At our last GIC in September, we asked you some live questions about NFTs (non-fungible tokens). Well, the polls are in and the results are interesting; 90% said NFTs were so much more than collectibles. 95% said that they were an investable asset class. But 66% said that they were not investors in NFTs. This makes sense when we consider that 50% of you said you didn’t know what NFTs were 9 months ago. We can surmise that despite us all recognizing the promise of NFTs, we’re still very much in learning and discovery stage – after all, this is a completely novel asset class. So, we thought we’d take some time to get to grips with some of the noise.
2021 saw NFTs explode onto the cultural scene delivering eye-popping headlines, setting records on everything from art to the price of a digital home. The sheer volumes poured through these markets to buy unique digital tokens with ownership verifiable via the blockchain have been unprecedented (even for the cryptocurrency market). The market has pulled in $2.5 billion in the first half of this year alone.
It’s clear that there’s an enormous NFT journey ahead. The space hasn’t got its head around it yet, everyone’s busy buying collectibles, which seems to be the first use case, but NFTs could be anything; it could be an insurance contract, intellectual property rights, it could be music. What else? And what is driving the value of an asset that’s really just a digital token people can pass around? Before we can really appreciate NFTs, let’s think through what they actually are.
NFTs are recorded ownership of digital assets. Markets can’t operate without clear property rights – when a transaction occurs, there needs to be proof of transfer of ownership – and NFTs give parties something they can agree represents ownership. This mean we can now build markets around new sorts of transactions and new sorts of products. As ‘non-fungible’ implies, each NFT is a unique digital item. They are stored on blockchains – so we can trace the history of ownership and who owns what, when.
At the moment, there’s so many things to get our head around and everything is happening at such a fast pace. But the reality is that this is very meaningful technology that allows you to operate within a digital world; own things and transfer things. Today, it is art, but tomorrow it could be IP or tokenized real estate. Even digital identities are going onto NFTs (NB we will be talking to self-sovereign identity expert Dele Atanda at our Dec 7th GIC on such matters), and now we’re seeing brands take a slice of the pie – even McDonalds issued an NFT. The point is NFTs have captured our attention and are rapidly going mainstream. We need to understand how big this revolution is, we need to analyze not only what they are now, but also, what they will mean for us in the future because NFTs have the potential to disrupt global trade completely.
To find out more register for our Dec 7th free, virtual GIC where will be looking into the business economics underpinning NFTs and how they could unlock our collective futures.