If it feels like the world is moving exceptionally fast today, you’re not alone in that feeling. NFTs are the start of a major financial revolution. Over this past weekend, NFTs (Non-Fungible-Tokens), accelerated into the mainstream as well over $100m in NFTs changed hands in just a few days. Since NFTs use a public blockchain, all of the transactions, history, volume and number of participants are fully transparent. To help explain how this all works and why it’s important, we’ve tokenized this very article as an NFT so that it can now live permanently on the blockchain and function as a store of value.
Last week, NBA Top Shot sold a Zion Williamson “moment” for $100k. The buyer expects that 1st edition moment to be worth $1m someday, and he may be right. A collection of Beeple’s digital art sold for $3.5m in December and another one of his collections is going on auction at Christie’s from Feb 25 – March 11. You can track the Christie’s Beeple auction here. Nike holds a patent to start selling CryptoKicks which will be some sort of NFT Nike digital shoe. Mathematical music called Euler Beats with unique royalty properties are selling for north of $20,000. Most of these transactions are completed via Etherium.
NFTs and cryptocurrencies were linked at the beginning of 2012, almost by accident, with the issuance of Colored Coins. Nobody made any money but many iterations later CryptoKitties appeared in 2017 and suddenly, somehow, a lot of money was changing hands.
What do you get with NFT art or other collectibles? You’re buying a feeling.
Marc Andreessen said recently, “A lot of people are cynical about this kind of thing…But people don’t buy things like sneakers, art or baseball cards for the value of their materials… They buy them for their aesthetics and design…A $200 pair of sneakers is, like, $5 in plastic. You’re buying a feeling.”
Stores of Value
Art has long been considered a useful store of value for ultra-wealthy families. That may or may not be accurate. The costs of those art transactions can be huge, with fees as high as 40%. A lot of art collecting is about a feeling or a sense of pride. Many pieces never materially appreciate in value and can be destroyed by heat, humidity or sunlight. Some great historical works have scarcity and importance that contribute to their increase in value over time, but risk management is a challenging endeavor with art investing.
Many futurists consider Bitcoin, crypto, and now NFTs to be the new stores of value precisely because they have inherent scarcity built-in. Wealthy investors may use hard assets like land and art to store value, especially through inflationary periods. Given the large dollars flowing into NFTs, it’s possible that wealthy forward-thinking investors like Mark Cuban, Chamath Palihapitiya or Peter Thiel are intending to use NFTs as their own personal long-term stores of value. At the very least, they own a piece of an emergent trend.
Buy this article
We’ve turned this article into an NFT. There is only one original copy available and it exists on the Etherium blockchain. It was purchased yesterday by a friend for .1 Etherium, apx $150. The proceeds of that sale went to Rosie’s Place to help homeless women in Boston. If someone wanted to buy it today, they could make an offer, transfer ownership and the sale would be publicly recorded. Perhaps someday it will be worth more than the original $150 purchase price.
A creative and passionate community
NFTs and crypto may seem like nonsense at surface level, but this is just the beginning of the blockchain revolution. Since the blockchain is mostly software, it can iterate incredibly fast. Passionate software developers who want to play a role in designing the future of our financial system can spin up new tools and applications in a matter of weeks. Due to the complete transparency of the blockchain, there are many amazing tools available to track the activity in each NFT market.
With the rapid innovation in the cryptocurrency space, it’s a matter of time before the blockchain replaces or inspires the replacement of our current financial systems. Blockchain advocates value transparency, fairness, creativity, proof ownership and efficiency. Many of our current financial systems lack many of those attributes, especially transparency, fairness and efficiency.
What do we do now?
Buying NFT art or experimenting with this new technology is best for those who want to be on the leading edge. Unless you are particularly inspired by NFTs or curious about the technology, the risk of losing 100% of your invested NFT capital is high. No one really knows where this is all going or what it will look like in a few years. However, with over $100m flowing into NFTs over the past week with full transparency, it’s worth watching the NFT market closely to see how it evolves. Future opportunities may include the ability to trade music royalties, movie rights, IP rights, royalty streams, branding rights etc. Trading shares of companies through digital means is not all that different than trading NFTs. Either way, large groups of technology focused entrepreneurs seem to really want decentralized and democratized financial systems. It’s still early days, the next few years, and probably even months, will be exciting to watch as the NFT world evolves and emerges.
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