What are NFTs – 101?
NFT stands for ‘Non-fungible tokens’ – an emerging class of assets powered by the crypto revolution. Their non-fungibility means they are unique digital assets, which makes them rare and which drives their value. To explain this more – consider dollars that are fungible i.e. a $10 bill is the same as any other $10 bill and can be exchanged for like to like or two $5 bills can be exchanged for the $10 bill. On the other hand, consider a painting that is a unique asset and one painting is different from another – thus paintings are non-fungible.
Is this Big?
This has literally blown up since late 2020! From $40m 3 years ago, the NFT space has crossed $400m. The crypto-art space, a NFT use-case, has been rapidly growing.
Checkout: https://cryptoart.io/data for more stats. The big bar you see in the chart represents the month of Feb, while the March bar is just 3 days up to 3rd March.
NFTs are not a sudden phenomenon; they have been around for 2 years but the tipping point has been this one-of-a-kind digital items wave that’s taken over everybody’s imagination. These items have given NFTs a visual or a more tangible spin and something which gives context. Context is what drives value, isn’t it?
Can you dumb it down, please?
It’s a very basic concept really. People like to own and collect rare items – Baseball cards, Pokemon cards, rare paintings, wine, etc. There are multiple motivations why people would want to make a collection – some want to build/complete their set, some want to create something they can pass to future generations as something of value, some want to make it a status symbol, self-expression, etc etc. And you can show off your stuff to the whole world – it's digital.
NFTs are the digital manifestation of this fundamental concept and allows you to create, own, trade digital items which are rare and/or unique. What ensures someone cant copy it or screenshot it? - It's the underlying blockchain they sit on! - the proof of ownership lies in the blockchain that powers the NFT. NFTs are also actually a shot in the arm for the whole crypto phenomenon as it helps take crypto more mainstream and gives a great use-case. Etherium is at the front of all this but there are other altcoins like Polkadot that are fast becoming popular to support NFTs.
Can you give me some examples of NFTs sold?
NBA top shot – show-stopping moments in the form of a video clip you can collect from an NBA game. Created by Dapper Labs - they have sold almost $230m worth of digital collectibles in a very short period. A LeBron James highlight sold for $200k. Mark Cuban who also owns an NBA team highlights that this is akin to the model of trading cards – only there is no risk of theft or damage as its digital and the value is still driven by demand/supply
Logan Paul – recently sold almost a million dollars worth of clips that represents highlights of him unboxing his $2m Pokemon cards
Niche collectibles – Crypto Punk collection of 10k characters with unique traits has a base price of $18k per item - an item Punk 4156 was bought for 650 ETH ($1.2M). Cryptokitties is another such niche collectibles selling well over $20m in virtual cats
Grimes, an artist, sold $6m worth of digital art using the NFT route only a couple of days back
So How does it work? Can I do it?
Artists/ Creators can build their own NFT item or even a collection and host it on platforms like Rarible or Mintable without any need for coding etc. Since most of these platforms use ETH you’ll need some way to deposit ETH into the wallets hosted by these platforms to pay for the cost to create an NFT (called gas fees) – something like a Metamask wallet may be needed. Then again some of these things are being simplified by some other applications like Audius.
Another aspect is that it ties the object to the creator and in many cases, the original creator gets some royalty for any value improvement over successive transactions. Does that remind anyone of the ‘improvement fee’ on Earth2?
How does it apply to Earth2?
Without realizing it, the land you buy inside Earth2 is a potential NFT, it’s a unique property in itself. However, like all NFTs the value will depend on the desirability of each property – so whether it’s the location or it represents the land where the Eiffel tower stands or whether it’s a piece of art done by a talented designer.
Well without realizing what I was doing, I would have done now close to 30k+ tiles in art design on Earth2 including for several dear friends who also happen to be top players on Earth2 – some of all that you would have seen somewhere. And this is where the big art started on Earth2, which is arguably the most famous art in E2
And some other virtual land concepts are already listed in the NFT space for sale!
Decentraland has done about $42m worth of NFT volume as per nonfungible.com (you can check there for more info on others like Decentraland)
What’s the Future?
The space is very nascent but is witnessing the proverbial Gold Rush, so one needs to be very careful especially if purchasing any NFTs. They don’t come cheap for the average Joe and your financial planner won't recommend any oversized portfolio allocation. But if you will insist to hop on the crazy NFT bandwagon, maybe get a very low exposure (again not a financial advise – see your planner). And, if you already have any property on Earth2, that’s already a potential NFT in the making. Obviously, it will also depend on how the developers see the NFT space juxtaposed with the game. Shane has openly claimed 'Love' for #NFTs and time will tell how we get to see NFTs come to Earth2. I will certainly be following this exciting space closely, and will share more – soon!