Back in late August when Tascha Che, who is a crypto and NFT investor, was moving, she was contemplating how hard it was to move her jewelry safely and had the thought that NFT versions of her jewelry would retain their value, as long as those NFTs remained scarce.
She tossed off this tweet:

It engendered a lot of comments, including tweets from people who clearly thought what she'd said was ludicrous:

Still, it inspired her to try this as an experiment. She bought a $5,000 diamond, and destroyed it, and then sold the NFT -- for 4.5 ETH (then $19,000). Immediately after, her buyer had an offer to buy it for 11 ETH. The current price is 42 ETH (~$123,000).
I interviewed Tascha about what her inspired her "performance art," as she called it, why she believes the NFT of her destroyed diamond was worth more than the diamond itself, and why NFTs remind her of YouTube. Here's a lightly edited transcript of our conversation:
Recently you destroyed a diamond and you sold an NFT of that. Give us the backstory into why you did that.
I'm a crypto investor, mostly looking into DeFi, and very recently started getting into the NFT hype. I realized, "Wow, this space is much bigger than I originally thought," because what NFTs are doing is to democratize the creation of assets.
I started thinking of different use cases for NFTs. At the time, I was moving, and I had to move some precious jewelry, and I needed to keep them safe. It was quite a hassle. So I started thinking, 'If these were NFTs, there would be no trouble.' I wouldn't need to protect them physically. I wouldn't need to have a safe to keep them from being stolen.
I posted this tweet saying, If you have a NFT backed by a real diamond and your diamond gets destroyed in a fire, but you still have the asset. And the asset is still in limited supply. So on the asset side, nothing has changed.
For some reason, this tweet went viral and if some people got very angry about it. A bunch of people were saying, 'This is outrageous, this is stupid.' So I thought, I would do this experiment for real. I bought a real diamond for $5,000, and I told people, "Look, this is experiment. I'm going to smash the diamond and I'm going to create a destroyed diamond NFT." And I will try to sell the NFT to see if it retains any value.
So I destroyed the diamond and I put up an NFT on OpenSea last weekend and it sold for 5.5 ETH ($19,000). The funny thing is the person who bought the diamond NFT from me right away got another offer for 11 ETH, but I don't think he's taking that offer.

Tascha's destroyed diamond NFT on OpenSea
What do you feel you learned from doing that experiment?
Originally, many people didn't think it would work. They said, "Okay if I had the deed to a house and the house got burned down, is the deed still worth anything?" The answer is no.
So how is this different? To me, this is very different because a deed is not an asset. It's just a certificate of the asset, which is the house, but NFTs are an asset class in themselves. An NFT has all the properties that's needed for an asset to exist.
It's not that the NFT is not a certificate of the diamond -- the diamond is basically lending a hand for the NFT to acquire some initial value. To put it another way, the NFT can inherit the social agreement that has long existed on the diamond -- that a diamond has value, it has limited supply, and it's something that is treasured by society. In that sense, the house and the deed are not a same relationship as this diamond and the NFT.
My original hypothesis is it should retain the asset function of the diamond. The diamond obviously is a physical object and it serves multiple functions. There is a real world function. You can use it for decoration, for industrial purposes. And then there is a store-of-value function because people realize, "Okay, this is durable, this is a prized object, and if you buy this thing, you can keep the value of your money."When this diamond NFT is created, obviously it cannot fulfill the physical function of the diamond. You cannot wear it on your finger. But it can totally fulfill the asset function of the diamond. It should be able to take on the portion of the diamond price that is about the asset function.
I calculated that that's about 75% of the diamond price. You can figure that out by looking at a price differential between a natural diamond and a lab-grown diamond. Cause the lab-grown diamond is not taken as an asset. It only has physical utility. My assumption was the NFT should be about 75% of the diamond's price, plus some liquidity premium, because NFTs have better features as an asset than physical properties like diamonds or houses. They're more liquid, more transferable, and easier to hold. So there should be a price premium on that. I calculated the floor price was about $4,900 for this NFT. And that was the floor bidding price that I set up.
I think it was $4,300 if I remember correctly.
You have a better memory than me. That was the initial price. Then people were saying, "Well, this doesn't really prove your hypothesis because it sold for almost $20,000. What's that additional value about?" People were saying, "This is because NFTs have so much hype and there's a bubble," and so on and so forth. There is some of that in the sense that we are in an expansionary phase of NFTs as an asset. So the prices are, in general, kind of fluffy. But on the other hand, you can also say, 'Well, this is the first experiment of this kind done to a diamond. And people are drawn to some of the collectible value as a first experiment." And there's actually a lot of thought going into this, in terms of where the value is derived from for the diamond NFT. Part of the price is that collectible value as a first of its kind. So people were saying, "Okay, because this is the first one, if you do this again and again, it will not have the same price." I agree, because this first one has the collectible value. If you replicate the same thing 4,000 times, it will not have the same price.
But I think the first component as a value transfer from the physical diamond still holds. This experiment of the destroyed diamond altogether is basically an extreme way to establish this one-to-one mapping between a physical asset and a digital asset.
Obviously in most cases, you won't do it this way, but I just want to make this point, to help people see those more clearly that once you establish this one-to-one mapping, it doesn't really matter whether the original physical object still exists or not because the asset takes on its own life.
Other people active in NFTs admit that right now there's a bit of a bubble in terms of the prices. And yet they also say they expect that this asset class will only grow bigger. What they meant was there are certain pieces whose individual prices might reflect the bubble, but then overall, the asset class will eventually grow, as you hinted.
The last thing I want to ask you about was -- I loved your phrase in the beginning, where you said that you feel the NFTs will democratize asset creation. Can you talk a little bit about that?
If you think about where assets are traditionally created, they were traditionally created either by government or financial institutions, and there's only one government in each country and it takes a lot to start a financial institution. And even with the fungible digital assets, like Bitcoin and Ethereum, it takes a lot to start if they're in blockchain. Even if you issue a ERC-20 token, it's still quite an undertaking.
But an NFT is something that anybody can issue. An NFT is very low friction. It's like how anybody can go on YouTube and publish a video. Whether your channel will grow or not is a totally different question. Most of the channels die. And same thing with NFTs. It's the same thing as YouTube, when you lower the entry barrier so much with the creation of assets, most of the projects would not survive just like most YouTube channels don't do very well. But in the long term, the space will grow tremendously because you unleash so much creativity and there's very strong incentive. Very smart people will be creating all sorts of use cases for NFTs. Right now we're seeing mostly artwork. The technological infrastructure is allowing new type of assets to be created by anybody with very little transaction cost.That's what I mean when I say NFTs are democratizing the creation of assets.
I agree with you that most of the projects probably won't survive long-term. But the space as a whole -- it's genius. I'm very bullish about the asset class.
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