The Market for NFT Digital Collectibles: Hype or Blockchain Bonanza?
From June 23 to June 30, 2021, Christie’s auction house will be auctioning artwork from 18-year-old trans artist FEWOCiOUS, real name Victor Langlois. He has five lots going on sale, each representing a year of his life as he discovered his gender identity between ages 14 and 18. His digital artwork is considered groundbreaking, and so too is the form in which it is being auctioned – as non-fungible tokens or NFTs.
Much like FEWOCiOUS, NFTs have burst on the scene in the past year, making it possible for people to own and collect digital goods. And it’s so much more than artwork; NFTs allow people to buy digital moments, including the original video footage of blocked shots in basketball games, and even social media memes. In May, for example, 21-year-old Zoe Roth sold the popular “Disaster Girl” meme in which she was featured as a child for nearly $500,000. The meme was stamped with digital code that marked its authenticity, thus rendering it a unique NFT.
‘Humans Understand Scarcity’
Simon Taylor, co-founder of 11:FS, a company at the forefront of digital financial services, recently joined the popular Wharton Fintech podcast to help demystify non-fungible tokens and explain the energy that is driving this passion economy for people who are into everything from digital art to cryptokitties. Taylor described the NFT craze through the example of NBA Top Shot, a platform that allows sports fans to buy, sell and trade numbered versions of specific, officially licensed video highlights, fueling the NFT “moment marketplace.”
“A fungible token is where if I give you a dollar and you give me a dollar back, nothing has changed,” Taylor explained to Wharton Fintech host Ryan Zauk, an MBA candidate at the Wharton School. “But if I give you the original Mona Lisa and you give me a copy of the Mona Lisa…you win in that deal. So, the Mona Lisa is non-fungible and the dollar is fungible, because it has an equivalence of value…What’s the digital equivalent of the [Mona Lisa example] that’s really hot right now? Baseball cards. The whole sports memorabilia space is just absolutely on fire. NBA Top Shot comes along and says, ‘You know what’s better than a baseball card? 10 seconds of NBA history.’ You can own the original 10 seconds time stamped by the NBA…just a little bit special…Humans understand scarcity and will pay more for one of the original 10. Somebody may leak that and copy it, but it doesn’t mean those original 10 don’t have value. That’s exactly what is happening in non-fungible tokens. People are getting really excited by buying these original scarce things…The people who are buying that stuff are not buying it to be part of the crypto economy. They’re buying it to be one of the only people who owns that rare, unique moment.”
As Taylor suggested, NFTs are digital assets in the so-called crypto economy, which includes cryptocurrency like Bitcoin, tokens and, most importantly, blockchain. Blockchain technology, a digital ledger that records who owns what in the virtual world, makes the market for NFTs possible. Kevin Werbach, a Wharton professor of legal studies and business ethics and an expert in blockchain, has said, “Blockchain is a new structure of trust…a decentralized kind of database where there’s not one actor that controls it.” Each unique, digitally-coded NFT (and the ultimate name of its owner) is stored on the blockchain. And an NFT’s value can fluctuate, just like stocks. Often, it depends on how much someone is willing to pay for it.
“NFTs are a unit of data stored on a blockchain, used to commodify digital assets such as art,” notes Sarah Hammer, managing director of Wharton’s Stevens Center for Innovation in Finance, which launched The Blockchain Laboratory to research blockchain and cryptocurrency. The Stevens Center, says Hammer, recently awarded funds to a professor to do research on the NFT marketplace. “I expect there will be a lot of evolution in the NFT marketplace as the legal rights and capabilities around the technology continue to evolve,” she adds.
“Will speculative investors push the prices of NFTs to unfathomable heights or will it serve its original purpose of helping artists to sell their pieces of art and make ends meet?” — Laksana L.R., NFT Market Watcher
The music industry is especially watching that evolution because NFTs’ money-making potential could signal big bucks for musicians who have seen their profits erode with the demise of the CD and digital downloads.
In March, Kings of Leon was the first band to release an album as an NFT. When You See Yourself had three available digital tokens for NFT collectors, including a special album package, live show perks like front-row seats for life, and exclusive audiovisual art. The band reportedly generated more than $2 million from the sales.
During a recent visit to Wharton Business Daily radio show on SiriusXM Ch. 132, John Fleckenstein, COO for RCA Records, spoke to host Dan Loney about the potential of NFTs for the music industry.
“Anything that is a business reliant on intellectual property rights, in particular in the digital space, this is a potential game changer,” noted Fleckenstein. “Everybody’s question right now is are we in the 1990s-era dot-com [bubble] version of NFT and it’s going to be years before it settles into a robust business model, or is it going to happen overnight? The noise of what we did with Kings of Leon was clearly very loud given it was the first time anybody’s put an album with an NFT, but the kernel of what an NFT means for us is exciting. Our industry has gone from a place of where you physically had to buy a piece of music to consume it, to a world where you could get music anywhere you are, anytime of the day, whenever you want with zero barriers to entry through streaming. This all of a sudden offers up the idea of bringing scarcity to the digital space, which is exciting for us.”
Yeti Toys, Tweets and Jacob Collier
NFTs have captivated the world’s youth, who are into the emerging crypto economy (people use bitcoin and other cryptocurrency to purchase NFTs) and the latest digital, finance-related trends.
“I am interested in NFTs because they have many different applications and potential in this digital world we are living in and growing in. It’s the cool factor of saying, ‘Look what I got! This is the only one like this in the world,’” says Cohen K., a high school student from Washington state who is participating this summer in the Wharton Global Youth Program Future of the Business World online course. Cohen is launching a business around NFTs, though he is reluctant just yet to share details.
“I would invest in an NFT because these first NFTs are pieces of history,” adds Cohen, whose father purchased an NFT of the VeVe app in the form of a yeti toy that uses augmented reality. “NFTs are written history, but instead of handwritten they are written through code.” One of Cohen’s favorite NFT moments in recent months? Twitter CEO Jack Dorsey selling his first tweet as an NFT for more than $2.9 million.
The NFT hype has already cooled somewhat in a matter of months, though many people are still following the moment marketplace and figuring out how they can profit from it. Inspired by Cohen’s NFT fascination, we decided to check in with some of the students who participated in our 2020-2021 Wharton Global High School Investment Competition to learn about their interest in NFTs and where they think this market is headed. Here’s what a few of these aspiring investors (all of whom made it to this year’s Top 50 semifinal round) had to say:
“I am interested in NFTs because I am keen on observing how society will treat this new asset class. Will speculative investors push the prices of NFTs to unfathomable heights or will it serve its original purpose of helping artists to sell their pieces of art and make ends meet? I guess I’m drawn to the uncertainties behind NFTs.” – Laksana L.R., 16, Indonesia
“NFTs are interesting because the creation of a market for digital collectibles that give buyers true legal ownership of a video, piece of artwork, etc. is simply unprecedented…The only concern with NFTs is whether or not investor confidence will continue to stay at current levels. NFTs are similar to cryptocurrencies in that they are much less accepted than the dollar. Even if confidence wanes in the dollar, it won’t lead to a crash simply because of how many users there are but, as evidenced by Bitcoin’s latest drop from 56k to 34k, cryptocurrencies, and potentially NFTs, have more volatile price changes. Nevertheless, I would invest in NFTs because the market is clearly there, and if I can purchase a few assets that have potential to grow in value, I wouldn’t pass it up.” – Vedant K., 17, U.S.
“One has to understand that the sole reason there is any demand in the NFT market is because it’s an NFT; similar to why people went bonkers subscribing to IPOs [Initial Public Offering] of any dot-com company – because it was a dot-com. People are willing to buy any NFT, made by a celebrity or the like by shelling out thousands, if not millions of dollars. But, as the craze over NFTs fizzles out, the value attached to a lot of them will also erode. We do believe the NFT market will still be present 20-30 years from now, but will be much more sober. History shows that whenever something new is introduced, especially in the financial context, investors or rather speculators overestimate its value because of the trend associated with it, only to realize that the value is no more, as trends are finite.” –Team Bullseye, 17, India
“I was first introduced to NFTs when my favorite artist Jacob Collier put a poll on Instagram asking if his fans wanted him to create and sell NFTs. As a die-hard fan, I wanted to get hold of whatever it was, but I went in and did some research about what an NFT was in the first place, so that I could convince my parents to buy it for me. NFTs really piqued my interest because it helped artists sell one-of-a-kind artworks, whose value can never be matched… One downside of NFTs is that Ethereum [the most actively used blockchain] is extremely energy hungry, leading to climate change — the exact thing we are working to solve. One story I read on the news gave shocking numbers: one NFT took up electricity that could power up a family home for two months. If a solution to sustainable energy can be found for computers to do large computations, I think more people will become open to the idea of trading NFTs, and the market can grow. I think NFTs are a great idea of investing while promoting creative work, so I would definitely invest in a couple NFTs supporting my favorite artists!” –Amita S., 17, U.S.
“In March 2021, the news about Christie’s auction for virtual art by the artist Beeple drew me toward researching NFTs. Given that the artwork sold for nearly $70 million, I was curious to know why NFTs held such significant value and how they worked… NFTs are exchanging at overinflated values; however, that doesn’t mean they’re a bubble going to explode. NFTs are here to stay.” –Gaurav S., 16, Nigeria
Related Links
- NYT: The ‘Disaster Girl’ Meme
- Rolling Stone: Kings of Leon
- Gotham: Fewocious NFT Interview
- Wharton Global Youth Program
- 11: FS
Conversation Starters
Are you following the market for NFTs? Do you think the interest and investment in them will grow? Share your thoughts in the comment section of this article.
Amita S. says, “One downside of NFTs is that Ethereum [the most actively used blockchain] is extremely energy hungry, leading to climate change.” What are your thoughts about this? Would it prevent you from actively engaging in the NFT marketplace?
Like NFTs, what new technology has captivated your attention and why?
I would like to point out the following. First, for those who are still confused as to what an NFT is, imagine this scenario. You walk into the Louvre and look at the Mona Lisa. Someone walks up to you and offers to sell the Mona Lisa to you. You decide to buy the Mona Lisa for, if nothing else, the sheer novelty of it. The person then takes your money and walks off. When you try to ask where the Mona Lisa is and why you don’t have it in your hands, they say that you didn’t actually purchase the Mona Lisa, you purchased a little sticky note saying you own the Mona Lisa that is posted in a very specific, very obscure broom closet, that nobody will ever come across unless given specific directions. They then offer you a cardboard rollup of the Mona Lisa that was surplus from the gift shop.
Second, introducing scarcity to the digital platform is an impossible task, as by virtue of everything being made of code, you can pretty much just download/copy anything that was put anywhere with the right know how. While you could say that the purchase of an NFT gives you some sort of title, such as “Sole Owner of the Disaster Girl meme” such a title is backed by nothing, because anybody can just take a look at the picture of the Disaster Girl meme and download it, depriving the purchaser of a material advantage, and nobody is going to care that you spent over $500000 dollars on an image. Thanks for coming to my TED talk.
Firstly, I have to thank you for the excellent explanation of an NFT. The analogy you made with the Mona Lisa really does highlight the nature of an NFT, reminding people that many NFTs are intangible. I would definitely agree to this point and hope it helps others understand just what an NFT is.
Your second point is regarding the impossibility of scarcity to the digital platform, arguing that it being fully digital makes scarcity impossible. You continue, replying to the “Disaster Girl meme” example mentioned in the article, by contending that the person who purchased this NFT gained nothing but a useless title. To this point I tend to disagree- in the modern world where digital assets (such as virtual currencies in the gaming field) are intangible and are often unexchangeable for real money, virtual systems prompt users to psychologically (and voluntarily) value digital assets like society places on the dollar.
Furthermore, the concept of setting up a psychological feeling of value is how society eventually normalized exchanging a 2.6×6.1 inch piece of paper with a “10” on it for a pizza downtown. Tangible currencies like the dollar are finite due to environmental degradation and economic inflation, which is a trend also existent in NFTs (blockchains release large amounts of carbon like cited in the article and can also lead to inflation/overproduction), governments and NFT-creators dictate values based on user demand. With the rising demand for NFTs, it begs the question of if these valued digital assets can rise in monetary value like new companies such as Team Bullseye is hoping. After all, NFTs are unique and can hold a digital scarcity in part due to tokenization.
In conclusion, I’m cautiously supportive of the growth of NFTs. On the pro side, NFTs are a relatively novel concept that many have yet to discover, offering large margins of profit. Additionally, it can promote crypto/online currency payments (like Paypal) which in turns reduces habitat destruction that is associated with paper money production. However, it has some cons like contributing to the carbon emission total and has the potential to be remotely stolen/hacked. Overall, I do believe NFTs are promising for the future and think the article and your comment have interesting and competing points.
You make several insightful points regarding NFTs. Investing in NFTs may not seem reasonable, given the extreme hype and ease of replicating the original asset. While I’m also cautious of this new technology, I think its future applications are worth considering. When NFTs started to become popular, they were primarily utilized as highly priced digital art, GIFs, videos, and even simple pictures. The viral Nyan cat GIF that I remember from my early middle school days, for example, was sold as an NFT for almost $600,000! Even though I could easily copy this GIF and it may seem like an “impossible task” to bring about scarcity, NFTs could become much more than just digital collectibles. Consider the transition from physical paper to computers. Computers provide added features that enhance the process of recording, storing, and sending information. We can imagine NFTs in a similar light — with more features and uses, NFTs may become a worthy investment.
Even now, NFTs can be used as digital concert tickets. Such perks can greatly improve the careers of aspiring musicians by allowing fans to more easily support them. NFTs also provide improved ways to pay artists. For every new purchase of their work, an artist receives a royalty, and as their work appreciates over time, they continue to benefit.
NFTs make transactions more efficient, quick, and secure, given their dependence on blockchain technology. No third party is required to conduct transactions, and blockchains record transactions, so the information stored cannot be altered. There have been several instances where physical sports memorabilia was copied, and the copies were thought to be original and were sold at extremely high prices. With NFTs, we can at least track the transaction history back to the original creator. The ease of transactions and relatively secure technology could potentially allow NFTs to function as ownership of cars, land, and even patents of inventions. That “little sticky note saying you own the Mona Lisa” could transform into something much bigger than an art fad.
Thanks for your insightful ideas, Alfred. I completely agree with you on the fact that anyone has the ability to view and share the NFT, but I disagree that this takes away the value of the object. Many people can view an original Monet, or maybe own a print in their home, but not many people can say they own a Monet in their home.
NFT’s have what we call “hedonic value”, as compared to functional value. Hedonic value is the value a person gets from the feelings of fun and “coolness” they receive from something, where arousal and sensory stimulation occurs. Despite being a digital world, we run on hedonic value. Marketers use this when thinking about selling their product, as to how they can create “social currency” (the idea that people will buy/share things that will improve their status). Many rich people have the “social currency” of being able to brag they own a Monet, but I have no social currency by opening Google and purchasing a print of a Monet. Even having the code for an original Monet is more valuable and has more social currency than a copy Monet, if we’re in the realm of NFT’s. Consumer societies are directed largely by the accumulation and consumption of material goods. You spoke briefly about a “lack of material advantage”. The material advantage doesn’t need to exist, the social currency and participation in a consumer society (and the associated pleasure with that) is enough for someone to value NFT’s.
NFT’s also have something called “Biographical Indexicality” which means it has value the same way collectibles have value, because they index our life in relation to a time in history.
If NFT’s were to lack value, it would actually be due to the fact that we can’t touch NFT’s, rather than the lack of it’s functional value. This fits in perfectly well with a philosophical/consumer psych viewpoint on the subject. The need to examine products “haptically” (by touch) is driven by our intrinsic motivations, such as hedonic value (Peck and Wiggins, 2006). For example, Apple has in-store iPads that allow us to touch and use the object, which can improve our idea of it’s functional value as well as help bring us closer to pacifying the need for hedonic value, which may lead consumers to make quicker decisions in purchasing the product. We can define this as a “Need for Touch”. We can easily hypothesize that the “Need for Touch” might reduce the value of NFT’s than initially expected, especially because the Need for Touch did not push consumers towards making “unique” purchases (Vieira, 2013). It’s interesting to see how marketing and consumer psych can make the case for how NFT’s will and will not become more valuable as time goes on.
I enjoyed everyone’s insightful replies about the value of NFT’s from a economic perspective. I chose to view this discussion through a philosophical/marketing and consumer psych perspective because they are my interests. Thank you Alfred for your intriguing reply and thank you KWHS for this interesting article.
Alfred, I really appreciate your comment so much, as it speaks worlds to me and so many others as smaller artists as we try and implore people to understand our view. I could not have asked for a better understanding of what an NFT is and just how pointless it is. Alfred, your explanation about the Mona Lisa caused me to think about an important factor of being a small artist: commissions. It was quite likely that the Mona Lisa was a commission, and many small artists like myself, and even larger artists rely on commissions in order for customers to spread a good word about our work, or to support themselves. NFTs have a huge impact one how people see commissions.
It isn’t easy to get an audience of people who actively support your artwork. Just the pure joy of seeing even 1 or 2 likes on an art post is never a repetitive or boring feeling. All of that hard work for one piece, and finally, finally, someone is acknowledging your skill and effort with their singular like. It is an incredibly refreshing experience, especially for smaller artists. So when I heard of NFTs, I thought this would be beneficial for small artists. After all, it seemed no different from accepting a commission and making your customer the sole owner of the piece, right? Wrong.
When NFTs started blowing up, you would see famous and successful idols selling. The ‘Rick Roll’ music video was being sold as an NFT. In fact, an NFT of Chadwick Boseman was held for auction in his honor at the Oscars. The Real Oscars. And just as Alfred mentioned, in our digital world today, there is nothing that is going to tell the purchaser that they are the “Sole Owner of the Chadwick Boseman Oscars Art Piece” besides their own mind. So not only does it do Boseman a great disservice by remembering him with something so fleeting and insincere, it also shows how primarily famous people (in this case a nationally famous awards event) are benefiting from NFTs.
NFTs take away from art commissioned by artists who may be struggling to live, because why would someone buy an art piece when they could buy Jack Dorsey’s first tweet because it’s ‘original’ and they will be the ‘sole owner’, like there aren’t hundreds upon thousands of screen shots of that exact same first tweet. When you tell someone “Yea dude I paid 2.9 million to be the original owner of Jack Dorsey’s first tweet!” they are 1) most likely going to look at you in shock and 2) ask you why in the ever loving world would you pay 2.9 mil to own someone else’s tweet. Bluntly put, just as Alfred did, nobody is going to care that you spent so much over a tweet or an image anybody can make. The only difference is the 2.9 million paid towards an already rich man rather than the 100 dollars paid for a full body character commission from an artist who needs to pay rent or buy food. Overall, I just cannot see the point of NFTs primarily because of how it affects smaller artists and Alfred’s point about our digital platforms of today.
First of all, we cannot deny the hot and rapid growth of the NFT market. The data shows that the NFT market transaction volume at the end of 2020 was 250 million U.S. dollars, and the transaction volume in the first quarter of 2021 exceeded 2 billion U.S. dollars. Like Bitcoin, NFT is also composed of code, but it is irreplaceable. Bitcoin, Ethereum, and Dogecoin are similar to those produced in the assembly line in a factory. But each NFT has its own uniqueness. The investment behavior for NFTs is not completely rational, but investing in NFTs can be profitable in the foreseeable future. But like Bitcoin, NFT transactions will be affected by government regulation. This kind of regulation will be a huge negative for NFT. Just as the trading and production of Bitcoin encountered increased supervision by various countries, the price plummeted, causing a liquidation. NFT trading also has this risk and disrupts the financial investment market. A large amount of energy consumption will increase the conflict between NFT traders and environmentalists. At the same time, the government’s energy restriction measures will increase the cost of NFT and raise the barriers to entry. In general, I think NFT has become a potential investment opportunity. But from a rational point of view, the risk of investing in NFT is still high.
Thank you for your comment. While I agree that NFTs provide a good investment opportunity and will be affected by government regulation, it isn’t necessarily a bad thing.
Firstly, let’s acknowledge that NFTs are currently a speculative investment, so risk is unavoidable. From the risk perspective, there is both systematic risk(of the blockchain technology market) and idiosyncratic risk(of NFTs). For example, the owners of africrypt, an online crypto exhcange, defrauded investors of 3.6billion in bitcoin. Similarly, the NFT marketplaces have the same systematic risk. Furthermore, each individual NFT, which are generally artwork, can fluctuate in price drastically due to different “hedonic values”, which Mehtaab B. has already given an excellent explanation.
With government intervention, the efficiency of the market can be increased and risk mitigated. For example, using listed and regulated exchanges(such as coinbase for crypto) can reduce the risk of tunnelling of the exchange owners and reducing external costs, increasing efficiency. While it is undeniable that regulation also reduces the appeal of decentralization, I would reason that as NFTs are a new type of product, therefore what is more important is consumer confidence in NFT. In the infancy of this technology, regulation can provide confidence in NFTs, leading to an increase in investment of NFTs, increasing popularity in NFTs and bringing external economics of scale such as reduced gas fee. As the benefits outweigh the downfalls of centralization, in the early days of blockchain technology, NFT trading will be benefited from regulation, and price fluctuations may be reduced while popularity grows.
For the sustainable development problem, recently ethereum has been shifting from a proof of work(PoW) to a proof of stake (PoS) system, reducing energy consumption by up to 99%, tackling the outrageous energy consumption problem. This will lower the barrier of entry and prove NFT and smart contracts to be a sustainable method of exchange. In the long run, I believe this sustainability will create a healthy eco-system for NFT. As more investors come in, artists can thrive while energy consumption remains low. As time goes, NFT will then be proven to be beneficial to society while also promoting a sustainable system of blockchain (as opposed to PoW of the bitcoin system), giving it a competitive edge.
While NFTs alone are a big thing, it is merely a glimpse of the bigger picture. Only viewing NFT from an investment and risk perspective is not enough. The NFT market is only a small part of the blockchain economy. I am a firm believer in the prominence of blockchain. From a personal perspective, as bigtech like Facebook continues to abuse user data for advertisment, privacy will become top priority for users, giving opportunity for blockchain’s peer to peer capability to protect user data. From a social perspective, as fears of hyperinflation continues to loom, NFTs and cryptos can be a better storage of value than the USD. From a global perspective, distrust in authority is destined to grow and a decentralised economy is an imminent trend, blockchain technology will be an indispensable element in our lives. While NFT and blockchain technology is still in its craddle, I am very positive on the outlook of it. Yes, NFT may be experiencing a bubble. Yes, there maybe too much regulation in the long term. However, I believe the inherent market demand for blockchain technology will steadily improve the flaws in NFT and blockchain.
Thank you again for your insight and KWHS for the amazing content
I agree with you. I think you are right to be optimistic, especially during the epidemic. During the epidemic, governments adopted loose monetary and fiscal policies and invested a lot of money, for example (according to Sina Finance) The U.S. issued more than 4 trillion U.S. dollars in currency from 2020 to March 2021, which has led to flooding of market liquidity and means inflation. The value of cash is shrinking, and the emergence of NFT has given excess funds an opportunity to resist devaluation.
In my opinion, as someone who has been following the NFT and crypto boom in recent months, that NFTs do indeed hold an immense amount of potential, because it is basically just digital art, which is extremely easy to transport digitally, also cutting down on fuel and transportation-related costs which would have been present if it were an actual piece of art. However, since it is essentially just digital code, the issue of counterfeit NFTs stands to be a huge problem, as previously stated by Alfred, which is why by devising a few ideas which could distinguish between fake and real NFTs I believe this industry has the potential to achieve sustained positive growth.
It is a now a matter of life that NFTs are quite the buzzword and a popular topic of debate by pundits. Yet, I am still pessimistic about the ultimate value and spread of NFTs. Personally, I believe that the technology behind NFTs (blockchain) will be revolutionary, but I am not sold on the idea that this technology will be used in its original form. This is due to the lack of intrinsic value that are behind these NFTs. If a consumer was to purchase an original painting by Leonardo Da Vinci, that painting has value because it was made by a historical master. This basic premise is disrupted in NFTs because consumers must believe that an image of Da Vinci’s painting is just as good as a real life one if they have “ownership” of it on the blockchain. In addition, consider the number of NFT scams; there are an astounding number of them, all of which cut down on the legitimacy of NFTs. I believe that NFTs will ultimately change our world, but not in their current form. Perhaps NFTs could be used as a supplement to tangible purchases or be used as a more efficient way to keep public records of sales through the blockchain. Unfortunately, we can only infer what will happen in the future of the tumultuous bitcoin and NFT market.
For me. I disagree because nft is too risky to invest because you can get scammed, phishing links, etc. but you can make your own nft or brand so you can make a good amount of profit, it is just better than investing in nfts and nfts are unreasonable for the future, thats my opinion on nfts
First and foremost, I really appreciate the way you explained how NFTs work by using the Mona Lisa scenario. I have always been interested in the trend or world of technology. I first found out about NFTs when lots of popular artists were investing on NFTs such as Justin Bieber, Snoop Dog, Eminem, and many more artists. I was extremely curious about how NFTs work and why so many people are investing in it. After researching, I thought that the idea of NFTs is very interesting. People and artists can create and invest in something they love doing. NFTs have a huge variety of things you can invest in. At first, I thought NFTs could only be art, turns out you can have almost anything you want including cards, music, and much-much more. Most people have always said that NFTs can be simply downloaded and boom, you have the NFT you want. In buying the NFT that you want, you have the verification that you and only you have got the original and only one in the world. I believe that NFTs are going to be the next level in investing, NFTs aren’t only about investing, it’s about doing what you love.
For me, NFT’s are ridiculous. Don’t get me wrong I totally believe in the core technologies and the potential benefits of NFT’s, but the more I’ve learned about how they’re actually being used the more I’m genuinely worried. So just to start with, NFT’s are not what a lot of people think they are. If you own a NFT of a piece of work, whilst you do have ownership, you’re still not the owner. Having NFT of something doesn’t give you rights over that design. It doesn’t mean you can then start printing t-shirts with it on and selling them.
And even thought NFT’s may have started out being all about respecting the artist, as of right now the majority of them are not being made by the lone creator pouring heart and soul to the work they’re actually being made by opportunistic business people. Take as an example, the lazy lions. If you look at all the collection you’ll start to notice something that facial features keep reappearing and that’s because lazy lions are not the work of a passionate individual who’s genuinely trying to design creatures with real character. They’re mass produced, computer generated cash grabs.
Have you heard of the ‘Mutant Ape Yacht Club?’ The ‘Mutant Ape Yacht Club’ is one of the world’s most famous NFTs, after notable celebrities worldwide, like Post Malone, purchased it. Like the Mutant Ape Yacht Club, so many different NFTs were recently introduced in the financial market by big-name fintech companies and popular influencers. Realizing the popularity of this new form of the high-tech financial asset, I, who always dreamed of becoming a pioneer using entrepreneurial talents to lead the frontier of innovation in the finance industry, wanted to know more about NFTs. Based on my research, I have learned that NFTs are financial securities consisting of digital data stored in blockchain technology, a form of a distributed ledger that records the ownership of virtual assets in the metaverse world. Furthermore, NFTs have enabled people to collect and own digital goods, including the original video footage of blocked shots in basketball games and even social media memes.
Later, I realized I was not the only one interested in NFTs. Some of my classmates were raising money together to buy NFTs. So I created a student-led organization called The Bambiez Economic Club with my best friend Hajin and four other classmates from our grade. The purpose of our organization is to instill in students the skills and knowledge necessary to manage a portfolio of newly rising financial instruments, invest in NFT projects that promote socially conscious themes, and donate 50% of our profit to local non-profit organizations in need of financial support. In an attempt to gain real-world experience in investing in NFTs, each member of our Bambiez club was given $100 of seed money, with financial aid from Mr.Seo, the Vice Principal of our school. He gladly supported our club as we aim to introduce problems associated with NFTs — high volatility of NFTs, maintenance of NFTs, legal issues, and cyber threats — to our school. We planned to invest for three months, having a middle progress check meeting and a final presentation about the investment outcome for each member.
After three months, all the students could not avoid the loss of their seed money, including myself. We did not know the significant amount of volatility and risk associated with financial leverage when investing in NFTs. Rather than investing for the future ‘value’ of the asset, we were investing in NFTs that had the highest possibility of being ‘hashtagged’ by famous influencers. Fighting against innate human nature was too hard as I could not wait for the prices of the NFTs to go up and was looking for other NFT projects to invest in. Most members looked at cell phones 24/7, gambling to gain money with a fluke. The biggest problem was how it affected our club members’ academic performance. Even Hajin was searching for promising NFT project videos on Youtube uploaded by random people in English class. Realizing the severity of the problem, I contemplated ways to solve multiple issues when investing in NFTs.
I soon realized the reason behind this phenomena is because people are too easily exposed to social media that only emphasize the positive effect of Bitcoins and NFTs. The media hides problems and risks and portrays the significant gain of the few. From my experience of investing in different digital assets and researching more about them, I realized they are easy to scam. Also, as the cryptocurrency market increased significantly, fake marketplaces and fake sellers, who sell copies of others’ work without giving credit to them, have increased significantly. Moreover, cryptocurrencies are not regulated by federal laws. The absence of a law means that no government organizations are investigating whether this new form of digital asset is a fraud or not. A prime example would be the recent Luna incident. The Korean inventor, who had a significant stake before Luna was listed, attracted many investors and guaranteed a certain amount of financial return. However, when the value of Luna crashed and later became delisted from the cryptocurrency market, he took zero liability for the investors’ loss.
Learning how blind faith in cryptocurrencies became a huge social problem, I thought there must be something that I could do to raise awareness and to warn people about the risks. Thinking of the future generation, investing in this new form of the digital asset throughout their lives, Hajin and I prepared presentations for high school students. During the presentation, we explained the financial risks of investing in NFTs and cryptocurrencies and shared the results of our club members’ investing experiences. We introduced the experience of our investment results, and students began to ask more questions.
In addition, I have a goal that I want to realize shortly – a mock investment competition for school students and teachers. They can only invest in cryptocurrencies. First, all students and teachers start with the same seed money with a total competition period of 45 days to enable investors to handle the volatility of the market in an extended period. I want to initiate this competition because there are no experiences that can be as good as losing money to learn about cryptocurrency risks. I wish we could expand our club activity outside our school, such as doing a public campaign in front of Capitol Hill about the risks of cryptocurrencies and NFTs.
Still, I believe that digital assets are the future. So my ultimate dream is to create a reliable cryptocurrency that people can trust and use as a form of currency like the U.S. dollar. Furthermore, laws and rules should be made to regulate this newly formed technology. To do so, I dream of learning more about financial law to help later create the proper rules that could protect people from being scammed. I will continue to inform people of the risks of crypto-currency investments and suggest ways to prevent fraudulent transactions and crimes against financial institutions.
I feel like NFT are very two sided. Those that are booming and has a good brand are getting very large sales. But those that aren’t are just mostly meme’s and people trying very hard to make allot of money out of it. But i see NFT as a good investment if u understand the concept and the fundamental’s of NFT u can make a large amount of money from it. For example loads of college’s have NFT course as a major, and loads of people participate in the NFT major. The NFT world is very popular among’s people, since loads of people are making a living out of it. What i find interesting is that the NFT market continues to grow spontaneously, even tho at first alot of people has allot of doubt on it. As stated NFT’s are Non Fugible Token that runs on blockchain to protect it, authorizes transactions and to protect its legitimacy. In my opinion NFT’s will continue to grow with crypto currency. NFT’s are also similar to Video Game currency they aren’t real in the real world and dont give u anything in return from buying them besides the NFT.
The concept of NFT and, by extension, Web 3, an umbrella term that incorporates concepts such as decentralized blockchain technologies and token-based economics, seem genuinely interesting during the modern age, an era where many of our activities now reside on the internet. As with any technological revolution, however, NFT, while promising great opportunities and profits to budding artists or entrepreneurs and speculative traders or investors, respectively, is not exempt from critical reviews, especially given the recent economic downturns further exacerbated by journalistic sensationalism exposing blockchain-related financial collapse in the likes of Terra LUNA, which wiped out almost $45 billion in market capitalization within a week.
To those unfamiliar with the concept of NFT, allow me explain with a simple, albeit clichéd, analogy. Imagine you wanted to buy, for example, Mona Lisa at a fair market price of roughly US$900 million. You pay the French government, and they give you a document stating that you now own the artwork, but the painting stays in the museum with a tag showing visitors that you are its rightful owner. An NFT is basically that – a receipt of ownership and not the “painting” itself. Using this analogy, we can detect some immediate shortcomings with NFTs.
NFT provides limited security for the buyer in the sense that, while it is supposed to provide digital scarcity, the purchased image or the digital token can be “duplicated” infinitely by a third party. To elaborate, when you purchase an NFT, you assume that you also own the digital file (e.g., a JPEG file) attached to the token. In reality, you are simply buying a “part of the blockchain” (or pieces of shared data) instead of the digital file itself. While the token is impossible to duplicate as that information is part of a network, the JPEG file can fall victim to downloads, screenshots, or other means of saving the file. This keeps the scarcity of the blockchain part of a token “safe”, but when a particular NFT is advertised to be, for example, a one-of-a-kind digital artwork, one has to ask how valuable the image file actually becomes?
It’s also important to note that NFTs have gained their value mostly through hype and “irrational exuberance.” According to The Washington Post, the Bored Ape Yacht Club, one of the most infamous and earliest NFT collections, had its average price drop by nearly 25%. In the same article, David Hsiao, the chief executive of the Black Journal crypto magazine, claimed that due to many outside factors such as inflation, rising interest rates, the overall declining prices of cryptocurrency, and the Ukrainian War, NFTs may experience an economic burst.
Despite such shortcomings, NFTs do not come without merit, as they are genuinely great way for artists to grow and make names for themselves online. Be they digital artists, 3D modelers, or musicians, it can be hard for these aspiring artists to create traction for their works even in the online era. With the use of NFT tokens, however, these obscure artists are able to sell “merchandise” of their own brand without the corporate meetings or manufacturing of physical goods. Even if they do not become mainstream stars, these artists will be able to make a career from their talents with relative ease as their works get sold.
Furthermore, NFTs as ledgers themselves are virtually impossible to duplicate in the shared network in terms of how they can be used as a secure way of storing online information. The blockchain, which is the system that NFTs operate on, is a new technology that few people understand enough to exploit its mechanics. Furthermore, the decentralized nature of the blockchain further strengthens its security measures. I have seen businesses use NFTs as a way to give out VIP passes for their customers. Since NFTs are intangible digital assets in a decentralized network with no visual form, it will be tough for online criminals to steal them, forge duplicates, or edit them in any way.
Lastly, NFTs and cryptocurrencies alike are a great way to perform online transactions. It’s fast, easy to use, and accessible for everyone. The difference between using NFTs and transferring money digitally is as follows. When using bank transactions, the money one sends is not immediately processed to its recipient. Instead, the sender first has to send the money to the bank or a third party. The third party then checks what currencies are being used, what other services or organizations may be involved, additional fees, the purpose of this transaction, and other factors. Due to such security checks, funds may be delayed by a couple minutes to a whole week. In contrast, transactions in the blockchain are executed directly between the sender and the receiver without a third-party, making transactions much more efficient for all people involved. Perhaps the biggest benefit is the use a unified currency, meaning that people will no longer deal with exchange fees.
History has witnessed economic bubbles come and go since time immemorial, and NFTs are no exception. But as the dot-com bubble had wiped out a huge part of the global economy and financial markets in the early 2000’s, the underlying technology has proven resilient and helped to create and sustain some of the biggest tech companies the world has ever seen – e.g., Tesla, Amazon, and Apple. In this regard, in an era where everything is becoming digitized, I believe it is only a matter of time that NFTs become as preponderant as what the websites, emails and smartphones have now become. Although I may not be the biggest supporter of NFTs just yet simply because they have yet to gain wide-enough trust among users, I’m still optimistic that they will one day become a part of everyday life.
Whenever I read an article like this, I yearn for a day when young people, especially girls, will learn how to interact with the up-and-coming crypto economy that is beginning to eclipse our current one. What I mean by this is the very notion that something has to be done in order to engage with this generation’s young innovators and dreamers. But what exactly can be done to make the current crypto economy kid-friendly? In order to answer this question, I will start by emphasizing the importance and value of NFTs.
What makes NFTs particularly special is that they are digital pieces of art that can be viewed and purchased by an expansive audience like never before. Currently, no other market out there can grant thousands, if not millions, of people unfettered access to seeing these “digital assets”. And although some skeptics of NFTs may argue that this will simply dilute the value of such pieces, they are missing one point that this article stresses, which is that NFTs are more than just digital goods: they are the epitome of human scarcity, in that buyers will spend upwards of millions of dollars just to “own that rare, unique moment.”
After discovering that these bursts of creative expression can appear in a diverse array of forms ranging from “original video footage of blocked shots in basketball games” to “social media memes”, I began to wonder about ways younger audiences could tap into this digital world/economy and channel their own creativity into digital works of art.
In order to reach this younger demographic of children, I decided that curriculums would be the first place to start. Specifically, coming up with ways to incorporate simmered down, easily digestible Web3 concepts into school lessons starting as low as 3rd grade would make the very idea of NFTs and cryptocurrency more relatable. My hope is that somewhere down the road other organizations such as Girl Scouts (which empower young women and their pursuit of STEAM-related careers) will endorse this revolutionary curriculum as well. While this seems very promising, in order to make students and children interested in the crypto economy, there has to be some other sort of engagement in the form of contests and competitions. After all, who wouldn’t want to win prizes consisting of online badges or merit or even money for creating digital NFTs?
To be fair, this idea is loosely based on the Doodle for Google contest in the sense that it requires students to submit digital illustrations and pieces of art, but in my altered version of this contest, I would have students create and code their own digital NFTs that would be voted on via polls administered on the blockchain platform. Winners of these monthly contests would either receive some compensation/reward in the form of cryptocurrency or other accolades, and it is because of competitions like this one that I envision that the crypto community could become a more brighter, colorful place than ever before.
Although this plan of mine needs some hashing out, in the meantime, this could be a very solid start to integrating technology into children’s skill sets and knowledge.
NFTs, or non-fungible tokens, are something that took the internet up by storm, however, NFTS have a few problems that can lead to its fall. However, as quickly as a trend can catch media attention, it can quickly fall back into obscurity if certain actions are not made to help NFTs out in the long run.
So, what changes can be made to NFTs to make it better? NFTs, simply put, are digital goods that people can buy and have virtual ownership. However, that is one of the many drawbacks of NFTs. While tangible items have actual value, the problem with the NFT is that although you have ownership over something, that something is an intangible item, which can’t be used for anything. Additionally, NFTs are losing value, as an example of this is the person who bought a NFT of the first tweet of the Twitter founder for 2.9 million dollars. When he tried to sell it later however, he failed to sell it for more than 14 thousand dollars. This could be because of the fact that the person who bought it thought of it as an investment and ended up failing. Although there is nothing that can be done in the event of an investment failure, you can do what the Bored Ape Yacht Club does, and create events for people who have the virtual ownership of their NFTs, to make it feel more inclusive. Additionally, when we buy items, we either use it or buy it for aesthetic purposes. However, since anybody can create anything in the virtual world, unless you want complete ownership over the item, it’s easier to just copy the picture.
Another problem of NFTs is the fact that some scammers are using NFTs as a way to make money. An example of this is the Phunky Ape Yacht Club, who just flipped the monkey picture from right faced to left faced. This simple change had made them 1.8 million dollars before they got banned from the centralized markets. However, they are still able to be purchased through other markets. Other people, also realizing that they can make a quick buck, started creating NFTs by creating one image and then slightly altering it to make a new NFT. Additionally, many NFTs sold didn’t come with copyright protection, meaning that anybody can make a copy of it without consequences. The simplest way to solve this problem is just to make it so that all NFTs have copyright protection for a certain amount of years after it was first sold, and to make it so that there are actual people that need to verify that the NFT wasn’t copied or something of no effort made. This way, there is more protection and effort in these NFTs. Additionally, increasing awareness on what is a NFT scam would help people not fall into the trap of buying a NFT for investment purposes.
In conclusion, NFTs have many upsides as discussed in the article, and with a few improvements, NFTs can be better than they are right now. These changes, although small, can make a huge impact on the virtual market.
i appreciate the way you explained about the NFT’s,but in my opinion NFT’s are ridiculous.It’s not really safe to invest in since it’s only just like a trend right now,also even if you had ownership over a NFT you cant even make use of them other than reselling them.Also NFT’s might just drop in value in the future.