ON THE UP: NFTs
Since the start of the new year, we’ve seen exciting shake-ups in the investment and trading world. First meme stocks, (GameStop anyone?) then the rise of SPACs.
Now NFTs (Non Fungible Tokens) are seeing a surge in momentum as crypto currency becomes more widely accepted and NFTs become easier to ‘mint’, buy and trade.
Pro-tip: Non Fungible Tokens (i.e. not interchangeable, one-of-a-kind) are a digital asset that can be purchased with a cryptocurrency which allows people and brands to create, buy and trade digital works no one can steal or counterfeit. As Mark Cuban says, “you can sell anything digital using NFT… anything our imagination can come up with.
Why are NFTs taking off right now? Most of the current buzz is around how NFTs are used to buy and sell digital art. They are setting a precedent for digital artists to get paid.
Thought leaders, money moguls and notable art houses like Christie’s are giving NFTs their stamp of approval, driving the momentum to surge. So too is the need to protect and monetize digital art and other virtual assets (much like how the music industry sought to prevent people from downloading songs for free in the first decade of the digital revolution… remember Napster?).
A few additional key factors fueling NFTs’ explosion across the cultural zeitgeist:
- When someone “mints” an NFT, the digital asset becomes one of one… it cannot be copy & pasted, edited, deleted or otherwise manipulated. The “one of one” nature is creating FOMO & demand
- Investment sharks and marketing prophets like Mark Cuban, Elon Musk and Gary Vaynerchuck see NFTs as the future
- Art collectors and famed auction house like Christie’s are giving NFTs their stamp of approval as they start to invest and auction off the digital art world
- Notable brands & people from the NBA’s TopShot, Nike’s CryptoKicks, and Microsoft to Warner Music, Shawn Mendesand Post Malone are getting in on the NFT action, creating mass awareness
- The tech behind NFTs is polarizing, creating discussion & debate because of its high carbon footprint
Momentum for NFTs will continue to rise as additional industries beyond digital art experiment with NFTs. They can be tokens for any virtual content: images, GIFs, music, even baseball or Pokémon trading cards.
The benefit of NFTs? They provide an exciting opportunity for brands to experiment in the digital world with one-of-a-kind experiences / digital products while staying authentic to their core values and brand.
It’s only a matter of time until industries like beauty, fashion, fitness, food / beverage, and travel / hospitality start leveraging NFTs. Imagine purchasing an NFT digital master class with a world famous makeup artist or chef and knowing it’s a one-of-a-kind that only you own.
Still wondering WTF is an NFT?
By contrast to other cryptocurrencies like bitcoins which are fungible (you can trade one for another and it would be exactly the same — apples to apples), NFTs are one-of-one.
NFTs are the digital equivalent of getting a certificate of authenticity when you buy a piece of physical art — except there’s no chance you might be sold a fake Banksy.
For those of you still craving more… a deeper dive into how NFTs are hitting on all 5 drivers of momentum and gaining cultural relevance.
DISRUPTION: NFTs are a game changer for commodifying digital art.
They have recently seen an explosion of support beyond the niche digital art landscape as they disrupt the digital art industry. They aren’t just an investment opportunity or a way to flip a piece of art, they are enabling a new kind of art to be commodified and rarified.
“It’s not just the traditional art collector or the tech-savvy art collector. Now anyone can be a collector, and on top of that, people are able to collect monuments and moments of digital culture. People are able to value things in a different way.”
Christie’s recently partnered with digital artist Beeple, who has been creating and posting one piece of digital art to his Instagram every single day since May 1st of 2007. This marks Christie’s first ever “purely digital artwork” with Beeple’s “First 5000 Days.” While the auction doesn’t close until March 11th,bidding has already gotten up to $3.5M.
Major investors like Mark Cuban aren’t just dabbling in NFTs, they see this as the future.
“This is like the early internet days all over again. I think [NFTs and blockchain tech is] going to be huge.”
INNOVATION: Thought leaders touting NFTs’ “one-of-a-kind” nature inherently drives FOMO among the masses.
NFTs have been around since 2015 but have only become popular recently for a few key reasons:
- Normalization of cryptocurrency: Bitcoin is now worth $50k. 6 years ago it was worth $400. And Coinbase is IPOing.
- An evolved understanding of how “ownership” works on the internet: People are moving away from the traditional thinking that if it’s available on the internet, anyone can access it.
- Sense of consumer FOMO after the WallStreetBets/Gamestop episode.
Buying digital art via NFTs lets you financially support artists you like, and just like buying traditional original works of art, it also gets you some basic usage & bragging rights when you show it off (e.g. by posting the image online in virtual galleriesor hanging it in your home via digital frames).
POLARIZATION: Crypto & blockchain’s big energy footprint has environmentalists concerned, fueling heated discussion & debate.
Those concerned with NFTs believe they will become more detrimental as they become more mainstream & popular. They have a much higher transaction rate than an average cryptocurrency. One NFT transaction is equivalent to an EU resident’s electric power consumption for 4 days. A single NFT can involve dozens of transactions, including minting, bidding, cancelling, sales and transfer of ownership. The average NFT on the site SuperRare.Co has an average carbon footprint of 340 kWh and 211 KgCO2 º — equivalent to an EU resident’s total electricity consumption for more than a month.
The counter argument is that the criticism shouldn’t be on the digital artists selling via NFT — they deserve to have a home for their art and earn a living making work that they love. They are setting a new precedent for compensating digital artists.
STICKINESS: Brands we know & love are bringing NFTs into the mainstream
NFT press erupted as famous digital artist Beeple (aka Mike Winklemann) sold digital items for record breaking amounts. Just a few weeks ago, Beeple set a new record for the most valuable artwork auctioned off on Nifty Gateway, an NFT marketplace. He sold 20 artworks for over $3.5 million. He quickly beat that record just a few days ago when a 10-second clip interpreting the aftermath of the 2020 US Presidential election sold for $6.6 million on the secondary market.
Now, major brands and influencers are getting involved:
- In July 2019 the NBA teamed up with blockchain company Dapper Labs to launch TopShot, a site that allows people to collect digital basketball highlights from in-game moments.They’ve so far done over $230M in sales and most recently sold a LeBron James highlight on the resale market for $200,000. Soon, Dappy Labs and the NBA will release a mobile game that enables collectors to play using the NFT highlights they’ve collected. That mobile game, slated to roll out this year, will allow consumers to build NBA-like rosters by acquiring NFT moments, then compete in online tournaments — and possibly win more scarce NFTs that can increase in value.
- Nike has been working on their own NFT offshoot. In December of 2019 they issued a patent for blockchain-compatible sneakers called “CryptoKicks”, which use blockchain technology to track ownership and verify authenticity of sneakers.
- Most recently, Shawn Mendes became the biggest musician to launch his own line of digital goods. Now his manager, Andrew Gertler, is partnering with Tyler Henry, founder of creative & design firm STURDY.CO (who has previously worked with Drake and Travis Scott) on the launch of their own NFT marketplace STURDY.exchange.
- Rapper Post Malone is adding a signature twist to NFTs by offering fans who make a purchase the opportunity to play beer pong against him.
- NFTs are also emerging as a way to grant access to exclusive experiences. In February, Microsoft launched a game that celebrates women in science and rewards players with NFTs that unlock secret games inside Minecraft.
SOCIAL IMPACT: Artists have had their work stolen for years — it’s time to put that to an end.
NFTs create a new model of digital creators to get paid. Now artists have an opportunity to still make money from their work in the resell market. NFTs have a feature that you can enable that will pay you a percentage every time the item is sold or changes hands, making sure that if your work gets super popular and balloons in value, you’ll see some of that benefit.
“It feels like this is the start of digital art being respected as an art form. I look at Banksy with graffiti or KAWS with vinyl collectibles — we take for granted the fact that they sell for $10M or $15M. 20 years ago that was not the case. Graffiti? That’s vandalism. Vinyl collectibles? Oh, those are just toys. It wasn’t looked at as a real art form. This could really be the start of people starting to respect digital art as a ‘real’ art form.” — Beeple
ON THE DOWN: CryptoKitties
Back in December 2017, CryptoKitties (a craze for virtual kittens that lets players buy and breed “crypto-pets” on Ethereum’s underlying blockchain network) was the first example of crypto-trading. It proved the crypto collectable model could work, but it was not scalable because the infrastructure was not able to withstand the demand.
Since then, the technology has advanced to enable NFT trading to scale. In 2019, Warner Music’s blockchain team partnered with Dapper Labs to create digital assets using a new public blockchain called Flow, which is capable of handling high transaction volumes for NBA’s TopShot, among others.