Digital media has transformed the way we interact with one another. It’s also created an entirely new marketplace for collectors, allowing them to own what are now known as non-fungible tokens, or NFTs. NFTs can best be described as a digital certificate of authenticity. NFTs are another form of blockchain-based assets like Bitcoin (BTC). The ‘non-fungible’ part means it cannot be exchanged for something of equal value. Cash is fungible. I can trade someone two $5 bills for $10, and vice versa. So what makes NFTs so appealing to collectors?
Trend, Fad or Total BS?
NFTs include a variety of digital items, ranging from artwork and digital fashion items to virtual real estate and collectible sports cards. The musician Grimes sold several exclusive pieces of artwork last month as NFTs. According to Nifty Gateway, her exclusive piece ‘Death of the Old’ sold for $388,938.00. Grimes isn’t the only artist to follow this trend, either.
GamesBeat reported that Shawn Mendes would begin selling NFTs via Genies, a platform that creates digital avatars and memorabilia for celebrities. However, their new “owners” do not exclusively own the work itself, meaning it can still be seen and shared online.
In an interview, Genies CEO Akash Nigam stated “What we’re able to do is not only allow the celebrities to memorialize a moment and own it forever through their journey, but their fans can own a piece of that moment through the form of digital identities.” In essence, NFTs allow fans to more directly support their favorite artists by purchasing their works. Like BTC, consumers can either purchase a fraction of the NFT or the entire thing.
Video games have played a prominent role too. NFT collection games like The SandBox and Axie Infinity have exploded in popularity recently, offering single and multiplayer gameplay. Players can earn and/or purchase cryptocurrency to buy virtual real estate, characters, and inventory items. Any in-game purchase could be represented by an NFT, making it easily exchangeable and potentially more valuable.
Sports clips have become immensely popular as well. Last month, an NFT of Lebron James sold for $200,000 on NBA Top Shot, a website that sells NBA video clips. The NFT also includes James’ stats, jersey number, the game's final score, and the Los Angeles Lakers logo.
The NBA has capitalized on this trend, joining blockchain company Dapper Labs to create NBA Top Shot. In essence, NBA Top Shot allows fans to buy clips of NBA highlights. Prominent players like Luka Doncic, James Harden, and Kyrie Irving all have NFTs. The collectibles are tiered; the higher the tier, the fewer NFTs are available. Common NFTs can be reproduced. Limited edition NFTs are the only of their kind.
The NBA owns the rights to all their digital assets, but to create a profitable, long-term market via Top Shot, the NBA must keep enough rights for their organization and players while making it enticing for Top Shot and consumers.
Consumers are key here. An NFT must be perceived as valuable at the time of purchase and in the future, otherwise it can’t be a viable asset class. Cultivating this ecosystem will allow this to thrive.
Athletes may see this as another opportunity to build their brand awareness and overall value accretive empire. Joel Embid, Philadelphia 76ers Center, for example, may give someone courtside seats to a prestigious game if someone buys one of his NFT “moments”, with the entire exchange being a social media capturable moment. Imagine having an NFT of the Kobe “Mamba Out” mic drop moment at the end of his career in the Staples Center, layered with a sample of Drake’s “Started From The Bottom, Now We Here”, visually displayed via a physical hologram-esque frame in the foyer of your home. It’s coming.
This will spill into other sports, and other industry verticals as well. You can potentially buy a piece of a Martin Luther King speech, the moon landing, or the ‘Miracle on Ice.’ The use case is as wide as we choose to make it.
Prominent entrepreneurs like Mark Cuban have praised NFTs as a way to disrupt the media industry. In an interview with CNBC, Cuban stated “I think the collectible side of it is going to completely turn the [art], music and movie industry upside down.” But what’s especially important is the certification and authenticity process; consumers must be confident in their purchase. Thankfully, NFT creators can learn from past mistakes.
The Problem with Paintings
On November 15, 2017, Leonardo DaVinci’s Salvator Mundi was sold for $450.3 million. The auction set a record for the most expensive painting ever sold, smashing the previous record of $179.4 million. Salvator Mundi is Latin for ‘Savior of the World,’ which is fitting for a painting of Jesus Christ.
Source: Wikimedia Commons
Salvator Mundi has had a tumultuous history. It was originally owned by King Charles I, until he was beheaded in 1649. It was rediscovered in 1940 after miraculously surviving the Nazi’s London Blitz. In 1958, it sold for $45 in Louisiana. It was hidden from public view for 47 years, until a group of art dealers bought it for $10,000 in 2005.
By then, it had had multiple repaintings with varying degrees of success. They commissioned Dianne Modestini, a professor at NYU’s Conservation Center of the Institute of Fine Arts to determine its originality. After several hours, Modestini determined its authenticity by finding a “pentimento,” or earlier draft of the painting underneath.
NFTs eliminate this authentication process because every purchase is automatically recorded on the blockchain. It can’t be changed once recorded. It also can’t deteriorate because it’s online. However, NFTs might not retain their original value later. One potential hiccup is that NFTs are currently built with the Ethereum protocol. What happens if another protocol begins its own version of NFTs? Will there be an equal identification / transfer of original rights?
Gimme, Gimme, Gimme!
If you’re interested in purchasing an NFT, there are several different ways to do so. Some popular NFTs include CyrptoKitties, a blockchain game where players can buy and sell virtual felines. If you’re not interested in video games, trading card company Topps created Garbage Pail Kids NFTs, which you can buy using WAX. Finally, actor William Shatner, famous for his role as Captain Kirk in Star Trek, has created NFTs from his career. (My personal favorite is the ultra-rare 1960s headshot).
If you have any interest in collectibles, tangible or intangible, you should seriously consider checking NFTs out. They’re a great way to support artists and musicians, show your love for a specific sports team, or collect meaningful memorabilia from your childhood.
If you liked this newsletter/blog post and want to hear more, check out my podcast The Whiskey Hue, a podcast from startup enthusiasts who are various shades of brown. You can learn more about my professional experience on my website. Sava360 Ventures colleague Harry Ortof | LinkedIncontributed to this article.