consists of just under 10,000 fantasy characters. The question is simple: Is it possible for a show based on NFTs to cross over to a mainstream audience that may not even know what those three letters stand for?

"There's real life and there's what Web3 is doing, and there's a divide between the two," Kolstad said in a recent Zoom interview. "You [need] to bridge the divide by just making a good thing, a good thing that makes people say, 'What is this? It's based on something? What's that?'"

NFT collections, like the Bored Ape Yacht Club, typically feature thousands of different characters, as well as a loose story that ties them together. But NFTs are polarizing. They've been enthusiastically adopted by some, but are despised by many. Those working in the industry are aware that interest is too limited to market NFT adaptations, like a TV show, based on its crypto credentials alone.

But that doesn't mean NFT characters, stories and franchises can't be fodder for an adaptation that goes mainstream. Forgotten Runes is one of many NFT brands hoping to jump from the blockchain to the big screen.

"The number of [NFT owners] in a single collection is usually around 5,000," said Bryce Anderson, production executive at Clubhouse Pictures, which helped produce I, Tonya and Birds of Prey. "If that's your audience, it's not enough to make a global brand. We talk about our TV shows, and it's 500,000 people per week or you get canceled. That's what you need."

It won't be easy. Much of the hype around NFTs was generated by the speculative bubble that enveloped the crypto market in 2021. The crash of crypto prices in recent months has sedated that speculative mania, dampening enthusiasm for NFTs. Despite the cold winds of "crypto winter," many creators are trying to prove that NFTs are here to stay.

Similar to how some developers and engineers left the Silicon Valley giants to join the crypto industry, renowned creatives are exploring NFTs. Most notable are the celebrities. Seth Green is working on a show that will star his Bored Ape Yacht Club NFT. Reese Witherspoon's production house is working on a film and TV universe for the World of Women NFT collection. Equally important are the artists and scriptwriters, who've come from companies like Pixar and Marvel.

"You never know what something's going to become," said Bearsnake, one of Forgotten Runes' founders. Bearsnake declined to give his real name but verified to CNET that he ran creative at an entertainment startup acquired by Disney. "Hello Kitty started as a vinyl coin purse. Did they know it was going to turn into... one of the biggest media franchises in the world? No, but it found an organic way to where it is now."

28 of the NFTs in Forgotten Runes Wizard's Cult, a collection of 9,995 pixelated NFTs. 

Forgotten Runes/OpenSea

Fund a show, own a character

For some, the goal is for a universe created from an NFT collection to break through the cryptographic ceiling and go mainstream. Others see NFTs more practically: as a way to help fund productions.

"The biggest barrier for any young filmmaker has been finance," said Spike Lee during a talk at the NFT.NYC conference in June. "Where are you gonna get the money?"

Lee says technology has helped decentralize filmmaking, as amateurs can now shoot and edit video on their phones and laptops. Funding, however, continues to bedevil up-and-coming artists. Lee hopes NFTs can change that. He's piloting a program at New York University, where he teaches filmmaking, that will allow his students to fund projects by issuing NFTs.

"Films are still going to be made by the studios, and I think that NFTs will fit in the independent cinema," Lee said.

At the center of the premise is intellectual property. Punters can invest in up-and-coming filmmakers and the characters they create, just like they can invest in startup companies. The more popular those characters become, in theory, the bigger the returns.

IP bleeds into the second proposed benefit of media creation via the blockchain. Buying an NFT often means buying the IP for the depicted character -- and the right to build on top of that IP by creating a backstory. Many hope this can change the way films and TV are written and created.

Take Forgotten Runes. Wizard's Cult is a collection of 9,995, each depicting a different fantasy character: mages, warriors, alchemists, clairvoyants and more. Those who own an NFT get access to the Book of Lore, wherein they can write an official backstory for their character. Once it's written, it can't be changed -- even if the NFT is sold to another person.

It sounds like a recipe for chaos -- the internet is undefeated at loading unsuspecting platforms with offensive content -- but the idea is that self-interest will prevail. Worthwhile characters can be chosen to appear in Forgotten Runes' upcoming anime. If it becomes a hit, the characters within, and their attached NFT, become more valuable.

Writing fan fiction is technically illegal, points out Bearsnake, as it violates copyright law. The proposition, made by many NFT collections, is that franchises can be built quicker by embracing the passion of fans rather than merely tolerating it.

"Some of my favorite pieces of literature of the last 10 years, like actual literature, is stuff people wrote on the internet, and released on the internet, for free," said Clubhouse Picture's Anderson. "That was their creative impulse, and I think [NFTs help find] a way to let that live in a more public way."

Anderson is cocreator of Runner, an upcoming NFT collection. Runner takes place on a planet called Omega and focuses on The Omega Race, a contest that determines who rules the whole planet. It's being penned by Blaise Hemingway who, through the Disney Animation Story Trust, helped write Frozen and Big Hero 6.

Runner is an upcoming NFT collection. It's founded by Bryce Anderson and Bryan Unkeless, both of Clubhouse Pictures. Between them, they've worked on films like The Hunger Games and I, Tonya.

Runner

To Hemingway, the idea of NFT holders being able to create official backstories for their characters reminded him of being a kid and creating storylines for his Star Wars figurines.

"There could be a character that appears on screen for two seconds in a cantina scene, but what's that character's story?" he said. "We're following the story of about 12 central characters, but there's an entire world that has parallel stories going on that intersect with this."

Hemingway and Anderson have plans to adapt Runner to other mediums, though none are concrete yet. A film or TV expression seems inevitable given the team's credentials: Working with Hemingway and Anderson are Bryan Unkeless, producer of the Hunger Games, and Cedric Nicolas-Troyan, director of Snow White and the Huntsman.

NFTs going pop

The business models of NFT collections -- the ones that have business models in the first place -- often rely on the ability to break out into mainstream culture. But breaking out requires quality products, and quality products take a lot of time and effort to make.

Forgotten Runes is among the more ambitious NFT groups. Beyond the anime show, there's a comic book series that had its first issue in June, plans for a tabletop game and, curiously, even a cookbook. A Forgotten Runes massively multiplayer online role-playing game, or MMORPG, is in development and is due for release early next year.

The idea of creating a franchise and expanding it into different mediums is as old as Disney, said Bearsnake. What's new with NFTs is a set of tools that allows fans to play a more crucial role in that process. Those tools, however, create problems as well as solutions. Creators need to make products with mainstream appeal but also placate NFT investors who are mostly speculators, more interested in short-term hype than long-term vision.

"The majority of people in the space are really in it for financial gain, and that's OK," said Bearsnake. "I think there's a lot of unrealistic expectations from a lot of the community to the founders, because not everybody understands what goes into just even making a comic book. Like, that was hard."

It's a difficult time to be branching out. The past few months have been tough on all things crypto. Ether, the currency behind most NFTs, is down over 50% since the year began. That's tanked not only NFT valuations -- Bored Ape Yacht Club NFTs are at about a third of their all-time-high -- but also mainstream interest in the arcane technology.

The circumstances for a blockchain blockbuster aren't the most auspicious, but NFT creators don't need to make the next True Lies. They just need to make the next La Totale.

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NFTs explained: Why people spend millions of dollars on JPEGs

NFTs explained: Why people spend millions of dollars on JPEGs

Take a quick look at the image to the right. What, if anything, could convince you that image is worth $9 million?

Richerd/OpenSea

What you're looking at is an NFT, one of the first ever created. It's part of the CryptoPunks collection, a set of 10,000 NFTs released in 2017, a time when much of the world was still finding out what bitcoin is.

Most likely you've already rolled your eyes, either at the $9 million figure or at the very idea of NFTs themselves. The response to nonfungible tokens hasn't changed much since March when they first started exploding. The public at large has reflexively dismissed them as environmentally harmful scams. The bigger the sale, the more brazen the injustice. 

Which brings us back to the above pixelated chap. Its owner is Richerd, an affable Canadian software developer. He started building cryptocurrency software around 2013, but eventually tired of it. After discovering NFTs earlier this year, Richerd bought CryptoPunk #6046 on March 31 for $86,000 in what he said was the biggest purchase he'd ever made in his life.

Richerd, who has over 80,000 followers on Twitter, last month claimed that his CryptoPunk was priceless to him and wasn't for sale no matter the price. The very next day his determination was tested when an offer came through for 2,500 ether, or $9.5 million. It was made not because Richerd's CryptoPunk is worth that amount -- similar NFTs now go for about $400,000 -- but rather because his bluff was very publicly being called. It was a challenge, but it was still a legitimate offer. If Richerd clicked "accept", 2,500 ether would have flowed into his wallet.

Richerd rejected the offer. 

"Well, obviously, the day before I said 'I'm not selling it for any price,' so if I sell it for that price, I'd be going against my integrity," Richerd told me over a Zoom call. "On top of that, I've used this CryptoPunk as my profile pic, as my brand. Everyone knows that's me."

Not too long ago, Richerd's explanation would have sounded insane to me. How divorced from reality would someone need to be to offer eight figures on a picture that looks like a Fiverr job? How scandalously misguided would a person need to be to rebuff that offer? After I spent a few months researching and following NFTs, however, it doesn't surprise me in the slightest. In fact, it makes a whole lot of sense.

There are 10,000 NFTs in the Bored Ape Yacht Club collection. Here are three examples. The middle one is owned by Jimmy Fallon.

Yuga Labs

Bitcoin millionaires

Here is one quick fact that explains why NFTs are bought for the equivalent of a CEO's salary: Bitcoin is estimated to have made over 100,000 millionaires. It's no surprise that NFTs became a phenomenon in March. That's when bitcoin hit $60,000, up over 500% from just six months prior. 

When you see a headline or a tweet about some preposterous sum being spent on an NFT, it's easy to become bewildered over how absurd that purchase would be for you. What's easy to forget is that very expensive things are almost exclusively bought by very rich people -- and very rich people spend a lot on status symbols. 

Take Bored Ape Yacht Club, for example. It's a collection of 10,000 ape NFTs, all with different traits that make some rarer than others. Rare ones have sold over for over a million bucks, but common variants go for around $200,000. (At the time of launch back in April, BAYC developers sold the NFTs for $190 each.) BAYC, owned by the likes of Steph Curry and Jimmy Fallon, is what you'd call a "profile pic collection." The main purpose of the images is to be used as your display photo on Discord, where most NFT business goes down, or on Twitter, Instagram or wherever else. 

To recap: $200,000 minimum for a profile picture. 

In isolation, that's insane. But place it on a spectrum of how wealthy people spend money, and it becomes less staggering. You can right click and save a JPEG, so why spend money on it? Well, you can buy a nice house in a safe neighborhood almost anywhere in the world for $1 million, yet celebrities regularly snap up $20 million mansions. You can find a fashionable dress for under $500, yet brands like Chanel build their business on selling ones for 20 times that amount.

Up to 100,000 people became millionaires when that green line shot skyward. 

coinmarketcap.com

We accept that rich folks buy extravagant items offline. Is it so inconceivable they would buy extravagant things online, too?

"In the real world, how do people flex their wealth?" said Alex Gedevani, an analyst at cryptocurrency research firm Delphi Digital. "It can be buying cars or watches. How scalable is that versus if I buy a CryptoPunk and use it as my profile picture?"

Obviously, status symbols aren't specific to the rich. All of us indulge in some way or another, be it buying a $20,000 new car when a $7,000 used vehicle will do, or buying a $30 T-shirt when Walmart sells basics for under $5. What most status symbols have in common is that they have a specific audience in mind. The banker sporting his Rolex and the chief executive stepping into her Bentley don't care that I think either of those purchases is excessive. They have a small but powerful group of people they're trying to influence. So, too, with NFTs. 

In the case of Richerd, he runs his own business, Manifold, where he helps show digital artists like Beeple how they can use blockchain technology to make art that could only exist as NFTs. Being a part of the most sought-after NFT collection helps in those circles. And when he says his brand is built on his Punk, he's not exaggerating -- a group of investors even named their organization after him.

"Anybody who owns a CryptoPunk believes certain things," Richerd explained. "Either you've been in the community for a long time so you believe in what these are, or you've paid a lot of money to get in, which shows conviction.

"I want to show my conviction. This is one of those projects that makes you put your money where your mouth is." 

A bit of trouble

NFTs are polarizing. There's a small group of people who believe in the underlying technology (tokens that prove ownership of a digital good), but there are many more who regard it as a hoax. Just as the second group struggles to see any value in NFTs, the first group can sometimes be defensive about the technology's imperfections.

And make no doubt about it, there are a lot of issues with NFTs. 

First is the confounding inaccessibility. There's a reason software developers tend to do well in crypto and NFT trading: Setting up blockchain wallets and other required digital apparatus is difficult. Even just buying and selling can be perilous. Send money to the wrong wallet address by accident, and it's gone forever.

Then there are the fees. Imagine you're interested in dipping your toes into nonfungible waters and you have $1,000 you're willing to lose. If you're minting a new NFT during a public sale you'll usually spend between $120 and $400. Not too bad -- until you factor in the transaction fees. Most NFTs are built on the ethereum blockchain, which is notoriously inefficient. The more people using ethereum, be it through trading altcoins or buying NFTs, the higher the fees. At a good time you'll spend about $100 per transaction, though double or triple that amount is common. Suddenly that $1,000 doesn't go very far. 

This is especially troublesome for NFTs, which are infamous for causing "gas wars." It's possible for 100,000 people to buy shiba inu coins at once, since there are a quadrillion in circulation. But when 10,000 people try to buy an NFT, it results in a massive spike in transaction costs as some users outbid each other to speed up their purchase. It may only last a minute or two, but a lot of damage can be done in that time. People spending over $10,000 on a transaction fee isn't rare. People losing $1,000 on a failed transaction isn't, either.

This is what it looks like when someone spends $4,000 on a failed transaction. It's rare, but not rare enough. 

Etherscan screenshot by Daniel Van Boom

Ethereum's inefficiency also contributes to the other major criticism of NFTs, the massive amount of energy they consume. Note that this is something of a semantic issue: NFTs aren't bad for the environment as much as ethereum is. Other networks, like Solana, use a fraction of the power. Ethereum developers are expected to implement an upgrade next year that will make mining it consume 1% the energy it currently does. At this moment though, while no one can say precisely how much energy ethereum consumes, we know it's a lot. (Bitcoin, despite getting all the headlines, is even less efficient than ethereum, which is why almost nothing is built on its blockchain.)

And finally, there's the fact that most people trading NFTs are doing so to make a profit. Scams are everywhere, and prices are volatile. Most of the people who create, buy and sell NFTs are ignorant or uninterested in the technology. If there is a technological leap taking place, it's likely to be obscured by the dizzying price movements.

"I'd call it a bubble," Gedvani said, "because the amount of speculators that are entering the market is outpacing genuine creators." 

But a bubble can pop and leave something better in its wake. Think of Pets.com. It had a peak valuation of $290 million in February 2000 but by November of that year, as the infamous dot-com bubble began to burst, it had already closed shop. It's used as a cautionary tale for speculative trading in bubbles. But the impulse to invest in Pets.com evidently ended up being justifiable. That particular venture was misguided, but the e-commerce trend it was flicking at was legitimate. Seven-figure pixel art may not be forever, but proof of digital ownership, which is what NFTs are really about, may be. 

A big 2022

Where NFTs will end up is anyone's guess -- and anyone who claims to know is probably trying to sell you something. What we do know is that the amount of people buying NFTs is almost definitely about to grow.

It's estimated that around 250,000 people trade NFTs each month on OpenSea, the biggest NFT marketplace. In the short term, CoinBase will soon open its own NFT marketplace, for which 2 million users are on the waiting list. Robinhood has similar plans.

More importantly, giant companies that already make money outside of the crypto space want in. Niantic, the company behind Pokemon Go, has just announced a game in which players can earn bitcoin. Twitter and the company formerly known as Facebook plan to integrate NFTs into their platforms, and Epic Games says it's open to doing so too. Envision a world where instead of buying skins in Fortnite, you buy an NFT for those skins that you own -- meaning you can trade it for outfits and weapons in other games, or sell it once you're done with it. (Epic said it won't integrate such a mechanic into Fortnite, but that may not stop competitors.) 

Richerd reckons the flood of people soon to enter the NFT marketplace will create a broader diversity of digital products sold for different audiences. Your neighbor might not want to spend $200 -- much less $200,000 -- on a profile picture, but maybe they'll be willing to spend $10 on a one-of-a-kind skin, or on a product in Facebook's Metaverse. But though the space may change, he remains confident that CryptoPunk #6046 is safe for a while yet. 

"Even if every NFT falls," he said, "CryptoPunks will be the last one."

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Crypto Security: Protect Your Coins and NFTs From Being Stolen

Crypto Security: Protect Your Coins and NFTs From Being Stolen

With crypto prices in free fall, crypto firms laying off thousands of workers and coins that are considered "stable" losing all their value, it's more important than ever to secure your remaining portfolio. 

The current crypto crash isn't the only way people are losing their money. There have been an increasing number of scams that give thieves access to your accounts and crypto assets. Just recently in May, Seth Green had several NFTs worth over $300,000 stolen, after the actor connected his crypto wallet to a scam website pretending to be a credible NFT project.

Protecting your crypto means taking some of the same steps you'd use to safeguard your other digital accounts, such as creating and using strong passwords. However, crypto accounts have unique characteristics like seed phrases that require additional security. Also, the crypto industry still lacks the regulatory framework necessary for the retrieval of your crypto assets if they're stolen.

In this story, we'll cover several ways you can protect your cryptocurrency and NFTs from being purloined and explain why it's worth taking the time to properly secure your digital assets from being stolen. For more on crypto, learn five questions every investor should ask about cryptocurrency and the latest details on bitcoin's wild price swings.

Always follow these two basic password security rules

One of the easiest ways to protect your digital assets is with strong passwords. Ideally, you want your passwords to be at least eight characters long and include random capital letters, numbers and other special characters. If you can make your password longer, however, you should, because the longer the password, the harder it is to crack, in theory.

If you're worried about remembering all of your long, complicated and unique passwords, consider using a password manager, which makes it simple and secure to store and use your passwords from one place. We recommended choosing a password manager with encrypted storage and two-factor authentication for extra security.

Also, when creating an account, never repeat your passwords. If one of your accounts is compromised, your others will also be at risk.

A strong password is vital to keeping your digital assets secure.

James Martin/CNET

Use a hardware crypto wallet for your most treasured assets

Your crypto wallet serves as the gateway to your crypto assets. "Hot" wallets such as software or mobile apps operate online, while "cold" wallets are hardware devices that work offline. Crypto wallets don't hold the actual coins or tokens -- they store the private keys that prove you own your crypto assets and let you buy, sell or trade on blockchains.

Anytime you purchase cryptocurrency or NFTs, they must be stored somewhere. Most people keep their assets in a digital wallet or marketplace, such as Coinbase or MetaMask, because they're free and easy to use, but for your most valuable holdings, you may want to consider a physical wallet.

A hardware, or cold, wallet allows you to store cryptocurrency and NFTs on a physical drive, which you can connect to a computer to access. Hardware wallets are generally more difficult to hack into, so they're a preferred option when storing digital assets that are especially high in value.

The Trezor One hardware wallet ($48.49) works with bitcoin, ethereum, litecoin and a variety of other cryptocurrencies.

Trezor

Here's more on the different types of crypto wallets.

Keep the seed phrase for your crypto wallet secure and offline

In addition to a password, most crypto wallets use a seed phrase for additional security. This seed phrase acts like a master password and is created whenever you set up a new wallet. A seed phrase is made up of 12 or 24 words that you can use to sign in to your account on other devices, or recover your account if you forget your password.

While this seed phrase provides additional security, it also comes with risk -- anyone who learns your seed phrase could potentially steal all the crypto assets recorded in your wallet. While you might be tempted to store your seed phrase somewhere online, it's crucial to write it down -- offline -- to prevent anyone from accessing it. 

Once you write down your seed phrase, store it in a safe or lockbox, so that it's not easy for anyone else to access. Specialized seed phrase hardware tools, like Cryptosteel and Crypt Keeper, can securely store your 12 or 24 words in a portable system that's protected from fire and flooding.

If your seed phrase is either lost or stolen, but you still know your password, immediately log in to your wallet and generate a brand new seed phrase.

This is an example of a randomly created 24-word seed phrase.

Nelson Aguilar/CNET

Be wary of frauds in direct messages on Discord

Discord is one of the unofficial homes of crypto and NFT communities. It's where many crypto enthusiasts go to discuss upcoming NFT projects, cryptocurrency prices, real-life events and even personal lives. Fans of NFT projects use Discord to form communities -- but it's also where hackers and thieves go to compromise accounts.

Here's how it works: A hacker may directly message you, pretending to be part of a project that you're following and interested in. The DM looks official and usually claims that you can mint an NFT that's difficult to get, at a relatively cheap price, and includes a link to follow. But when you click the link, connect your wallet and attempt to purchase the NFT, your wallet is drained of all your NFTs and crypto. And there's really no way to get it all back.

The most important research you can do to avoid falling for a fake NFT website is to use verified channels to find the correct website when attempting to mint or purchase a newly created NFT. Even if you receive a link from what seems like a credible source, use multiple online sources like Google, Twitter and Opensea to verify that you have the correct URL for the project.

An even simpler method to avoid falling into a scam is to disable DMs on Discord. On your mobile device, launch the Discord app, tap your profile picture on the bottom right, go into Privacy & Safety, and toggle off Allow Direct Messages From Server Members. You'll no longer receive direct messages on Discord.

Discord is where people go to discuss cryptocurrency and NFTs, as well as prey on potential victims.

Discord

Don't fall for support scams on Twitter

Like Discord, Twitter is a hunting ground for hackers looking to swindle unsuspecting victims into giving away their assets.

On Twitter, anytime someone mentions "stolen account," "lost password" or even "MetaMask," an army of hackers may respond, offering to help recover stolen assets or restore access into accounts. Hackers may then ask for your seed phrase via DM and use it to steal your crypto or NFTs. 

If you need support, go straight to the official customer service site on Twitter. Never give anyone your seed phrase, ever, even if an account is verified -- sometimes hackers have access to verified accounts. And never share your screen.

Not even Elon Musk can stop these Twitter scammers.

James Martin/CNET

For more about cryptocurrency security, learn whether it's possible to insure bitcoin and how the Securities and Exchange Commission is taking on crypto fraud.

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