Are NFTs a Passing Fad or a Nascent Market With Long-Term Potential?

Are NFTs a Passing Fad or a Nascent Market With Long-Term Potential? thumbnail

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NFTs, or non-fungible tokens, have become ubiquitous in recent years — a phenomenon that’s undoubtedly symptomatic of our new, post-pandemic, hyper-digitalized lives.

A non-fungible token (NFT) is any digitally represented asset that is able to be bought or sold. It is unique identifying information and stored on the blockchain, which tracks crypto transactions via peer to peer networks. The token cannot be duplicated. Likewise, it is non-fungible, meaning it cannot be interchanged, unlike a cryptocurrency like Bitcoin, where one coin equals another coin. These blockchain-based digital tokens have revolutionized many industries since their inception eight years ago. These industries aren’t just about art and collectibles. Gaming, music, and virtual reality (orVR) will also be able to reach new heights thanks to NFTs. But beyond the hype, does NFTs have any real future? The answer is a clear “yes” “

Where do we see NFTs?

All NFTs have smart contract and can be exchanged for cryptocurrency. NFT data is typically stored in files like audio, video, and image. NFTs are so closely linked to the world of art because of this. NFTs have revolutionized creativity. The way art is sold and bought has changed from brick and mortar galleries. Artists can now monetize their work online through an innovative form of self-publication. Websites like OpenSea or Rarible function as online auction houses. The most expensive NFT ever to be sold was The Merge by Pak, raking in an eye-watering $91.8 million USD. Although it is a high price, it is the price that consumers will pay for something rare and exclusive — an example of the principles behind market demand.

While these extravagant displays of wealth give NFTs an uneasy sheen, it’s worth noting how this monetization can impact the wider art community. The opportunity for artists to “tokenize” their work is truly game-changing. They are not only paid for their labor but also have intellectual property rights and a portion of the proceeds if NFTs are resold. NFTs also open up the market to everyday consumers, so more people might be able to buy the art they love.

Related: NFTs Will Soon Be Unavoidable. This is a good thing.

Further examples of NFTs

NFTs have a life beyond the art world. Music has been a fungible asset for decades. It is widely recorded and distributed in the form CDs, records, and online streaming services. However, these transactions only allow musicians to receive a small portion of the total money raised. Yet, with NFTs, musicians are now able to cash in millions within a matter of hours. Raking in practically 100% of the earnings, there’s no wonder it’s becoming an increasingly attractive method of sharing work.

NFTs have even been introduced in political races. Blake Masters, a senatorial candidate from Arizona, recently issued NFTs to support his campaign. Masters, a crypto evangelist and protege of legendary technology investor, Peter Thiel, created an NFT of the best-seller book, Zero to One, that he co-wrote with Thiel. He made 99 copies as a reward for top donors to his campaign.

Play-to-earn

In addition to music, another industry that has jumped onto the NFT bandwagon is gaming. NFTs are now available for in-game content such as avatars, skins, and other add-ons. Although downloadable content (DLC), can be sold to millions of players worldwide, there can only be one copy of an NFT.

Play-to-earn is one of the most exciting spaces within the NFT world. This niche model allows gamers to play games on blockchain and earn in-game rewards. These winnings tend to be NFTs and can be used in both the virtual — and real — worlds.

Platforms like MetaPlay, a blockchain incubator for DeFi and GameFi, offer simple games that help users get started with crypto and introduce them to NFTs and pay-to-earn models. This platform is cutting-edge and enables amateur players to compete in esports tournaments like professionals. Impressively, in just a few months, the platform has managed to cash in about $13,000,000 from over 16000 investors.

With the launch of the metaverse comes a promising future for NFTs. Virtual marketplaces are becoming an exciting prospect, with companies creating their own virtual spaces (e.g. NikeLand). Metaverses are also being used by museums such as the San Francisco Museum of Modern Art. Potential buyers can now view artwork in their own home without the need to visit a gallery.

Although the idea of NFTs collaborating with the metaverse is new, it is still a compelling one. And this can also be said about the future of NFTs. The metaverse opens up a whole new world (no pun intended) of possibilities. We would be foolish to ignore NFTs’ potential long-term benefits.

Related: Here’s What to Keep in Mind When Creating and Selling an NFT

Real-world assets

However, it’s not just digital assets that can be sold as NFTs. NFTs are becoming a more attractive option for investors, even though they are still in their infancy. For items that need their value to be preserved — such as a rare Greubel Forsey tourbillion watch or a priceless book like The Codex of Leicester — eliminating the physical transfer of the object and instead having it stored in a safe place reduces the risk of damage and fraud.

An effective method of prohibiting the transfer of counterfeits, NFTs have become a popular means of trading collectible items. You can trade virtually baseball cards and other sports collectibles, for prices up to a million dollars. This allows an item to be traced back to its original seller, proving authenticity, establishing provenance, and avoiding fraudulent reproduction.

Related: Collectibles, NFTs, and Why You Should Care About Both

Why NFTs are here for the long run

There’s no wonder people label NFTs a fad. They are a distraction because of the hype surrounding them. They aren’t going anywhere, but that doesn’t mean they won’t be around. It’s important to note that as with all ground-breaking technology, there comes a “plateau of productivity” — a phenomenon outlined in Gartner’s hype cycle, which indicates a period of lesser interest following a period of considerable hype. Amazon was one of the first to experience this plateau.

While these headline-grabbing, seven-figure NFT purchase may seem fickle at first, it’s not impossible to see NFTs’ long-term potential. NFTs are non-transferable, which is a major advantage over other digital assets that are connected to cryptocurrencies. All NFT transactions are recorded within the blockchain and powered through smart contracts. Their technology allows for the storage of an exact history of ownership transfers. This concrete documentation of ownership could be a game changer for certain markets, especially property. Only a third of the world’s population has legal rights to their land or properties. This makes it difficult for those who don’t have these rights to invest in their homes or get financial support.

When it comes to a decentralized economy, we have only started to move the proverbial needle. NFTs’ full potential and extent are still unknown. This space is transformative in creating new markets, augmenting existing ones, and raising standards for market integrity and authenticity.

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