Are NFTs a passing fad or an emerging market with long-term potential?

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NFTs, or non-replaceable tokens, have become ubiquitous in recent years – a phenomenon that is undoubtedly symptomatic of our new, post-pandemic, hyper-digitized lives.

An NFT represents any digitally represented asset that can be bought and sold. Because it is stored on the blockchain (a system that tracks crypto transactions through peer-to-peer networks) and contains unique identifying information, the token cannot be duplicated. Likewise, it is non-functioning, meaning it cannot be exchanged, unlike a cryptocurrency such as Bitcoin, where one coin is equal to another coin.

Since their debut eight years ago, these blockchain-based digital tokens have disrupted various industries. These industries are not just art and collectibles; gaming, music, de-fi and virtual reality (or VR) will also reach new heights with NFTs. But, beyond the hype, do NFTs have a real future? I believe the answer is an unequivocal “yes”.

Where do we see NFTs?

All NFTs have smart contracts attached to them and can be acquired in exchange for cryptocurrency. Typically, NFT data is stored in files such as images, video, and audio. That’s why NFTs are so inextricably linked to the world of art. NFTs have revolutionized the creative industries. Brick galleries no longer dictate the way art is bought and sold. Now artists can monetize their work through a new kind of self-publishing, with websites like OpenSea and Rarible acting as online auction houses. The most expensive NFT ever sold was The Merge by Pak, earning a dazzling $91.8 million. Though excessive, it is the price consumers are willing to pay for something so rare and unique – just one example of the principles of market demand.

Of course, these garish displays of wealth give NFTs a controversial glow, but it’s worth noting the effects these earnings can have on the wider arts community at large. The ability for artists to “tokenize” their work is truly groundbreaking. Not only are they legally paid for their work, but they are also guaranteed intellectual property rights in their creations and a percentage of the proceeds each time NFTs are resold. But similarly, NFTs open up the market to ordinary consumers – more people can now buy the art they admire.

Related: NFTs will soon be inevitable. That’s a good thing.

Further Examples of NFTs

NFTs have a life outside the art world. For decades, music has been an expendable asset, widely recorded and distributed in the form of CDs, records and online streaming services. However, with these transactions, a musician’s royalties are only a small fraction of the total money raised. But with NFTs, musicians can now cash in millions in hours. Bringing in nearly 100% of revenue, it’s no wonder it’s becoming an increasingly attractive method of work-sharing.

NFTs even showed up in political races. Recently, an Arizona Senate candidate Blake Masters slammed NFTs for his campaign. Masters, a crypto evangelist and protege of legendary technology investor Peter Thiel, has created an NFT of the bestselling book, zero to one, that he co-wrote with Thiel. He made 99 copies as a reward for top donors for his campaign.

Play to earn

Besides music, gaming is another industry that has jumped on the NFT train. In-game content such as skins, avatars and various add-ons can now be sold as NFTs. While downloadable content (DLC) can be sold to millions of players, only one copy of an NFT can exist.

Play to earn is one of the most exciting spaces in the NFT world. The niche model allows gamers to play games on the blockchain and earn in-game rewards. These winnings are usually NFTs and can be used in both the virtual — and Real – world’s.

Platforms such as MetaPlay, an all-in-one blockchain incubator for DeFi, GameFi, and metaverses, provide simple blockchain games to help new crypto users onboard and introduce them to NFTs and play-to-earn models . This advanced platform aims to enhance the esports experience by enabling amateur players to compete as if they were professionals in esports tournaments. Impressively, in just a few months, the platform has managed to cash in around $13,000,000 from over 16,000 investors.

With the launch of the metaverse comes a promising future for NFTs. Virtual marketplaces are becoming an exciting prospect, with companies creating their own virtual spaces (eg NikeLand). Similarly, museums like the San Francisco Museum of Modern Art are beginning to place their work in metaverses. Without the pretense of a gallery space, potential buyers can now view artworks in the relaxed atmosphere of their home.

While NFTs’ collaboration with the metaverse is a very new concept, it is nonetheless a compelling concept. And this can also be said about the future of NFTs. With the launch of the metaverse comes a whole new universe (no pun intended) of possibilities. And we would be naive to ignore the long-term potential of NFTs.

Related: Here’s What to Keep in Mind When Creating and Selling an NFT

Real world assets

However, it is not just digital assets that can be sold as NFTs. Real-world assets represented by NFTs, although in their early development, are increasingly becoming a desirable option for investors. For items whose value must be preserved, such as a rare Greubel Forsey tourbillion watch or a priceless book like The Codex of Leicester — eliminating the physical transfer of the object and instead keeping it in a safe place reduces the risk of damage and fraud.

An effective method of prohibiting the transfer of counterfeits, NFTs have become a popular means of trading collectibles. For example, baseball cards or other sports collectibles can be virtually traded for prizes up to a million dollars. The benefit of this is that an item can be traced back to the original seller to prove authenticity, establish provenance and prevent fraudulent reproduction.

Related: Collectibles, NFTs, and Why You Should Care About Both

Why NFTs are there for the long term

It’s no wonder people label NFTs as all the rage. The hype surrounding them is somewhat distracting. But that doesn’t mean they aren’t there to stay. It’s important to note that, as with all breakthrough technology, there comes a “plateau of productivity” — a phenomenon outlined in Gartner’s hype cycle, which indicates a period of less interest after a period of significant hype. This plateau was indeed experienced a long time ago by the likes of Amazon.

While these headline-making, seven-figure NFT purchases may seem fickle, there’s no denying the long-term potential of NFTs. Unlike other digital assets associated with cryptocurrencies, the non-exchangeable nature of NFTs has completely redefined the rules of ownership. All NFT transactions are recorded in the blockchain and enabled through smart contracts. Therefore, their technology makes it possible to store a completely accurate history of transfer of ownership. Such concrete ownership documentation could be groundbreaking for certain markets, especially real estate. With only a third of the world’s population having secure legal rights to their property or land, those who don’t may struggle to invest in their homes or get financial support.

When it comes to a decentralized economy, we’ve only just started moving the proverbial needle. The full scope of NFTs and their potential has yet to be presented. What is certain, however, is that this space is transformative in creating new markets, expanding existing markets and raising the bar for market integrity and asset authenticity.

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