Are Non-Fungible Tokens the Next Big Thing or Just Hype?
What do seven-time Super Bowl champion Tom Brady, digital artist Beeple, and the alt rock band Kings of Leon have in common?
They’ve all recently sold something of value as non-fungible tokens (NFTs). And they’ve made millions doing it.
NFTs have garnered a lot of headlines lately as the next biggest thing in cryptocurrency, yet many are still feeling the sting from a few years ago when many initial coin offerings (ICOs) for crypto-related projects never really panned out.
It’s hard to escape the hype of NFTs, yet they’ve clearly garnered a level of mainstream attention that most crypto projects only dream of. So what’s different here?
What Are NFTs?
Before we can answer the question about what’s different, it’s important to understand what NFTs are. Essentially, NFTs take a digital asset — an image, a video clip, a music file — and tie it to a crypto token on the blockchain. It is unique and can’t be replaced with something else.
Unlike Bitcoin or other cryptocurrencies, a single NFT represents a single, unique digital asset that cannot be divided into smaller pieces. Like virtual versions of art or sports trading cards, the supply of NFTs tied to a single item can be limited by the organization issuing them, increasing their rarity and value. The central benefit is changing a digital good that can be infinitely copied into something singular and one-of-a-kind. This prevents the fraud or counterfeit option of the art or asset, as it is held on the blockchain. Even if items represented by NFTs can be viewed online for free — like a Lebron James dunk — they cannot be replicated. However, they can be owned and sold and possibly even licensed out. And, as many investors hope, they have the potential to grow in value over time.
NFTs in the Mainstream
The concept of NFTs was first introduced in 2013, but it wasn’t until 2017 when the technology hit a critical mass with Dapper Labs’ CryptoKitties, a virtual game where people buy and sell blockchain-based virtual pets. In just its first week after launching, more than 6,000 people bought CryptoKitty pets, valued at $5 million. Over the next four years, CryptoKitties grew significantly, topping $15 million in value and accounting for approximately 25 percent of all Ethereum traffic. What does this mean? Fun bet or purchase online or true need? I think we all have our immediate response.
More recently, Dapper Labs teamed up with the National Basketball Association (NBA) to launch NBA Top Shot, which has topped $500 million in sales since its launch. Seeing numbers like that, it’s probably little surprise that superstar athletes like Tom Brady are trying to get in on the buzz with his own NFT company Autograph, which boasts board members from some of the top sports, music, and media platforms in the world.
Will NFTs Last?
At this point, it’s a little difficult to say what, if any, staying power NFTs will have. That said, given the amount of money and household names involved in various NFT projects, it’s likely that they are more than just a little blip in digital culture.
But it’s not likely mainstream interest alone will sustain them. The technology needs to be easy to use, which so far hasn’t been a problem. Compared with previously established cryptocurrencies, NFT companies build user-friendly platforms to make buying, selling, and trading NFTs a lot easier.
Another aspect of NFTs is their uniqueness, with the potential to allow digital content and art creators to more easily monetize their work. In fact, this is already underway, with the $69 million sale of a JPG file created by Beeple. This is something that previous cryptocurrencies simply can’t offer, and while the Beeple sale is just one example where NFTs are breaking new ground, there are likely to be many more coming. And that means it’s expected that NFTs will outlive the hype phase and eventually become part of the fabric of our digital culture.
— Christina shares candid insights and ideas based on her work, network and passion for payments and financial services. She focuses on the latest innovations from products and growth to people during the day while teaching students and mentoring entrepreneurs at night. Connect with her on LinkedIn or Twitter. All views are my own. —
