I would liken the precedent rise of NFTs to that of the 1849 gold rush that awakened an unprecedented consciousness for gold in people. Between 2021 and date, Billions of dollars have exchanged hands with folks rushing for ownership of the blooming digital collectible as utility and playability assets for the Metaverse and web3 technologies amongst others.
Non-Fungible Tokens (NFTs)
NFTs are uniquely identifiable assets, they differ from cryptocurrencies, which are fungible.
A non-fungible token (NFT) is financial security consisting of digital data stored in a blockchain, a form of a distributed ledger. The ownership of an NFT is recorded in the blockchain and can be transferred by the owner, allowing NFTs to be sold and traded. NFTs can be created by anybody, and require few or no coding skills to create. NFTs typically contain references to digital files such as photos, videos, and audio.
The core of the NFT is in its digital asset protection and ownership through smart contracts, which are considered digital certificates of authenticity. The blockchain is their key differentiator, enabling these contracts to connect those objects to an immutable ledger.
Digital Smart Contracts And Royalties
A digital smart contract is a computer program or a transaction protocol which can stipulate when artwork or a piece of collectible changes hands beyond the primary sale in which the creator gets some percentage of the transaction. The smart contract as a contractual obligation is made transparent on the blockchain. It gives uncountable proof of ownership at every single stage, giving creators the ability to protect their intellectual property (IP) and validate whether they were paid properly for subsequent transactions.
NFTs can be said to have attained prominence in February 2021 when LeBron James’s dunk sold for $387,600 on the NBA Top Shot NFT marketplace. Ever since we have witnessed over $40 billion change hands in 2021. Just late May of 2022 over $37 billion in 2022 has been recorded. In 2021, the OpenSea NFT marketplace the largest NFT market—saw over $13 billion in transactions. A great leap for a company that only recorded $21.7M in revenue in 2020.
The NFT Market Fears
Let’s not be deceived to think that NFTs are indeed gold mines without their pitfalls. People who dive into NFTs thinking it was a digital gold mine has seen the unplanned. Remember when iOS and Android apps were first introduced. A fart app made $1 million in just a week. Suddenly, everyone had an app idea and dived into it, the rest is history. NFTs are towing the same line.
Yes, it is a new way to monetize your IP which can be just anything with digital representations. The market however is getting more saturated and porous by the day, which poses a threat to its profitability.
The Future Of NFTs?
The Web3 and Metaverse most especially have provided enabling environments for NFTs to thrive. Brands are making efforts to navigate the NFT space in relation to the Metaverse.
The future is gradually unfolding and how these digital products will grow over time will be duly decided. Let’s take into consideration the Nike sneaker. There are 10 or fewer of them available as NFTs, which you can show off your pair in Roblox, Fortnight, Decentraland or endless other virtual or augmented experiences. NFTs can also be used as passes to get exclusive content from your favourite musicians, Watch Never-before-seen footage of your favourite movie and more are samples of the possibilities Metaverse powered by blockchain and NFTs.