By Ruchir
2021 was the year of the NFT.
Although NFT’s have been around since as early as 2014, it wasn’t until 2021 that people started to realize the power of this technology.
During the second half of 2021, it was all anyone could talk about, as projects and communities started surfacing and becoming a symbolic way to show off wealth and societal status.
Bored Ape’s started becoming profile pics.
CryptoPunks shot to the moon.
OpenSea saw numbers they’d only dreamed of:
In ALL of 2020, OpenSea did around $21M in trading volume.
In July 2021 alone, they recorded $328M in trading volume.
By August 2021, they hit $3B in trading volume, an increase of over 800%.
We are talking about exponential growth we’ve only seen since people starting adopting the “internet” back in the late 90s.
But why the hype? Is it all just a fad?
I think that there are 2 main reasons why it blew up - 1. Revolutionary Tech 2. Use Cases
Revolutionary Tech
To understand the tech, we have to first understand what an NFT is.
NFT, or a Non-Fungible Token is a digital asset (intangible), that links ownership to unique physical or digital items.
In laymen's terms, it’s a collectible - much like playing cards, or watches, or postage stamps, but just in digital form.
“But they are just JPEGS”.
Yup, you are not wrong. The difference is that NFT’s represent a digital Proof of Ownership that is securely recorded on the blockchain - you can easily prove what you own is yours, is original ,and that it is one of a kind. No duplicate of that asset exists anywhere else on the blockchain.
You couldn’t, for instance, prove if you were seeing an original or fake Mona Lisa if it was put in front of you, without experts examining the painting in excruciating detail to prove its originality. Blockchain and NFT make that verification a simplistic reality.
Now, here’s where things can get a little confusing. The key aspect that makes NFT’s so exciting is the ability to embed “Smart Contracts” in them.
Smart Contract is essentially code that exists on the blockchain that describes the functionality of the NFT. They allow the network to store the information in a transparent (everyone can see and access it) and immutable (can’t change it) manner. Ultimately, these codes are what control NFTs, and what gives them their use cases.
The goal of a smart contract is to simplify the transaction between 2 parties. It scales down formality and costs without compromising on credibility or authenticity.
Using a smart contract, you could, for instance, say that anytime a particular NFT is sold from one person to another, the original creator of the NFT gets a 10% royalty of that sale. That means without doing anything at all, the creator of the NFT can make money based on the actions of the secondary market that they have no control over.
This is just ONE, of the many many use cases of smart contracts. Wild stuff.
Use Cases
The use cases of NFT’s are immense and too many to go through in this blog post, but I’ll zoom in on 2 to show you the power of this asset and what it can mean for the future of any industry you can think of.
Art
Most obvious.
NFT’s have been a game-changer for artists. Prior to this platform, artists would have to create physical pieces, rent out galleries or spots in art auction houses, and hope that their work was recognized and appreciated by a few wealthy folks who thought of $10,000 as pocket change.
That’s a lot of overhead costs. Art supplies. Rent money. Time. All of that in hopes that someone would buy your work.
Now, with the help of a laptop and photoshop artists can create their work and put it on an open marketplace like OpenSea, and advertise their work to the world through social media.
Case Study:
Mike Winkelmann — the digital artist known as Beeple — made digital prints every day without missing a beat. He was creative, and he would post pics of his work on his Twitter and Instagram handles.
Until October of 2020, the most that Beeple had ever sold his work for was $100.
With more people starting to take notice of the NFT world, he started putting out his art as NFTs making between $60k to $70k per piece.
But in March 2021, he decided to take all 5000 art pieces, art that he had created every day for 5000 consecutive days since 2007, combine it into a collage, make it an NFT, and put it up for a Christie’s Auction in February 2021.
His NFT sold for $69.3 million.
He’s the first to ever do it on such a big scale, but he certainly won’t be the last.
NFTs have changed the ways artists look at selling and monetizing their work. They can consistently put out their workto millions of users on open market platforms, without spending excruitating amounts setting up galleries.
They can also use a regenerative algorithm and create 10000, 20000, 30000 pieces of work that all have the same base but with different underlying features (clothes, color, accessories), create a whole PFP (Profile Pic) project, and put them for auction on OpenSea. Of course, they have to be good and resonate with the buyers, but it has opened up the game for up-and-coming artists.
Music
I can see NFT’s having a big impact on the music industry.
Bold Prediction: In 10 years’ time, Record Labels will no longer be a thing.
NFT’s provide so much ownership, that it is now possible for musicians to use NFTs as their “label”.
Picture this:
A musician wants to release an album.
Here’s what they can do.
Turn their Album Cover Art into an NFT. They can make 10,000 variations of their cover art, with different rankings offering holders unique experiences.
Gold NFT - Ultra Rare, offering personalized dinners, studio sessions, etc. + perks of Bronze and Silver NFT.
Sliver NFT - Rare, offering them group Zoom chats or FaceTime sessions + perks of Bronze NFT.
Bronze NFT - Common, offering them early access to albums, sneak peeks into their life.
A week before their album release, they start the minting process. Let’s say they charge them a reasonable price, say 0.1 ETH per NFT (including gas fees). If they sell 10000 NFTs = 1000ETH, in today’s market (Jan 22nd) that’s worth $2.6 million.
It doesn’t just stop there, however. The musician can make their smart contract such that for every sale of their NFT on the secondary market (people selling the NFTs to each other), they could get a 10% royalty of every sale. That means that in their sleep, musicians could make money just based on what their fans are doing by selling the NFTs to one another.
This brings the artist and the fans closer. It creates a community where fans are:
Showing love by “investing” in their favorite artists
The artists are doing their best to make sure that their fans are happy and their “stock price” (NFT value) keeps rising.
Win-Win.
And it’s already begun! Budweiser and Gary Vee teamed up recently to launch musician “rookie cards” - essentially NFT tokens of up-and-coming artists that are slowly making their way into the mainstream. This gives holders a chance to be “early investors” in these musicians and follow their journeys.
The time for the “independent artist” is now.
What’s next?
Obviously, this space is extremely new, and everyone is trying to learn more about NFTs, hell, about web3 in general. It’s easy to get sucked into this space for the hype and the immense amounts of money being made, but that also means that it is extremely volatile.
There are 100s of projects coming out every day, and obviously, not all of them are going to hit it big. In fact, 99% of all NFT projects will end up failing as people start to realize that they are nothing but pictures that offer them no utility in return.
There are also tons of scams going around that are walking away with thousands of dollars, never to be seen again.
Just 2 weeks ago, a project “verified” on SolSea (Solana-based NFT marketplace) scammed their buyers. They claimed that a certain percentage of the sales of the NFT were going to WWF:
But quite literally 2 minutes later, tweeted:
And then swiftly proceeded to get rid of all their social media accounts.
It’s important to stay careful, especially right now when the hype is high and everyone is in it for the cash grab opportunity, which, let’s face it, is too good to pass up on.
That being said, there are a couple of things that you could look at when trying to make informed decisions on which NFT’s are good to buy and what you should be focusing on when trying to enter the ever-so-elusive NFT wonderland.
But more on that in the next blog post 🤩
Cya Nerds :)
https://mashable.com/article/the-future-of-non-fungible-tokens-poised-big-year
https://www.forbes.com/sites/nicolesilver/2021/11/02/the-history-and-future-of-nfts/?sh=4f08ea4f6a16