Non-fungible tokens – a rather complex name with a technical explanation. For those who simply buy Bitcoin to stack satoshis, the concept of NFTs seems rather intriguing, as more money flows into the space. With Cryptopunks and Beeples selling for millions of dollars, one might wonder where all this is going.
This is exactly why we at Paybis wrote this article. Over the next few chapters, we analyse the NFT trend, how it applies to the future, and the companies that choose to innovate by being the first movers. Let’s get started!
What are NFTs?
NFT stands for Non-Fungible Tokens, a term which here translates into a proof of uniqueness authenticity on the web. In short, a digital image, video, object or experience is attached to a unique blockchain wallet, which belongs to its rightful owner.
Still confused? Imagine NFTs as movie tickets. A ticket cannot be used at any time for any movie. It only represents your eligibility to access a specific movie at a specific time. NFTs are pretty much the same – Your blockchain wallet is the ticket and the movie is the digital information you choose to buy.
The growth of the NFT ecosystem
Do you remember Cryptokitties? For many, the concept of digital cats on the Ethereum blockchain was their first introduction to NFTs. That was a little more than 4 years ago. Ever since then, the NFT markets have continued to grow in the shadows and only recently we saw an explosion of interest, focused on one particular niche – digital art.
By many accounts, digital art was the first concept that found a great product-market fit in the ecosystem, incentivizing artist and buyers to participate. The sudden spike of interest was partially caused when Anthony Pompliano dedicated one of his newsletters to the concept of digital art on the blockchain.
But things didn’t stop there. Soon thereafter, we saw many projects riding the wave of NFTs across different niches, selling things like virtual real estate, digital fashion, tweets of celebrities, and other types of blockchain collectibles. While the first half of 2020 was rather quiet in the space, the second half saw a growth of epic proportions.
Of course, we are now four months later, and the growth still continues. On a year-to-date scale, the market has now grown by an impressive 1,785%.
So where is all this going? Many claim that we are currently on the brink of entering a new era, which will consist mainly of digital realities where we can buy items, work our jobs, and build our lives.
Enter the Metaverse
The Metaverse is nothing new. We have been talking for ages about the future of our world, with an added layers of digital reality. We are already creating massive virtual communities and personas on games like Fortnite. We can get a pretty good idea of the concept by watching movies like “Ready Player One”.
With the introduction of decentralized protocols and unique digital value, the Metaverse seems to approach faster than we thought. To get a better idea how cryptocurrencies and virtual realities can co-exist and develop upon one another, we suggest reading Piers Kicks’ excellent essay on the Metaverse.
Of course, with brand new worlds come exciting new opportunities. For companies, the concept of NFTs and virtual realities opens the doors to brand new audiences and even markets. For the sake of capitalization and continuous technological progress, these first movers jump on the bandwagon, hoping to benefit from the surge of NFT markets.
Which companies already use NFTs?
Large companies use NFTs across different niches that are still in the “wild wild West”. Among them, the concept that looks most promising for retail buyers is that of high-end luxury fashion. Many high-priced brands have yet to delve into the market, but have been making their way into virtual spaces for several years already, releasing digital products for games such as The Sims and Fortnite.
There are currently several companies that sell digital clothing, accessories, and even furnitures for your future digital home. One example is THE DEMATERIALIZED, a piece of clothing that can only be worn digitally.
The piece of clothing can be bought, sold, or traded on the blockchain with hopes of giving your “virtual self” a fresh look.
Another example is that of Andrés Reisinger, an Argentinian designer that designed and sold virtual furniture which can be placed in your digital home in the Metaverse. The 10 unique pieces sold for a total of $450.000.
When it comes to companies in the sports industry, we are seeing lots of action. NBA Topshots, which are NFT-wrapped highlight videos, currently go for hundreds of thousands of dollars, and other industries, like the UFC, are taking notice.
Mark Cuban’s Dallas Mavericks are also in the same boat. After opening up to cryptocurrency payments for its tickets, the organization is now working on its own NFT line, which is expected to go public later this year.
Slowly and then suddenly, most companies will realize the benefits of NFTs when it comes to distribution efficiency, product authentication, and the general direction of the world.
As the size of the crypto markets and the price of Ethereum continue their upward trajectory, the NFT markets will continue to get attention from mainstream media, who still have a very basic understanding of the concept.
What may now seem like a ridiculous investment for some has proven to be a goldmine for others, and we are still in the very early stages of the bull market.
When we eventually get a better idea of the Metaverse and the benefits it offers in terms of entertainment, work, and education, we can expect to see a “hockey stick” type of growth, similar to the one we’ve observed multiple times prior with Bitcoin. Until then, and like we mentioned, the first companies (and individuals) who choose to take the risk and establish a presence in this exciting new world will most likely benefit from the highest rewards.