Are NFTs the next big thing for the virtual economy?
While cryptocurrencies are hitting new highs every day, NFTs are slowly hitting the mainstream. Non-fungible tokens (NFTs), called crypto-collectibles, or ‘nifty’, are digital assets managed by blockchain technology. Each NFT contains identifying information which makes each NFT different.
Unlike regular cryptocurrencies, NFTs cannot be directly exchanged with one another. This is because no two NFTs are identical. Not even those that exist on the same platform, game or in the same collection. This makes the creation and circulation of counterfeit collectibles pointless. Each item can be traced back to the original owner. This is valuable, because it means online assets can be verified as rare. The rarer something is, the more valuable it likely is.
The NFT sector is set to become a leading type of asset, and a major driver of the virtual economy. The potential of NFTs to prove digital ownership of both real and digital assets (like collectible sports cards, virtual real-estate and even digital sneakers) is an important progression for an increasingly digital world.
The NFT market saw astonishing growth in 2020. Transactions tripled – reaching more than $250 million in total, and plenty of traders made six-digit profits. Traditional brands like Nike, Louis Vuitton and Formula 1 are leading the first generation of commercial uses of NFTs. This is because they open opportunities for a new type of consumer interaction. It encourages more mainstream attention, allowing companies to engage virtually and profitably with their customers.
Cryptokitties and Crptopunks pioneered the NFT collectibles back in 2017. They introduced projects that used creative expressions and technology to test out possibilities of rare art in the digital world. These companies continue to lead the space today. One NFT on their website sells for an average of $34,000 and some going upwards of $1,00,000.
The NFT market boom led to the emergence of many new NFT projects and platforms. It is reported that virtual art and sports collectibles are the strongest performing assets and show the most potential in this space. This is in line with the latest trend and industry surge. Collecting and flipping physical trading cards, due to a large part of people staying home and finding new ways to spend their time. Recently, collectors and influencers have been splashing seven figures and breaking all-time records for rare trading cards. A Pokémon first edition booster box which originally sold for $80 dollars in 1999 recently sold at auction for more than $1 million dollars. And, a 1952 Mickey Mantle baseball card went for a world record price of $5.2 million.
NFTs are primed for explosive growth in 2021. If companies, which produce more mainstream traditional collectibles (like Pokemon, the NFL and the NBA), branch out to NFT collectibles. Trading card enthusiasts’ shift to NFTs could be a gateway to bring millions of new users to the world of crypto and blockchain technology. Imagine an official reboot of the Pokemon Trading card game. In this instance, though, prices have skyrocketed in the past year by nearly 500%, but as NFTs on the ethereum blockchain! It is a billion-dollar opportunity brewing with zero marginal cost.
With galleries and exhibitions shut down, crypto communities have rallied around NFTs and digital art in an unprecedented way. Artists are empowered to sell digital artworks as unique objects. NFTs provide a platform for artists to sell their art to those that collect their work, while still remaining accessible to everyone else on the internet. This has provided new revenue streams and career opportunities for less established artists in the art market.
The NFT industry may be young. But, for some, it is full of potential and opportunities. Its application is not limited to artwork and collectibles, but much broader in the fast-growing virtual economy. The internet is dynamic, and NFTs are too – therefore, there is really no limit to what can be done.
It’s an exciting time to push the envelope and invent new possibilities. Especially with the increasing relevance and credibility of blockchain technology. Blockchain’s promise of trustless security can be applied to the ownership or exchange of almost any asset. This includes copyright and intellectual property rights. Blockchain technology offers opportunities for protection, registration, and as evidence that can be easily traceable. One day, our digital wallets could contain a proof of every certificate, license, and asset we own using NFTs.
People are seizing the opportunity to capitalize on a broader shift to virtual finance. This is already evident in the rise of cryptocurrencies and decentralized finance. Notable investors like Mark Cuban and Chamath Palihapitiya are optimistic about their growth.
The NFT market is growing at a tremendous rate, but it is still immature. We need a market where NFTs are traded on different platforms easily, rather than being bought and held on to. NFTs must undergo multiple volatile moments and improvements in infrastructure and user interface in order to better penetrate mainstream markets. I believe that the digital art collectibles market will soon be oversaturated, and leaders will be dominating it.
The excitement over NFTs is currently concentrated in niche markets. But, with growing education on blockchain and cryptocurrencies, new projects are continuously emerging. Slowly but surely, they are expanding NFTs to other aspects of our physical lives. Most indicators point towards an industry that will thrive in the future. I truly believe we are just getting started.