Can anyone in the arts or business world afford to ignore the rise of NFTs?

No doubt you’ve seen the NFT acronym in the headlines these days, but how many of you are wondering what they are or if you should even care?

NFTs or non-fungible tokens are digital assets that are recorded on blockchains. You have heard of blockchains most likely because of cryptocurrencies like Bitcoin. If you’re new to blockchains, they are simply digital ledgers that are viewable publicly. If you would like more detailed information on blockchains, please take a look at this explanation on Coinbase. 

While NFTs and Bitcoins both exist on blockchains, NFTs are different as they are not interchangeable and each token is one of a kind. Think of it this way if it’s still not completely clear, two Bitcoins are the same in the sense that if you had a $20 bill and your friend had a $20 bill the two of your could swap them and their value to you wouldn't change. But, if you had a dog, and your friend had a dog, it’s unlikely that you would trade dogs and view them as equal.

So what do you own when you buy an NFT you ask? Well, just like those who own Bitcoin, you own a piece of code in a blockchain and the pride of telling everyone that you own that code. Beyond that, it’s not likely you own anything else. Most NFTs don’t provide any actual ownership of assets, copyrights, or trademarks, and in the case of digital assets, there is likely an unlimited number of copies floating around on the Internet so everyone can download their own. 

Many would assume that given that the advantages are so limited with NFTs that no one would pay for this snake oil, but the market for them is on fire and only getting hotter. It might be partially driven by the incredible growth of Bitcoin and its implied acceptance by mainstream investors such as Elon Musk who indicated that Tesla was holding $1.5 billion in Bitcoin in lieu of cash.

Here are some of the big NFT sales that have made recent headlines:

• A digital artist known as Beeple sells an NFT for a digital collage entitled “The First 5,000 Days” for over $69 million (USD).
• Twitter Founder and CEO Jack Dorsey successfully sold an NFT for his first Tweet for $2.9 million (USD).
• EDM musician Steve Aoki recently sold $3.4 million (USD) in NFTs which included music and digital art.

Everyone from Mark Cuban, to Rob Gronkowski, to Lindsay Lohan, has launched their own NFTs to capitalize on the booming demand. While the jury is still out on when and if this bubble will burst, there is no doubt that those with a gambling spirit will be all-in on this bet.

Another NFT phenomenon that will drive growth in the sports collectables market is the success of NBA Top Shot which has generated over $230 million USD in revenue. At its heart, they are NFT versions of the traditional sports card. What you get in this offering is a “Moment” featuring a short video clip of a player from an NBA game. No ownership of the footage or copyright privileges are provided, but they are proving to be very popular. The most expensive Moment sold so far has been a LeBron James dunk for $208,000 USD. 

Every professional sports league on the planet would be foolish to not start planning their own NFT offerings, and it looks like the NHL is looking to be the next league to jump on the NFT bandwagon. 

While the current examples have been focused on digital assets, this opportunity shouldn’t be overlooked by institutions such as museums or galleries that own physical pieces that they aren’t likely to sell. The Louvre in Paris may never want to sell the Mona Lisa, but perhaps they can generate additional revenue by selling a limited number of NFTs for the Mona Lisa. These NFTs don’t provide anyone with ownership or copyrights over the Mona Lisa and the museum would still be able to continue exhibiting it in their permanent collection so there will be no loss of revenue from ticket sales. The Louvre would also benefit from future resales of the NFTs as the NFT can be designed so that the issuer will receive a percentage of all future resales. For example, if that percentage is 10%, the Louvre would receive 10% of the resale price of all future transactions for those NFTs. This could provide institutions with an endless source of future revenue without any additional capital investment, and the buyers would have the bragging rights of owning a rare, valuable, and unique asset.

When one starts applying more creativity to what can be done with NFTs, the number of organizations or people who can unlock value through this new application of blockchain technology suddenly grows exponentially. 

Are you already an investor in NFTs? Do you think they are a fad or do you think NFTs are the future? Do you see uses for NFTs in your job/company/industry? Comment below and tell me your thoughts, or how much you’ve already lost or profited from NFTs!