Hi! I’m Dan. I write about NFTs, specifically the endless utility possibilities. I also like to share news from within the NFT world. Thanks for subscribing! If you like a particular topic, or would like me to write about something else, DM me anytime.
So you’ve heard of these ape pictures selling for crazy amounts of money right? Well, these are one type of digital asset know as NFTs. A NFT or Non-Fungible Token is a form of digital asset that is made up of data stored on a blockchain. This means that obtaining ownership rights are straightforward, and proving authenticity of an asset is even easier.
2021 saw a massive boom for NFTs, with many art based projects skyrocketing in value. This includes but is most certainly not limited to, CryptoPunks and Bored Ape Yacht Club. There was even a sale of $69m for a Beeple NFT. The value of these NFTs, like any tradable asset, is determined by the market. These NFTs quickly became the PFPs (profile pictures) of celebrities, athletes and crypto community heavyweights alike. Suddenly, everyone wanted a PFP of an ape or punk. This lead to the creation of hundreds if not thousands of new NFT projects. Many people were already priced out of owning a punk or ape, and therefore were quick to jump onboard new projects that showed promise. This included, Lazy Lions, CyberKongz, Doodles, Invisible Friends and many many more. The cost of these NFTs then also jumped quickly into the thousands of dollars. The massive (and often overnight) rise in value of these NFTs, lead to many speculators joining the NFT market in the hope of making a quick buck and many investors became overnight millionaires. This hype eventually found its way to the mainstream media and brought a significant amount of attention to the NFT community.
Okay, but why are people paying hundreds of thousands, if not millions of dollars for a JPEG?
Much of the hype was certainly related to individuals hoping to profit off the NFT boom. However, owning a NFT has many benefits outside of speculators trying to make a profit. Below we will go through the most popular benefits:
Community
This one might seem a little silly when you consider the price some people pay for NFTs, but it is definitely a major reason why prices are so high. Think of owning a NFT like membership to a club. For example, owning a Bored Ape could be seen as having a membership to the Soho house in London. Access to the Soho house is reserved only for those with a membership. These memberships are not cheap as they provide many benefits that people are willing to pay for. Some examples of these benefits include access to a community of very wealthy and influential people. Simply being in the Soho house at the right time could result in a conversation with someone who could change your life. Owning a Bored Ape is no different as you get access to a community of highly successful people, ranging from pro athletes, celebrities and early crypto adopters. The owners of the Bored Ape collection, Yuga Labs, have rumoured that a Soho house equivalent venue will be established, possibly in Miami. This venue will only be accessible for holders of a Bored Ape. In the meantime, there have been events around the globe that were only accessible for BAYC holders.
The benefits of community are not limited to the access a NFT could provide. The crypto community in general is still very nascent. Many current NFT community members are meeting like minded individuals for the first time. Online chat communities through Discord and Telegram are creating many new friendships everyday. Access to these online communities is usually subject to an individual owning a specific NFT.
The benefit of community towards a NFT project is commonly dismissed by the mainstream media and those who haven’t experienced it for themselves. If you think that community has no impact on price, I highly suggest you join a discord community for a project you find interesting and see what the hype is about!
Utility
The next cause for hype is around the numerous types of utility a NFT provides. Many NFTs provide utility benefits to the owner. This utility could be similar to the above mentioned access to social clubs and events. There are many NFTs that are used as tickets to events either IRL (in real life) or in the metaverse. NFTs used for ticketing resolves many issues surrounding counterfeit tickets and I will go in-depth on this topic in a future newsletter.
Other forms of utility include access to pre-sale lists for future NFT drops. These lists, often referred to as ‘white-lists’, can be very difficult to gain access to. People will ‘grind’ endlessly to get their wallet added to a whitelist as this allows the user to ‘mint’ a NFT at the lowest possible price and gain ownership before the public sale. BAYC minted for 0.08 ETH and now sells for well over 100 ETH. Collectors that were able to get on the whitelist managed to obtain a Bored Ape for the lowest possible price.
It must be noted here that gaining access to a whitelist does not guarantee success. Many NFT projects sell on the secondary market for below mint prices. Gaining access to a whitelist however can be very profitable if the project is successful.
Another common feature of a NFT is the accrual of coins/tokens native to the specific NFT project ecosystem. Many NFTs are useable in some form of metaverse or online game. Collectors/gamers can earn tokens that are redeemable for in game assets. Think along the lines of upgrading a sword or getting a new outfit for a character. The online gaming sector is incredibly popular and many gamers acquire multiple NFTs that provide in-game benefits.
Similarly to the above, it is becoming more common for holders of specific NFTs to receive ‘airdrops’. Airdrops are where an individual receives an asset for free, by meeting some requirements. These requirements could be simply interacting with a program, such as using an exchange, or could be more complex like completing a certain amount of levels in a game. NFT specific airdrops are usually not complex and are simply sent to holders of the NFT. Recently, BAYC holders were airdropped APE coins. Many BAYC holders received over a hundred thousand dollars worth of APE coin for free.
There are endless utility possibilities for NFTs. I will go through many more examples in future newsletter, however I want to end on NFT leasing. This is something that is relatively new, but will certainly add another reason to own certain NFTs. Currently, Sandbox is preparing for land owners to start leasing land. Sandbox land is a type of NFT with endless possibilities. Leasing will allow owners that do not want to develop their own land, to lease their land to a third party, that does want to develop the land. Currently, the cheapest land is selling for 1.7 ETH. This might be too expensive for a game developer to purchase outright. This game developer doesn’t have to worry though, as they will soon be able to lease land from an existing land owner and develop their game. Other NFT leasing products include leasing in-game NFTs. Gamers are able to lease in-game assets to help them achieve certain outcomes. NFT leasing definitely doesn’t stop here. The possibilities are endless and are only just getting started.
Art collection
The final contributor to the NFT hype I want to go through is genuine art collection. Everything these days is going digital, and art is no different. Sure physical painting are great, but today some of the most prominent artists are only doing digital work. Further to this, there is great innovation happening in ways in which to display digital art. Hanging a large frame, capable of displaying digital art, will be completely normal in the not too distant future. Many famous art collectors have already amassed large collections of digital art and the worlds largest auctions houses, such as Sotheby’s and Christie’s, are selling digital art too. Art like anything else is very subjective. The price of an artwork is subject to many factors. The more attention and fame that digital artists gain, the more value these digital artworks will attain. It is really just a matter of time.
Everything you have said is great, but what stops me from taking a screenshot of someones NFT?
This is a very common detraction by people that don’t really understand NFTs. I always like to provide the following example. Say you go to the Louvre Museum in Paris to see the Mona Lisa. On your way out, you decide to browse the gift shop. In the gift shop they have hundreds of different sized prints of the Mona Lisa. You decide to buy an A4 sized print of the Mona Lisa. Do you own the Mona Lisa now? No, you don’t. You own a piece of paper that has the Mona Lisa printed on it. You can even hang it in your house, but you don’t own the original. The Mona Lisa is still owned by the French Republic. The same is true for NFTs. You can screenshot a BAYC if you like, make it you PFP, no one is stopping you. But you don’t own it simply by screenshotting it. The owner of an NFT has verifiable ownership through the blockchain. As mentioned earlier, all NFTs are created and stored on the blockchain. This means that when you purchase (or mint) an NFT, the NFT is stored in your blockchain wallet. You own the code that generates the NFT. It is incredibly easy to verify ownership of an NFT. NFT art therefore has a major advantage over traditional, physical art. Proving the authenticity of a NFT art work is very straightforward, the entire history of the artwork can be seen from creation through to history of ownership. The same can not be said for physical art. For argument sake, let’s go back to the Mona Lisa. No one can with 100% certainty guarantee that the painting hanging in the Louvre Museum is the original Mona Lisa. It could have been swapped for a fake at any time in the past, as what happened with many other famous art works. The real Mona Lisa could be in a private collection somewhere that no one knows of. Im not saying the Mona Lisa in the Louvre Museum is fake, but what I am saying is that no one can prove that it is the original. This is not the case for NFTs as the entire history of a NFT is viewable on the blockchain and it can quickly be studied to verify authenticity.
No one truely knows what the future has in store for NFTs. Many if not most of the current art based projects will not retain this value in the long run. This being said, I believe that NFTs have endless utility possibilities outside of art!
If you’ve made it this far, thank you for reading! I hope you’ve enjoyed this article where I try to explain the hype around NFTs. In future articles, I will start going through various forms of NFT utility that already exist and what is possible in the future!
Cheers
Dan