You may have seen headlines recently about a digital creator’s collection selling for $70M, a video-game gif with a character named Nyan Cat selling for $500k, or Jack Dorsey’s first tweet on Twitter sell for $2.9M. With the crypto boom of late 2020 and early 2021, multiple digital industries have emerged: the most prominent being NFTs.
NFT stands for Non-Fungible Token, a unique digital asset that contains audio, video, or images. NFTs are verifiable through blockchain technology and are primarily bought and sold using the cryptocurrency Ethereum. NFTs are often referred to as digital art, and the marketplace and overall demand for the asset determine the fair value for an NFT. The primary difference between traditional digital art and an NFT is that an NFT is “real.” A real-life parallel demonstrating the concept of NFTs is DiCaprio’s Mona Lisa painting – where the original artwork from DiCaprio has more value than remixed works such as a Mona Lisa t-shirt or an entirely fake version. Taking this concept back into the NFT space, there will be more demand and value for an image of the first Tweet made on Twitter by the founder, rather than someone simply taking a screen capture.
The most prevalent and exciting part of NFTs is how creators can monetize their work. Creators can monetize their work by giving their audience the option to monetarily support them, implementing strategies to profit off future transactions of specific NFTs, and offer benefits to NFT holders. Simply by releasing an NFT, creators provide a method for their audience to support them, rather than giving just a donation. Also, creators can implement royalties in NFTs, which can result in millions of dollars in future income for high demanded works. The NFT creator Beeple is a great example – $70M NFT seller, Beeple, has implemented a 10% transaction royalty for particular NFTs, which will continue to pay him or his beneficiaries for years to come. This is an element of NFTs that isn’t seen regularly in the physical art space, and the ease of blockchain and online transactions allows it to occur quickly.
Creators are not the only people benefiting from NFTs. For starters, creators can offer their NFT holders specific benefits. This can be a physical good, service, or a digital incentive that increases demand for specific-NFTs and increases their price and value. The primary financial benefit of owning an NFT is appreciation. Many high-demanded NFTs have skyrocketed in value with the recent crypto boom, offering significant gains for investors.
Author: Gavin Murphy