Most notably, during the last few weeks, Christie's sold an NFT artwork for $69 million, the artist Grimes made $5.8m in 20 minutes selling NFT art, Jack Dorsey's first tweet sells for $2.5m, a cat playing a keyboard sold for $61k, Logan Paul sells $5m's worth of NFT's ahead of his Pokémon Box Break, and a video clip of Lebron James dunking selling for $71k.
NFTs are a game changer for the digital economy. The way it enables digital ownership has the potential to unlock tremendous value as we're increasingly living our lives online.
Three major enablers that have led to the breakthrough of NFTs
First of all, decentralized finance (DeFi) is the main driver of the emergence of NFTs. Blockchain technology and cryptocurrency have been a key enabler for the phenomenon, emphasized by the fact that at a very high level, most NFTs are part of the Ethereum blockchain.
Secondly, another important driver is the increasing number of creators out there. It might look obvious thinking about the well-known artists mentioned above, but there is a (very) long tail of online artists that are using NFTs to publish and make money from their art. This widespread pull from the creators themselves, and the pull from the superfans behind them, is driving this into the mainstream of the general consumer. This could potentially unlock a huge new category of middle-class creators.
Creators expect multiple streams of income: Superfans will become true fans of the creator - if you are prepared to spend several thousand or even millions of pounds by being part of the creators' journey, you are no longer in the super fan category, you are one of their true fans. NFT's will become huge communities for creators for them to access their true fans, create fan clubs and enable creator shareholders to be part of the creators' journey for several years. Fans will be able to be part of the creative process that will support the creator by creating their respected creativity together, alongside their community of NFT shareholders.
Which platforms are making the most noise in this space?
The team behind Dapper Labs has had the most influence in the space, to date. They launched CryptoKitties (essential cartoons of different types of cats as NFTs) back in 2017, then under the name Axiom Labs. After the success with CryptoKitties, the same team set up Dapper Labs, raised $12m from a16z, and launched NBA Top Shots. They have signed partnership deals with NBA, UFC and Warner, which might be an indication of what's to come.
In the same realm, we have the European fantasy football startup Sorare where players can trade and manage a virtual team with digital player cards. They most recently raised $50m from US venture firm Benchmark Capital.
A whole group of platforms and marketplaces where artists and creators can mint, and fans can buy and sell NFTs have popped up, with Nifty GateWay, Rarible being the dominant ones and marketplaces such as Mintable and OpenSea (recently backed by a16z).
Picks and shovels
An old adage which never seems to fail is that where there's gold to be mined, there are picks and shovels to be sold. As NFT transactions are tracked on a public blockchain, this creates an immense amount of data related to any NFT. Examples are soraredata.com and topshotdata.com, websites that are growing quickly together with the platforms the data is originating from. This need for data aggregation and other business models adjacent to the trading and tracking of NFTs represent major business opportunities for the data-savvy entrepreneur.
Regulations coming into play
Regulators will most likely step in soon - this is a new type of retail investment and there is a risk of driving up huge hype without actually educating the consumer on how Blockchain / NFT investing, and technology actually works. The other challenge will be identifying who owns the original art pieces and whether is it a replica of what is already out there.
Status & reputation
It's great owning an NFT but how we actually use it and show our collection to the wider community is yet to be seen, but NFTs could be used from back-stage passes at gigs, closer interactions between creators and potentially some form of royalty play through social tokens.
Creating a middle class of creators
NFTs will create a whole new era of true fans for the creators - if NFTs can augment and unlock closer interactions with the creator, by accessing their gigs, owning a piece of their next piece of creativity such as artwork or music track - the creator will be able to identify whom their true fans are, creating a whole new asset class and income opportunities for the creator. Creators can monetise NFTs directly by setting the terms and being in full control of what their fans are buying.
How will NFT's eventually be used at scale is yet to be proven but we are excited about this space.