NFTs (or non-fungible tokens) have been on everyone’s lips for the past few months. Brands from Givenchy to the NBA are getting into the game. Its adoption by the mainstream has been so rapid and so profound that last year the Collins Dictionary even made the term its word of the year for 2021.
However, the fact that we have been talking about NFTs does not mean that everyone is converted to the cause. The fact that in the last 30 days (at the time of writing), 9 of the top 10 NFT sales were either Bored Apes or Cryptopunks, the two kings of NFTs, is proof that the NFT market in general has yet to capture the public imagination. If you’ve heard of NFTs in the press, chances are that article was illustrated by a bored monkey or crypto punk. Last year, a pack of 101 Bored Ape NFTs sold for $24 million and a Cryptopunk sold for nearly $12 million at Sotheby’s. Despite the plethora of new NFT projects launching every day, legacy tokens with a set resale value are still king.
The way much of the press has written off NFTs as speculative assets for the wealthy and digital trend-following talismans for the famous (think Jimmy Fallon, Post Malone, and Eminem) explains some of their bad reputation. But another is because, to many observers, they make little sense. An assessment that I think is completely wrong but deserves a rebuttal.
It’s not hard to see why non-crypto natives struggle to grasp the concept of digital assets being “non-fungible”. To many who have ever right-clicked “Save As…” on an image or video, the primary medium being ‘coined’ as NFT, this new paradigm of digital ownership seems strange.
As such, the coverage in the non-crypto press has in most cases been dismissive. This does not have to be the case. The technology behind NFTs is innovative and has tremendous potential across a wide range of use cases. Whether it’s allowing players to own and resell assets within the games they play; to prove ownership (or partial ownership) of physical assets such as property, or to help share music royalties more fairly, this embryonic concept has a long way to go.
The idea that code can prove the uniqueness, authenticity, and provenance of a house, character skin, or song in a decentralized, open, and secure way is profound. Smarter and more intuitive innovators than I will exploit this potential for a long time to come. But, many companies are going further again, attaching tokens to real-world redeemable benefits; moving digital asset tokens into a kind of club membership that provides ongoing value to the token holder.
Tokens don’t always have to have a high-tech application to provide value. At ThetaDrop, we are collaborating on NFTs with global brands like Samsung, Katy Perry, Dionne Warwick, The Price Is Right, and the World Poker Tour. In almost all of our partnerships, a key thread has been real-world rewards, or what is known in the crypto community as “utility” tokens.
This does not mean that tokens without this kind of use case are useless as critics claim. We cannot underestimate the value of art for art’s sake, or the community these tokens create around them. Also, do not deregister NFTs that are PFP projects, which are a combination of both. Like the currencies we use every day, NFTs have value because many people agree that they do. If a community of collectors and enthusiasts wants to support an NFT project, whether it be because of the shared values of a group or because of the attractive aesthetics of the tokens, then it is a worthwhile endeavor.
There are challenges to the widespread adoption and acceptance of NFTs. One is climate change, although one encouraging development is the sheer variety and number of projects that promise not only to be carbon neutral, but also carbon negative. Proof-of-stake protocols like Theta use less than 1% of the energy needed for the same transaction in proof-of-work protocols, which mostly mitigates any environmental concerns about NFTs. Makers and collectors are getting the message, and that can only be a good thing.
People often make fun of the news; sometimes this is due to a lack of understanding. If that’s the case, I think the crypto community deserves a small share of the blame. We are often too insular; too reluctant to explain to those outside our community what we are doing. Sometimes that’s for self-interest reasons, other times it’s because the task may seem too difficult. Many mainstream journalists could probably do better on this front as well, communicating more clearly about the technology’s potential.
NFTs are likely to become so commonplace that the term itself may fall out of use. Instead, we’ll just talk about the property, the technology behind it will be implied.
Guest post by Mitch Liu of Theta Labs
Mitch Liu is Co-Founder and CEO of Theta Labs. Theta Labs has pioneered Theta Network, the fastest, greenest blockchain built for media and entertainment; ThetaDrop, the world’s first real-time NFT marketplace; and THETA.tv, a leading decentralized live streaming platform.
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This post Say it again: NFTs are more than digital art
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