NFTs: Learn Lessons from Your First Steps in the World of Digital Collectibles
Collectibles have been part of human culture since human history. Shells, bones, feathers, pigments, and arrowheads have been found in settlements tens of thousands of years old. While Non-Fungible Tokens (NFTs) are new in some ways, collectibles are older than civilization, and collectibles as investments have also been a big part of business history.
In the business and technology worlds, there are many stories that unfold as a combination of boom and bust. The railroads in the US and the dot-com bubble are two obvious examples.
These stories make some investors poor. However, the same stories often enable advanced business models and lead society to new levels of prosperity. The NFT sector seems to be following a similar path today.
Long depression bubble of the 1870s
The 1870s were a decade of rapid industrial development, railway construction and the establishment of new social societies. In the United States, 237,000 miles of railroad were built from 1870 to 1873. Various types of speculation were also widespread during this period (e.g. buying land along the railroad lines for later resale).
The crisis began with a stock market panic in May 1873 on the Vienna Stock Exchange. In September the crisis reached the USA: first the Northern Pacific Railroad Company went bankrupt, then some of its competitors, then it was the turn of banks and industrial companies that supplied rails, rolling stock, etc. A chain of bankruptcies followed.
Many investors lost money, but some services and companies took advantage of the boom to grow and expand, and railroad infrastructure served the US economy for decades.
The dot-com bubble from 1995-2000
The dot-com bubble was created by the rise in the shares of Internet companies (mostly American), as well as the emergence of a host of new Internet companies and the realignment of old companies towards online business in the late 20th century. The stock prices of companies offering the use of the Internet for income have skyrocketed.
These high prices were justified by numerous commentators and economists who argued that a “new economy” had arrived, but in fact these new business models proved ineffective, and the money spent mostly on advertising and big loans sparked a surge of bankruptcies, a sharp drop in the NASDAQ, and a collapse in server computer prices
The bubble peaked on March 10, 2000 when the NASDAQ index hit 5132.52 points (its daily high) during trading and fell more than one and a half times at the close of trading.
When the bubble burst, the once promising projects were left penniless. The money evaporated from the industry and even companies whose businesses were based on more than clicks and high-profile advertising suffered enormous losses. For example, the shares of the telecommunications company Cisco fell 86% and those of Amazon fell 93%.
Again, many investors have lost money, but some services and companies, including Cisco and Amazon, used this time to lay the foundation for long-term growth, and Internet infrastructure has served the global economy for more than 20 years.
Digital collectibles, also called non-fungible tokens (NFTs)
“Gold is gold everywhere, fungible and indifferent. But when a gold disc is stamped by a mint with certain pompous words and the image of a king, it receives added value – seigneurage. It only has that value insofar as people believe it is – it’s a shared fantasy. “
– Neal Stephenson
A good is fungible if a unit essentially corresponds to another unit of the same good of the same quality at the same time, in the same place, etc. In particular, cash is fungible.
Non Fungible Tokens (NFTs) are tokenized versions of assets that can be traded on a blockchain. While cryptocurrency coins like Bitcoin are fungible, NFTs are the opposite as the underlying assets are in some ways unique and cannot be exchanged for the same.
This uniqueness enabled Christie’s to sell the NFT “Everydays” by digital artist Beeple for $ 68 million in March 2021. NFTs are also used to trade in collectibles like baseball cards and computer game items like weapons and avatar skins.
Examples of NFT Success Stories: Celebrities and Influencers
- Actress and businesswoman Lindsay Lohan sold an NFT image of her face through Rarible for $ 17,000. It was later resold for $ 57,000.
- Grimes, singer and wife of Elon Musk, sold a digital art collection called WarNymph on Nifty Gateway for $ 5.8 million.
- Former baseball star and artist Mika Johnson sold his artwork for $ 2 million on Nifty Gateway in just 28 hours.
- The American YouTuber Paul Logan has published a collection of 3,000 video clips in which he unwraps new Pokémon cards. In one day, he sold 1,772 tokens on the Bondly platform for a total of $ 3.5 million.
- DJ Justin Blau, aka 3LAU, sold his album for $ 11.7 million on NFT.
- Video games and virtual items
One of the most popular games in the crypto space is Axie Infinity, in which you battle and level up against a team of Axie pets. The game gained popularity in the Philippines. There’s nothing in the gameplay that resembles a blockchain game, but there is one important benefit – the ability to openly trade Axie in NFT markets like OpenSea. Earning tokens from the game has become a good source of income for players, even exceeding the minimum wage in some countries. There is also a decentralized autonomous organization (DAO) called Yield Guild Games that Axie rents out to players who want to play but don’t have the money to buy it. Several rare Axies were purchased for a total of $ 159,000.
There is another popular game, Dark Forest, where you explore different planets and collect NFT artifacts that give bonuses when tied to a planet. The ability to discover and collect these items or even win them in battle and then trade on decentralized markets makes the game even more fun.
Current state of the digital collectibles market following the recent correction
On the one hand, according to blockchain media protos.com, the amount of NFT sales in the last week of May fell by 90% compared to the beginning of the month. At its peak, sales were approximately $ 103 million on May 3; At the end of May, the market fell to just about $ 19 million in a week.
On the flip side, Cointelegraph quotes: “While the current statistics look poor compared to recent all-time highs over a period of time, it can be seen that the average number of NFT sales between January and the end of May. This shows that the sector is strong despite the market slump that began on May 12th. “
The NFT ecosystem may have seen a sharp drop in activity and token values over the past month, but it’s far too early to announce the death of NFTs as the world has only scratched the surface of what is emerging with this one Smart contract technology is possible. “
Findings from Top Shot
One of the most popular and effective NFT projects is NBA Top Shot, which was founded by the blockchain company Dapper Labs.
- Top Shot’s first success factor is the support of a strong sports organization – the NBA – and a wide audience of NBA fans who want to buy NFTs regardless of market conditions.
- Second is the active guidance from Dapper Labs. This experienced team also has other successful NFT projects, including its own blockchain platform and payment tool for NFT – the cryptocurrency Flow.
- Another important factor in introducing appropriate technology and business solutions was the creation of an advisory board in which the NBA worked with Dapper Labs. They formed a blockchain advisory board with top entrepreneurs like Brooklyn Nets owner Joe Tsai and Dallas Mavericks owner Mark Cuban, Steve Pagliuca (Boston Celtics), Ted Leonsis (Washington Wizards), Vivek Ranadiv (Sacramento Kings) and Ryan Sweeney (Utah) Jazz).
- As mentioned earlier, strong community engagement is an important factor for a successful NFT implementation. The NBA, its players and fans are also very active on social media, which has contributed significantly to the success of Top Shot.
In our opinion, any other ecosystem that wants to make their NFT / digital collector ecosystem a sustainable success should
- have a committed community,
- be active on social media,
- Partner with an experienced blockchain company and …
- be ready to work in close collaboration with entrepreneurs and experts to continuously improve business models and relevant technical tools that do them good
According to a recent estimate published in Techcrunch, the estimated size of the global collectibles market is $ 370 billion. Physical gold had dominated the vast niche of the “store of value” niche for millennia, but now it is seriously challenged that crypto is a worthy rival in this area, worth trillions of dollars. Similarly, the market for collectibles had remained largely physical for centuries; Now, however, this market has no choice but to evolve over time as the digital David emerges to challenge this Goliath and many think that NTFs / digital collectibles are the future of this market.
Alex Lightman is the founder and CEO of Keemoji and KeePay, the makers of digital privacy keyboards and a new platform for payments, tokens and digital collectibles. He is the author of Brave New Unwired World and Reconciliation, co-author of Augmented: Life In The Smart Lane, and has received four global awards including the inaugural Economist Magazine Readers’ Award for Innovation, where he defeated Elon Musk in a global vote.
Disclosure: The author owns several NFTs, and his companies Keemoji and KeePay are working to bring access to the digital collectibles ecosystem for millions of mobile users from sports teams, major sports and esports leagues, telecommunications companies, and influencers.