It first started with CryptoKitties in 2017. Then we had CryptoPunks and NBA Top Shot. Most recently, this March, Beeple’s digital art piece “Everydays: The First 5000 Days” sold at Christie’s auction for US$69 million. All of these are NFTs. Essentially, NFTs are a way to transform a digital good, that can be endlessly copied, into something one of a kind. NFTs are digital collectible items (GIFs, images, memes, games, code, videos, artwork, music, games, even text) that people can buy, sell and trade. Almost any piece of digital content can be turned into an NFT, with the records of ownership and authenticity, maintained on a blockchain. Once its uploaded on a blockchain in the form of NFT, it will become a unique piece of digital content, as it will always be possible to determine the original file even if its copies are shared indefinitely on the web. Just like other cryptocurrencies, NFTs exist on a blockchain. But they are also different. Bitcoin and other crypto’s are fungible, meaning that one bitcoin is always worth the same as any other bitcoin. On the other hand, NFTs have unique valuations set by the highest bidder, just like a Rembrandt or a Picasso and cannot be directly exchanged with one another. Non-fungible tokens have been the talk of the town this year, especially since the sale of Beeple’s artwork at Christie’s. Are NFTs going to be an agent of change that disrupts the collectible world, with ramifications in other industries, or is it just a fad?
Ilias Louis Hatzis is the founder and CEO at Kryptonio wallet.
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The NFT market grew nearly ten-fold between 2018 and 2020. In 2020 the NFT art market took off, growing by 2,800%. According to data published by Statista, the total NFT market was roughly $55.3 million in size during 2020 with art, gaming, sports and other collectibles representing just over 70% of the market. In 2020, NFTs sold as artworks generated roughly 12.9 million U.S. dollars. Beeple’s First 5000 Days digital artwork was by far the most expensive non-fungible token (NFT) sold in 2021. With the activity we’ve seen so far in 2021, I think we can expect the NFT market to be substantially larger compared to last year.
NFTs attracted a lot of attention as part of the CrypoKitties craze in 2017, which allowed buyers to buy and trade digital versions of kittens. The market for the digital kittens rose steeply for certain rare items and then quickly fizzled.
But NFTs hold the promise to give people ways to make their work more valuable by creating scarcity.
NFTs are not just changing the art world. Other industries, from the NBA to sneaker makers, have also joined. Mark Cuban, for example, reportedly told USA Today recently that NFTs “could turn into a significant revenue source for the NBA over the next 10 years.” Mark Cuban is already building a new online gallery to display NFTs in any form. The new project dubbed Lazy.com, is effectively an online gallery for artworks.
In February 2021, Grimes sold about $6 million worth of tokens representing digital art on Nifty Gateway. The highest-selling piece was a one-of-a-kind video called “Death of the Old” that involves flying cherubs, a cross, a sword, and glowing light that’s set to an original song by Grimes. The winning bidder took it for nearly $389,000.
Memorabilia and other collectables is another genre of NTF that’s started to thrive.Dapper Labs has collaborated with the National Basketball Association to create NBA Top Shot, a marketplace for digital highlight clips that are the tech equivalent of baseball cards. In February, according to crypto tracker CryptoSlam, Top Shot reported $187.3 million in sales, an extraordinary rise of 1,197% compared to the prior 30-day stretch.
Taco Bell is an example of another big brand NFT play. It celebrated the return of potatoes to its menu with taco NFTs that sold out in minutes. The ‘NFTacobells’, five versions of digital art, selling 5 copies of each (25 pieces of digital art in total), are now being resold for 1,000s of dollars.
Recently, auction house Sotheby’s announced an NFT collaboration with digital artist Pak as part of its first sale to be held in April. AT&T’s DC Comics has put a proverbial stake in the ground, but the addition of companies with branded content such as Hasbro, Mattel and Disney would go a long way to legitimizing NFTs. In many respects there are few companies as adept as monetizing their IP as Disney, and given its character library that spans not only Disney characters but also those from Pixar, Marvel, and Lucasfilm, it could reap a huge windfall.
Gucci also joined the party by releasing digital sneakers in collaboration with Belarusian design studio Wanna. The designs can cost between $9 and $13 and, although they are not technically NFTs, buyers can “wear” them through augmented reality technology or game avatars like in Roblox, for example. But the luxury label already reportedly has plans to launch limited-edition virtual designs, which could then enter the NFT realm.
Jack Dorsey sold his first-ever published tweet as an NFT for $2.9 million. Kevin Roose sold a crypto token of a newspaper column for more than half a million dollars.
Lindsay Lohan and YouTuber Logan Paul both created some sort of digital collectibles based on NFTs. Post Malone teamed up with a startup called Fyooz to launch a celebrity beer pong league using NFTs.
The rock band Kings of Leon was the first group to release an album as a series of digital tokens. The album, “When You See Yourself,” became available last Friday in three NFT formats, each with extra enhancements, from $50.
NFTs could enable a new distributed model of media ownership, making it possible for content creators to directly profit from their digital assets without intermediaries.
So far the internet has not really fulfilled the promise of enabling the masses to make a good living from what they create. With sites like YouTube and TikTok, anyone now has the power to make music, entertainment or another creative work. Right now, most digital content is being monetized by ad-supported platforms, like Facebook, or subscription-based ones, like Netflix or OnlyFans. These platforms act as middlemen between content creators and consumers, and make a cut for distributing the content. While content creators still own the copyright to their work, they relinquish part of their ownership and control to the platform.
Marc Andreessen is fond of telling a story of the Internet’s “original sin”. When he was running Netscape in the 1990s, he approached a variety vendors to integrate payments into the browser. No one, not Visa, MasterCard or any bank, was interested in working with him. There were sites like Amazon where you could make a transaction, but that happened in a secure place on their website. You could not, and still cannot, simply click to buy something you see online with browser-enabled functionality. That meant the Internet developed around advertising rather than direct commerce.
NFTs can eliminate the original sin.
The use of NFT technology is at an early adoption stage right now, but it is building momentum fast. NFTs essentially open up a new space to play and trade in while reinforcing the value of digital assets in a different way. They have the potential to invert the ownership model, create alternative monetization, drive engagement and get on the radar of new audiences.
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