Since the beginning of 2021, Non-Fungible Tokens (NFT’s for short) has finally made the crossover into the mainstream. Initially seen as the most oddball feature of the crypto space, NFT’s have recently been covered by newspapers and news websites such as CNN and The Guardian. Searches for “NFT” in Google have quadrupled in the last month. It seems that this crypto oddity is now a household name.
On the off chance that you haven’t heard about them yet, NFT’s are essentially the collectible counterpart to cryptocurrencies like Bitcoin (BTC) and Ethereum. Whereas the value of 1 BTC is the same as any other BTC (and are therefore known as fungible), NFT’s are unique digital creations (and therefore, non-fungible), which can be traded on various marketplaces such as the basketball-themed Cryptoslam, which has become almost a virtual version of Christie’s.
In fact, in recent days, even traditional auction house Christie’s has entered the NFT space, selling a work by the digital artist Beeple for an incredible $69.3 million.
And so far, digital art has been the biggest beneficiary of the NFT boom. Jpg format images, video clips, and musical tracks comprise most of the collectibles sold so far. These include a Logan Paul Pokémon card, footage of Le Bron dunking the ball ($208k), and – perhaps most bizarrely – William Shatner trading cards, one of which was an X-ray of the Star Trek actor’s teeth.
All in all, it is estimated that the NFT market was worth a total of $338m last year, although even this is probably an underestimate since it does not include every private deal.
So here we are in March 2021, with NFT’s looking like the breakout technology of the year so far. What other applications could we see Non-fungible Tokens used for? Which other sectors of the economy could exploit the underlying NFT concept for profit? Let’s look at some new potential uses.
Professional sports clubs and players have been dabbling in cryptocurrencies and the blockchain for a few years, but up until recently, this was mostly a token effort (no pun intended). However, the rise of NFT’s has allowed clubs and players to exploit the market more fully, and 2021 has already seen some interesting developments, with French soccer giants Paris St. Germain behind most of them. Not content with having their own fan token (called PSG, naturally enough), the club released a special digital collectible to mark their qualification for the Champions League quarter-finals. This had a knock-on effect for other fan tokens, with Juventus and Barcelona’s tokens shooting up in value. Soccer clubs long had the problem of not being able to let fans invest in their brands and NFT’s look like the most credible way to do so.
Pac-man creator Atari has in recent years leveraged its strong brand to cross into many non-gaming verticals. The latest venture is an online crypto casino, with NFT’s used as a kind of reward system for the most loyal players. Mainstream online casinos such as Irish provider Mr Green have avoided accepting cryptocurrencies until now, put off mainly by the extreme exchange rate volatility. The use of NFT’s as part of a loyalty scheme might however be tempting. This would particularly be the case with casinos that enjoy a strong brand identity.
It’s no secret that digitalization has been financially bad for the music industry. From Napster to Spotify, each new technological iteration has seen artists earn less and less with each record they release. But NFT’s hold the potential for bands and individual artists to fully monetize their often-passionate fan base. We all know the superfan who is desperate to get his or her hands on the first copy of a single by bands like The Who. Could each new future release have an NFT applied to it, so that one day a superfan could be the proud official owner of one of their greatest hits? We believe they will, and while the regular fans could listen to copies on Spotify a dozen times a day, that superfan would be identifiable as the owner of the track itself.
The examples above are from the entertainment world, but NFT’s could well have important uses in people’s day-to-day lives. WiSeKey’s patented technology is already used by millions worldwide to secure their most valuable possessions, from real estate to jewels to fine wine. The company recently added an NFT layer to its security platform, allowing users to confirm ownership and stop unauthorized replication. This clearly also would have uses for luxury brands to put an end to counterfeit goods diluting the brand, especially once NFT’s are integrated with the supply chain and consumer’s mobile devices.
Democratizing Real Estate Investments
One particularly exciting application for NFT’s is in the real estate market. While the property is out of the price range of most (without taking out a mortgage), an NFT could act as a fractional share of a property. This would allow smaller investors to participate in commercial and residential property markets more fully. And unlike the spectacular boom and bust of mortgage-backed securities in the late 2000s, no leverage would be applied to NFT’s, making them safe for smaller investors.
Potential problems which could hinder the growth of NFT’s
But NFT’s might face some headwinds in the coming years. The Ethereum cryptocurrency which NFT’s are built around uses a ‘proof-of-work system which is incredibly energy hungry. With climate change moving further up the in-trays of politicians with each passing year, it is hard to see NFT’s escaping new taxes, as well as attracting negative attention. Will this environmentally unfriendly aspect of Non-fungible tokens be enough to derail their growth in the years to come?
Climate-change issues aside, NFT’s are clearly an exciting and novel use of blockchain technology and appear set to be embraced even further by the mainstream. Which new applications of NFT’s do you see in the rest of 2021?