In the fast-paced world of technology, NFTs are nothing new, having been around since 2014 so why is it only now that everyone is suddenly talking about them as the next big thing? The first NFT was minted in 2014 but it made little or no waves outside the then niche world of digital art. But 7 years later, Collins Dictionary made NFT its word of the year, saying the term had seen a ‘meteoric’ rise in 2021… so what happened in between?
NFT is short for non-fungible token and is defined by Collins as ‘a unique digital certificate, registered on the blockchain, that is used to record ownership of an asset such as an artwork or a collectible’ – but this definition throws up even more questions…what is a digital certificate? How do I ‘own’ when I can’t touch it? What’s the point of it?
In the art world, NFTs were seen as just another means of producing and buying and owning art. And just as in the physical world, the more prestigious the artist and the more in-demand the piece of art, the higher the price the NFT could command, with most being sold at auction on specialist NFT marketplaces such as OpenSea.
But digital art NFTs selling for £4.4m such as Grimes’ collection in 2021 or the collage by digital artist Beeple that sold for £50.3m (interestingly sold at Christies rather than on an NFT marketplace) are still out of reach of the average man on the street and lack mainstream appeal so what changed to bring NFTs to the masses?
There are 2.5 billion gamers in the world and in 2021 the gaming market was worth $180bn. With much of this revenue coming from micro transactions with players spending on in-game personalisation and ‘boosts’, this was a sector ripe for digital ownership.
Ben Cusack, founder of Viker Games, whose strapline is ‘Bringing blockchain and NFT games to the masses’, says ‘For the first time in the game industry, NFTs give gamers the opportunity to own part of the game and crucially, at an accessible level’.
But gaming isn’t the only sector where NFTs are proving to have mass appeal. In November 2020, Top Shots, an online card trading game, licensed the NBA for a card trading set – immediately widening the appeal of NFTs by tapping into the world of sports fandom and making them accessible for the average person to purchase. Just as buying trading card packs in the physical world, NBA fans could purchase a pack of NFT ‘moments’ – essentially video clips of players’ ‘shots’ or ‘plays’. Each ‘moment’ has a different rarity – when the NBA, one of the most commercially savvy sports organisations/entities entered the world of NFTs, it opened up the world of NFTs and created 1000s of new NFT speculators, investors and creators.
Where can I buy an NFT and how do I do it?
What started out as a handful of specialist NFT marketplaces, has multiplied and whilst OpenSea remains one of the largest and most open platforms, marketplaces such as Foundation, Mintable, Rarible and SuperRare are experiencing success with trading increasing at breakneck speed in the past 18 months and OpenSea recording its all-time ONE-DAY trading high of $261m in January this year.
But why have investors been so quick to jump on the NFT trend?
When web 1.0, the first iteration of the internet first appeared on the scene, companies and brands watched to see what would happen and whilst some took the risk and moved onto the web early, many waited until it was too late. Many household names, pillars of the high street, such as Topshop and Debenhams, ended up being eaten by web-first brands such as Amazon, ASOS and Boohoo.
Then came the mobile revolution with the advent of the iPhone (iOS) and Google Android (OS) that saw agile, mobile-first companies disrupt across categories with brands such Monzo and Revolut succeeding in a sector dominated by legacy brands such as Lloyds and Barclays.
With the arrival of web 3.0, brands were no longer going to risk missing the boat. Web3 is an idea for a new iteration of the web based on the blockchain, which incorporates concepts including decentralization, token-based economics (cryptocurrencies) and NFTs. The big difference with web 3.0 is the power being decentralised, users taking ownership of their data, and no longer pawns for the Amazon, Facebook and Google giants of web 2.0.
Burnt fingers and FOMO have resulted in huge investment in the blockchain (NFT) space, with brands wanting to capitalise on the next big thing. The pandemic also contributed to the meteoric rise of NFTs by creating the perfect storm of investment from tech companies and larger VCs, brands needing to diversify their revenue streams in changing world as well as armchair gamblers finding more time on their hands and using NFTs as just another way to invest.
There is also a conspiracy theory (a true one!) that at the beginning of NFTs the value and popularity of NFTs was driven and inflated by a small group of early adopters into the crypto space to maximise their own profits in this space.
Where does it go from here?
There’s still work to be done to really bring NFTs into the mainstream as for now they’re still firmly placed in ‘nerd-land’. There are still barriers in purchasing NFTs – buyers need to have a crypto balance which is held in crypto wallets and link their wallets to the marketplace they want to buy the NFT on. Not the ideal user journey.
So part of the future will be about creating a frictionless purchase journey that will enable the Average Joe to buy an NFT and realise the true value of owning a digital asset.
But it will probably be today’s 15 year olds explaining it to you.