What do fantasy artists, sports fans, and digital gurus all have in common?
(Besides an obsession for their craft and a need for strong wifi…)
You guessed it. A curiosity for:
The bigger question I’m curious about: Are NFTs a boom or bust market?
Before we answer the question, let’s do a quick deep dive into what exactly a non-fungible token (NFT) is.
What are NFTs?
In simple terms, it’s a digital asset - or token - converted into code that is part of a blockchain (most commonly part of the Ethereum blockchain).
Non-fungible means that the digital asset cannot be traded for something exactly the same, and it also can’t be copied.
For example, if you have a dollar, you can trade it for another dollar: that’s fungible. If you have a non-fungible token, no one can have the exact same asset, so it’s completely unique and cannot be traded for itself.💲
To give a visual representation of what differentiates a digital non-fungible token to a physical fungible token (stay with me), I wanted to share this four block graphic from Cyptohuff that points out the different sides of this topic.
On the bottom right side, you have the physical fungible category which would be things like physical cash or a gold bar.
On the top right side, you have a physical non-fungible asset class like the Mona Lisa artwork.
On the bottom left side, you have a digital fungible category which would be classified as a bitcoin for example.
And lastly on the top left side, you have the digital non-fungible category which has been causing all sorts of excitement lately.
How It Works
One of the most interesting aspects of owning a token is that since it “lives” as code on a blockchain, you have complete control over it. It’s not like having money in an account and having to go through a bank to get to it. Blockchain is completely decentralized and there doesn’t need to be an intermediary to facilitate an exchange. ⚖️
So what is the NFT? What’s the actual asset?
It can be anything: digital art, cartoon drawings, a song, a sports card, an avatar…
Here’s an example of a NFT for sale I came across on twitter:
To buy one, you need to connect your digital wallet and use Ethereum to buy yourself the token. Many people buy for the novelty of collecting, while others are purchasing NFTs as an investment, believing that their value will increase overtime.
You might be wondering, Why bother? How is this different from taking a screenshot of the same image and storing it on my phone?📱
Well… it’s basically the same, just that you don’t own the token. And it gets more complicated: some NFTs have multiple copies, so you might be part of an elite group of 20 or 50 that each owns the same NFT.
People can choose to sell NFTs by “minting” a digital asset that they own and putting it up for sale. If you drew a stickman on a sticky note and then took a picture of it, you could upload that JPEG as an NFT.
And you might even make a buck. NFTs are proving to be extremely lucrative. But the question is, will they continue to be valuable or is this just a fad the internet’s going through? Let’s keep digging. 💸
The most expensive NFT sold to date was a compilation by the American digital artist Beeple called The First 5000 Days. It features a collage of each art piece he created per day since 1981. It sold for almost $70 million USD.
Grimes, the Canadian music artist and girlfriend to Elon Musk, sold digital artwork she made after advertising it on Twitter - and she made almost $6 million in 20 minutes. ⏰
If this doesn’t seem crazy enough, brace yourself: Jack Butcher, who is known for making complex topics into simple visuals on the Twitter account @visualizevalue, listed an NFT for sale.
NFTs Up Close
The NFT is an explanation of what an NFT is (how meta):
It sold for... 74 ETH.
In USD, that’s $176,578.80 for the image above you’re looking at.
So, we've clearly seen there's a market NFTs.
Coindesk calls them “one of the hottest crypto trends of 2021” because the overall sales of NFTs has already increased by 55% compared to last year - an increase of $139 million.
But the bigger question is:
Will the market of NFTs be sustained?
Some believe the NFT world is a space that is going to continue to boom and may become the future of monetization for artists, fans, and sports. Others believe NFTs could be a fad peaking in 2021.
They claim there needs to be more infrastructure around the ownership of NFTs before more of the general public buys in. One last topic to point your attention to is sports.
Yes. NBA-related NFTs have already generated over $250 million.
Consider this Vancouver-based start-up with a celebrity group of investors: Dapper Labs, the partners of NBA Top Shot, is turning the sports merchandising industry on its head after raising $305 million USD. If that’s not a slam dunk, I don’t know what is. 🏀
NBA Top Shot is the virtual asset basketball collectables for fans to purchase. Think digital ownership of trading cards, with packs selling for as little as $9.
What does this indicate about the future of the NBA moments?
Say Michael Jordan creates a virtual Rookie card. Then he sells it as an NFT. Can the owner of the NFT then print it on a t-shirt and sell the shirt?
Boom or Bust?
There’s no doubt this technology could potentially have a huge impact on tangible assets. However, there’s also a lot of questions around the stability of the NFT market. It’s an exciting time to follow this movement but I want to leave you with a question that I’m personally thinking over:
Are NFTs a boom or bust market?
Share your answer below. I’d be curious to hear what side of the conversation you sit on.
P.S. If there are topics you’d like to see me cover in future, please let me know below or join the conversation in the comments. If you liked the article, please invite your startup friends to subscribe.
Until next time!
*Disclaimer: please do not interpret this article as financial advice. The purpose of the article is to educate people on the new trends emerging in tech.