How to Make Money with NFTs: Demand Licensing Rights
If you’re looking to make money in NFTs, the first step is to not buy NFTs.?
At Bitcoin Market Journal, our investment philosophy is simple: Buy and hold bitcoin, plus a small number of quality crypto assets, for 5+ years.
95% of NFTs on the market will not be worth anything in 5 years.?
Most NFTs are junk. In their current state, NFTs will be like that stack of old baseball cards or Beanie Babies for your relatives to throw out. Do you really think you’ll bequeath your Bored Ape to your heirs? (NFTs do have one advantage: they don’t take up space in your attic.)
Most NFTs are just art factories. In their current state, NFTs are the opposite of a good investment. A creator just needs to come up with an animal theme (cats, dogs, lobsters), add some drugs, make a bunch of Photoshop templates, then churn out slightly different variations.
Most NFTs do not give you any real rights. In their current state, NFTs are a sucker’s game: you are buying a one-time license for … what, exactly? To use it in your Twitter profile? Getting exclusive access to a club full of other suckers? To resell it to other suckers?
Here’s a stock photo of a Cryptopunk that someone probably paid a fortune to own. You’re getting it for free. Think about that.
I feel that NFTs are this bizarro world where suddenly everyone is an art collector. Since when did the crypto community get so interested in fine art? Last I checked, it was a lot of get-rich-quick gamblers. Could it be that NFTs are just a way to turn a quick buck?
NFTs are a bubble. If you need any more proof, you can now short NFTs. That’s right: if I hate NFTs so much, I can actually bet my hard-earned money that the value of that CryptoPunk pictured above will fall. If the price goes down, I make money ... all of which just pumps more money into the bubble.
I’m sorry to burst the bubble, but someone has to say it. WAKE UP!
If you’re “investing” in NFTs thinking you’re going to be an overnight millionaire, get ready for some hard lessons about how markets work. Or you can snap out of this spell right now, sell your NFT collection, and roll the money into better long-term investments … like the ones below.
*SNAP!*?
How to Make Money with NFTs, Option 1: Buy NFT Platform “Stocks”
Don’t buy a collectible. Buy the collectible platform.
Why would you go buy Beanie Babies on eBay, when you could buy eBay?
Here’s the 5-year performance of EBAY stock: the price has nearly tripled in that time. The 20-year performance is even more ridiculous: your investment might have grown 15x.
The current crop of NFT marketplaces are like the new eBays for collectibles. (eBay also supports NFTs, but it's late to the game.)
The strategy is to buy and hold the “stock” (i.e., the token) in these NFT platforms, which fall into three categories:?
1) Open Marketplaces: Anyone can list anything, which means they have an enormous selection, and also a lot of junk (like eBay).
OpenSea is by far the largest open marketplace, but they’re privately held, so you can’t easily buy OpenSea stock. You can buy OpenSea stock through secondary markets like EquityZen, but that’s complicated for most investors. For most of us, we’ll have to wait until they go public.
Rarible has a RARI token, which might be like buying “stock” in the company. One problem: RARI is currently minted at the price of 41,250 new tokens each week, so your share of ownership is constantly being diluted. The tokenomics are not great for long-term investors.?
2) Curated Marketplaces: On this type of NFT marketplace, not just anyone can list an NFT; creators have to go through a screening process. This means fewer listings, but higher quality.
The biggest player here is SuperRare, whose RARE token at least has clear tokenomics. One billion RARE will be minted, with about a quarter of those going to partners and investors. SuperRare is still very new and unproven, so this would be a highly speculative investment.
3) Proprietary Marketplaces: These are marketplaces that sell only their own NFTs. For example:?
NBA Top Shot, where you collect NBA clips from your favorite players. This runs on the Flow blockchain, which has its own FLOW token. As Flow was created by Dapper Labs, who literally invented NFTs, buying and holding FLOW might be a good bet on the future of their NFTs.?
Ethereum runs most all the other proprietary marketplaces, so the strategy is just to buy and hold ETH. Of course, Ethereum has morally reprehensible fees, so you might make small side bets on Solana, Algorand, Cardano, and anywhere else NFTs are emerging.
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Demand Licensing Rights?
NFT holders should rise up and demand that they get licensing rights to the NFTs they have bought with their hard-earned money.?
If you buy a CryptoPunk, you should be able to plaster that mofo on T-shirts, mouse pads, and toaster cozies. You should be able to pitch a new series to Netflix based on your NFT, because you own it. That CryptoPunk should work for you: otherwise, you’re the punk.
If you buy an NBA Top Shot, you should be able to get royalties on that clip every time it is broadcast anywhere in the world, in perpetuity.
Instead, here’s the common licensing terms that most people agree to when buying an NFT:?
“Your purchase of [the NFT] does not give you the right to publicly display, perform, distribute, sell or otherwise reproduce [the NFT] for any commercial purpose.”
How does this make sense??
As a long-term value investor, I am very excited about the possibility of NFTs that would earn revenue over the long term. I would totally buy an NFT of a pop song that would pay me royalties on every stream, or an NFT of a book that pays royalties on every copy sold.
Dapper Labs, the OGs of the NFTs, actually released an NFT License 2.0, which does exactly that: it offers the ability to commercialize your NFTs – to make money with them. With this license...
...you can do with your Kitty art what you could never do with Mickey Mouse: you can take the art and design associated with the NFT, and make a living by using that art in creative ways. Put it on a shirt. Make your own comic book, featuring your Kitty. Buy 52 Kitties, and put the art on a deck of playing cards. The possibilities are endless. (Full blog post here.)
This sounds pretty great: you can make up to $100,000 per year by licensing your NFT, if it’s offered under the NFT License 2.0.
The only problem? NFT License 2.0 was released almost three years ago, and no one’s using it.
That’s because NFT “investors” do not know any better. They think this is as good as it’s going to get. I will always side with the investors, so I am encouraging all you Bored Apes and Stoner Cats and Meth-Huffing Coyotes to demand the NFT License 2.0.?
DEMAND LICENSING AND ROYALTIES ON YOUR NFTs.
How to Make Money with NFTs, Option 2: What NFT Investors Need Most of All
As smart blockchain investors, we need to build a character strength called PERSPECTIVE.
Great art, which is supposedly what you're buying with NFTs, is all about perspective.
Perspective is seeing things from both the small picture (artistic skill, brush technique, originality of the idea), as well as the big picture (the artist's place in history, influence of the work, and its universality).?
As investors, we also need perspective: both on the small picture (is this NFT going to be worth anything in 5 years), as well as the big picture (where is this larger market going, and will I be sorry I didn't buy licensing rights).
If you've been using our Investor Mindset MP3 tools (think of them like guided meditations for investors), you have been building the mindset you need for successful long-term investing.
Perspective is another piece of the puzzle.
If you've been with us on this journey, you'll see that sitting still is a matter of developing perspective: instead of being lost in our thinking all day, we start to develop the capacity to look down on our brain, to see it from above.?
That's perspective. And it translates into every area of our life, from our jobs to our finances to our relationships.
This week's episode will help you build perspective. Paid subscribers can get the entire series here, including our new Episode 6, which helps you build perspective:
Remember: I believe in the long-term potential of NFTs, but not in their current state. I might invest in NFT marketplaces, and I'll definitely invest once they start paying royalties.?
That's my perspective. I'd like to hear yours.
Health, wealth, and happiness,
John Hargrave is the author of Blockchain for Everyone: How I Learned the Secrets of the New Millionaire Class, the bible of blockchain investing.