NFT

Non-Fungible Token

This goes to say that, if you are an avid blockchain connoisseur and use it frequently, purchasing digital assets- in this case NFTs- with cryptocurrencies in blockchains. A popular example is of “Nyan Cat”, the GIF of a rainbow-casting feline that was a viral meme back in 2011. Fast forward to February 2021, the original GIF was sold at an online auction for 300 Ether, the cryptocurrency that powers the Ethereum network. That was equivalent to nearly $600,000 at the time.

Users were able to buy, trade, and breed digital cat collectibles. Each new cat was an NFT which certified its originality and ownership. It works the same way “pokemon” cards do, for example. The value of a “pokemon” card isn’t in the paper or the ink that it’s printed on, it’s in the rarity and collectability of that card. And much like “pokemon” cards in the physical world, you can trade and collect “Cryptokitties” in the digital world.

Well, the same team that developed “Cryptokitties” also worked together on developing the new sports memorabilia NFT for the NBA called “NBA Top Shots”, a platform that allows users to procure a collection of digital basketball highlights, like a video clip of a posterizing dunk. All highlights are NFTs and have become big business. By mid-March this year, “NBA Top Shots” had clocked in over $338 million in sales since it went live in October 2020.

NFTs are also becoming a staple in the mainstream art world as well. Auction house Christie’s opened bidding for its first purely digital art NFT. Bids rocketed into millions of dollars.

In Europe, unlike the US, many cryptocurrencies do not qualify as financial instruments (in US terms, “securities”), but many NFTs may well do, particularly because they normally have an underlying asset. Depending on what the NFTs represent and how they could easily be considered as contracts for differences, derivatives, or even collective investment schemes. But not all NFTs are financial instruments. So, when visioning and designing such a project, you may consider hiring a lawyer and/or get professional assistance before choosing to do so.

There’s also a lot of concerns with NFTs and intellectual property rights. But when buying or selling NFTs, the agreement of sale should clearly specify if the buyer is actually acquiring the intellectual property or just a license to use it. By extension, the issuer also needs to give proof that he or she owns the intellectual property being sold or licensed.

It’s also important to understand the nuances that the implementation of regulatory and legal frameworks for NFTs have. NFTs are stored in blockchain ledgers, usually Ethereum, but, although there have been many efforts and developments in this regard, there is not yet a clear functioning regulatory framework in most parts of the world. Which makes it difficult to even take the legal aspect of NFTs, when the things that it’s concomitant with (like cryptocurrencies and blockchain) don’t yet have a regulatory framework established for themselves as well.

NFTs are the most appealing for content creators, as it is a new way for them to solve the monetization issue that most artists have in the digital space. With NFTs, their content is verifiable and is recognized as being one-of-a-kind and authentic, making their creations scarce and, therefore, more valuable- which means more money for creators. NFTs also mean that they can establish different conditions in which they give up ownership of their creations under- like how we mentioned with commissions-, which means creators have full agency in the way they choose to do business with potential customers.

For consumers, NFTs not only are a new and innovative way to support their favourite content creators- the artists with the most success with NFTs have an established following already-, but they can transform people’s attitudes towards ownership, making it possible to own a real-world asset that’s thousands of miles away. NFTs are of great relevance to the everyday consumer since it could introduce millions of people to cryptocurrencies for the very first time, since NFTs operate under different blockchain platforms.

NFTs also present new opportunities for brands and institutions to monetize their assets and services in different ways. NFTs allows for them to deliver unique and exclusive brand experiences for your customers, like by monetizing their best-performing ads multiple times over by turning them into NFTs and letting customers buy a piece of the brand’s history in the making. Brands can use NFTs as a way to reward crowd-funding. The likes of Starbucks and P&G have been sourcing product ideas and feedback from consumers for years, but now co-creators can get rewarded for their contribution by owning a share in the final output. NFTs can also become a thing in luxury brands because they lend themselves well to brands that already thrive on scarcity. According to Gucci, it’s “only a matter of time” before luxury brands release their own NFTs.