The NFT revolution is going mainstream
Updated: Nov 3, 2021
Recently non-fungible tokens (NFTs) have been making headlines everywhere, from crypto forums and news sites to even the most traditional news sites. Its quite extraordinary to witness NFTs having achieved what even Bitcoin has struggled to do in 12 years: they have managed to bridge the world of cryptocurrency and traditional finance.
In recent weeks, we have surprisingly seen the likes of Visa venture into the NFT space and, as their popularity continues to gain momentum and acceptance, could it be possible that NFTs will be the gateway to mainstream adoption of digital assets?
It is somewhat surprising that a relatively new and little known area of the digital asset sector is garnering so much interest with investors that have not delved into the world of cryptocurrencies before. NFTs have been able to bridge this gap by appealing to a wider demographic than any other digital asset so far, with links to the creators, sports, and online gaming industries it is opening up NFTs up to literally millions of new users.
NFTs are effectively meta data stored on a blockchain that certifies a digital asset to be unique and not interchangeable. This allows NFTs to represent unique one-of-a-kind digital items such as digital art, which can include photos and videos, and even tweets. NFTs are also beginning to make some in roads into the world of online and mobile gaming.
The digital gaming revolution
The gaming industry is a prime example of how NFTs have the potential to create new revenue streams for the world of digital assets. Research conducted by Newzoo, shows that the online gaming market is on trakc to surpass $200 billion in revenue by the year 2023, with the market growing to more than 2.6 billion gamers worldwide.
This massive segment of the world’s population and that could very well become brought into the world of digital assets via NFTs, and during the course of 2021 was are starting to see evidence of this happening.
For example, the mobile game Axie Infinity has exploded to become one of the most valuable NFT collection ever, having generated over $2 billion in total sales to date.
Axie Infinity is a Pokémon-style game created by the Vietnamese developer Sky Mavis. It has around 250,000 daily active users from all across the globe. The game centers around cute furry creatures called Axies, which players breed, acquire, train, use to complete challenges, and do battle with online. The object of the game is to obtain small love potions (SLPs), which can be used to breed new Axies that can then be deployed within the game. What makes this game different from others online is that the Axies are in fact NFTs, and gamers earn tokens through gameplay which can be used to breed more monster NFTs. What could be a better incentive for digital asset adoption?
NFTs have a variety of different applications in the gaming world, from in-game customization, such as enhancing a character with so-called “skins”, to allowing gamers to sell or purchase digital property or land in a virtual world, such as part of a virtual landscape.
Bridging the gap
There has also been a growing interest in NFTs from a number of unexpected places. For example, in August, global payments giant Visa announced that it had bought a CryptoPunk — an NFT-based digital avatar — for nearly $150,000 worth of ETH, the Ethereum network’s native token. The company believes that NFTs will play a major role in the future of social media, entertainment, retail and commerce.
Visa is not the only well-known company venturing into the NFT space. On 1st October the established New York auction house Christie’s will holding the sale of Art Blocks’ NFTs, which will be paid for in ETH. Christie’s has already participated in some some successful NFT sales, having previously sold one created by digital artist Beeple for $69 million earlier in the year. It is perhaps no surprise that the auction house is keen to continue to be involved in the evolving and growing world of digital assets.
NFTs also appear to have helped support the price of several digital tokens, including Solana’s native token, SOL, which reached an all time high price in early September. One could speculate that a main driver for this could be Solana’s recently launched NFT marketplace, Solanart, as well as its Degenerate Ape Academy, an NFT project representing a collection of 10,000 unique pictures of cartoon apes. The apes have become extremely popular, with Solana selling one of its apes for $1.1 million on 11th September. Furthermore, solanart.io is aiming to position itself as Solana blockchain alternative to the hugely successful NFT marketplace which operates primarily on the Ethereum network.
NFTs and the role in communities
A variety of business sectors are also starting to see the potential of NFTs. Businesses that have strong brands will need to start thinking about who their audience is and how they will continue to appeal to it. In some respects business is of the speculative nature right now and as such that aspect is being somewhat avoided. But it is becoming evident that businesses will need to understand who their community is, who their audience is and most important of all ensure that they are speaking to it.
Social tokens will play an ever growing role for brands, communities and influencers alike. It will be a way for businesses, internet groups or celebrities to further monetize themselves beyond the typical means. For the communities and fans it will be a means of owning something that will give them a sense of belonging and a closer connection to the individual or brand.
In the creation of these communities, one enticing aspect for the licensing community is the notion that royalties on secondary sales is possible — not just on the original transaction, but also on any subsequent sales that take place in the future, as this will be tracked via the blockchain. But whether those lifetime royalties will with stand legal challenges regarding the rights of Intellectual Property (IP) owners to control the resale of products containing their IP is yet to be seen.
When digital assets travel to other platforms an original royalty will go back to the creator, so for the first time you can capture this royalty forever. And in working across platforms, NFTs could for example be tied into things such as film premieres or sneaker drops.
Therefore, by allowing things to travel across blockchain platforms, the creator can essentially future-proofing their NFTs, because we don’t know how technology or the chain will travel. Plus it is unknown what the winning chain and use case will be. Therefore companies will need to keep openness to make sure the brand and fans can continue to engage with NFTs.
Social tokens will continue to evolve and morph into different forms to suit a variety of use cases. In the case of the Whale token, owners of them get a fractional stake in Whale Shark’s NFT collection. Whale Shark is an influential collector in the NFT space and owns several valuable pieces.
Social tokens might seem like a strange idea, but there’s plenty of value to them. Take Whale, for example. There are currently 10 million of the tokens in circulation with a fully diluted valuation of over $120 million.
Rally is another popular social token. It’s a platform based on Ethereum that allows creators to offer tokens to fans. This allows different social media stars to make use of the platform for interacting with fans at the same time as adding value to their interactions.
Bitclout is different example of a social token platform. It has tokens set aside for the most popular Twitter users, even if those creators have nothing to do with the tokens.
Steem Coins are another social token worth noting. The social tokens are tied to social media platforms run by Steem. Users of these services gain tokens for their contributions. They can also vote on the value of content and how many tokens it should be worth.
Massive growth potential
Although the growth of the NFT market has definitely surprised many in recent months, with the volume of sales reaching $2.5 billion in the first half of the year, the market remains very much in its infancy. Some have predicted that the NFT market will continue to permeate into many areas of business and culture which could see the sector grow 1,000 times larger as a result of disrupting various industries. NFTs could represent an opportunity for those who are looking for “the next big thing” in digital assets, however just like the crypto market in general it is still very speculative. Winners will undoubtedly emerge as the space matures, but at the same time there will be a lot of losers, so it is vitally important to ensure that you undertake your due diligence first.
Perhaps most interesting, though, is the way that NFTs seem to be igniting the mainstream imagination. Unlikely as it is, digital collectibles seem to be bridging the gap between traditional and digital finance and attracting a far wider demographic into the world of digital investing than Bitcoin has been able to achieve to date. As they grow and innovative uses emerge they will become a gateway for more mainstream adoption of cryptocurrencies and in time it will become ever more difficult for the skeptics to dismiss them as just another passing fad.