How does a 10-second video sell for $69 million? Will NFTs burn out? What can we expect out of them?
To determine what’s next for non-fungible tokens (NFTs), it's important to learn about their history.
In early 2021, an artist named Beeple (Mike Winkelmann is his real name) sold a 10-second video online for $69 million.
Before then, he had never sold a piece of art for over $100.
The digital signature authenticated by blockchain is the key part. It certifies who owns it, deeming it a digital asset. This is where the “non-fungible” in non-fungible token comes from: The items can’t be exchanged in the same manner as dollars, stocks, or gold.
The exclusivity of products that only exist online has attracted enthusiasts and investors alike, causing NFTs to catch on like wildfire.
Blockchain allows these digital assets to be authenticated for their one-of-a-kind nature.
Pablo Rodriguez-Fraile first bought the 10-second video because of his familiarity with Beeple:
You can go to the Louvre and take a picture of the Mona Lisa and you can have it there, but it doesn't have any value because it doesn't have the provenance or the history of the work. The reality here is that this is very, very valuable because of who is behind it... The reason I did that sale was in no way, shape, or form for the money... I really thought it was the right catalyst to signal the validation of what’s happening in the industry.
The piece then went on to resell for the $69 million price tag we’re now familiar with.
In the short time that NFTs have been introduced to mainstream society, digital artwork has come to own and trade its own NFTs.
NFTs are traded on a creator's terms via smart contract, making it a unique way for creative minds to profit from their work.
It’s only been a couple of months since the history-making video purchase. Just look at the Academy Awards. The “unofficial” gift bags featured an NFT of commissioned art to honor the late actor Chadwick Boseman.
Though the attendees didn't receive the best reception, the mainstream use of NFTs left a mark on the financial world and beyond.
The CEO of Twitter, Jack Dorsey, sold THE first tweet for $2.9 million. There was an entire bidding war over the 2006 tweet. The same person who purchased the NFT of Dorsey’s tweet bid another $1.1 million on an Elon Musk tweet.
The tweets were sold under the same category: valuables.
However, it’s not just rich people with disposable cash in these bidding wars. One of the bidders was a tech entrepreneur on the Forbes 30 Under 30 list, while the bidding winner was the CEO of the blockchain connecting company Bridge Oracle.
Since most of them are part of the Ethereum blockchain, the increase in the platform's price can definitely be linked to the increase in popularity of NFTs.
While NFTs are not entirely responsible for Ethereum’s performance, you can’t ignore the timing.
NFTs were introduced to mainstream society in late February 2021.
What’s next for NFTs?
Think of NFTs as a safety deposit box or an autograph.
Frauds are always out there, but luckily the authenticity of NFTs can be verified through government issues.
But before NFTs were used in travel documents like passports, they could be applied in other ways.
We all miss concerts, right?
Ticketing platforms are already on the blockchain train. One of the leading live entertainment companies, Live Nation Entertainment, will be using a blockchain for engagement, communication, and rewarding ticket holders.
In 2020, live entertainment companies faced their biggest issue yet. They had to refund all of their canceled events, so finding a way to retain ticket holders became a top priority.
FanDragon and Aventus Network developed a two-layer blockchain protocol for Live Nation France. Using TixTo.Me, a digital wallet that enables the two-layer blockchain, users are in for a completely new ticket-purchasing experience.
FanDragon CEO Alan Rakov firmly believes in this:
We use blockchain to make sure we know who a ticket holder is, and then to deliver engaging messages to help them retain their ticket. We can even send ticket holders new tickets via the blockchain for when an event is rescheduled.
If blockchain technology is becoming more of a go-to method, NFTs could serve as the new proof of admission. This could then pave the way for NFTs to be issued in transcontinental travel.
If you’re not familiar with Joseph Schumpeter, he was an Austrian economist who coined the term “creative destruction.”
It means “out with the old, in with the new.” The means of producing disruptive technologies such as railroads or the internet are hashed out and replaced with a method deemed more efficient or modern.
The technology itself isn’t dissolved or destroyed. It’s simply revolutionized to keep up with the times so it doesn’t end up dissolved or destroyed.
Henry Ford is the best example. Contrary to what you may believe, Ford didn’t invent the assembly line. Assembly lines were actually around for quite some time in meatpacking factories, but in applying the assembly line to the automotive manufacturing process, the industry was changed forever. Now the assembly line is forever associated with Ford.
This same idea can also be applied to artists and the distribution of their work.
The artist Beeple wasn’t the only one who found success with NFTs.
An NFT auction called Carbon Drop raised over $6.6 million. One artist who converted their art into NFTs found their work selling almost immediately for $500–$1,000 each. One NFT they donated was sold for $25,555.
Grammy-nominated DJ and music producer Steve Aoki released two art-music hybrid NFT collections. Aoki fully believes a NFT platform provides artists with more exclusivity and appreciation:
If I had to pick between playing a show for a bunch of people in the crowd with their backs turned to me, or playing for a small group and they’re singing along, having the time of their life and just with me, Aoki said. It’s an easy decision. This is what we’re doing right now. We’re in this space of very enthusiastic art heads, music heads and even investors are getting in. There’s room for everyone.
Aoki’s first collection managed to rake in over $4 million in sales in March.
In just March alone, collectors spent over $200 million on NFT-based artwork. The art industry needed this win. Global sales of art in 2020 were down 22% from the previous year. On top of that, combined dealer and auction house sales were at the lowest level since the 2009 financial crisis.
The NFT-based art market grew more than 800% from January to May 2021.
Marc Glimcher, the CEO of a leading contemporary art gallery in New York called Pace, understands the creative destruction that NFTs could bring to the global art market:
There are people in the crypto community who are important future patrons of the arts... If we keep clinging to our old group of patrons, we are going to be going to a lot of funerals and not a lot of birthdays.
Casey Reas, an artist in LA, launched a new venture called Feral File. The first of its kind, Feral File enables NFT artists to present limited editions of their work in an online exhibition, giving them opportunities to reach audiences they never thought possible.
It’s no question that artists will find a way to use NFTs to their advantage, and the global art market will likely benefit the most.
Some companies are booming in the NFT space, and venture capitalists are taking notice.
Let’s put it this way: In all of 2020, NFT startups raised about $35 million. Since May 2021, $90 million was poured into digital collectibles and NFT companies. The top two startups comprise about 70% of the $90 million raised.
In February 2021, Sorare, a blockchain-based fantasy soccer game, raised almost $50 million.
Many soccer fans wanted an experience where they could collect, connect, and trade with the sport in a completely different way — an experience that has now been brought to reality.
One of the biggest early-stage venture capitalists in the world added Sorare to its already impressive list of companies it's backed, including Twitter, Instagram, and Discord.
The next biggest investment was $23 million to OpenSea, a marketplace for NFTs. Its mission is to provide customers with a one-stop experience for buying, selling, and discovering non-fungible assets.
OpenSea's format tells its users important information about the NFT of their choosing.
While NFTs may only be known as collectibles now, they have a wide range of possibilities that illuminate their potential to generate more liquid, data-driven assets.
NFTs are here to stay. They show too much promise to just be a 2021 fad.
That being said, the average price of NFTs in April 2021 was 60% less than February highs.
However, this is nothing to panic about. Experts like Noelle Acheson, the managing director of research at CoinDesk, compare this drop to after the birth of the internet:
The NFT craze is not so much about prices and quick profit as it is about a new model of creative monetization, a new type of engagement with fans, and a new cultural 'experience' for users.
Average prices may have dwindled, but according to CoinDesk, sales volume has been up 40% since February 2021.
What comes up must come down, right? But that doesn’t essentially mean gone forever. Beeple himself said, “When the internet bubble burst, it didn’t wipe out the internet — it wiped out the crap.”
NFTs provide us with a lot of opportunities. We’re becoming more digital by the day, so we knew something like this was on the horizon.
As NFTs branch away from the art world and into different sectors, we need to keep up with the how and why.
Energy and Capital can deliver on that. You can never be too informed on all things blockchain and cryptocurrency-related, so make sure to stay signed in to always remain updated on the next opportunity!
