NFTs are the next big thing… Or maybe they’re the current big thing and will be gone in a few months time, depending on who you ask. Some people are making millions from selling NFTs, others are losing their savings; it’s not a guaranteed opportunity.
Personally, I think they’re a really interesting concept which could create amazing opportunities, but (like all digital things) the initial value is potentially misunderstood.
So, what is an NFT? 🃏
NFT (or Non-Fungible Token) is a cryptographic token usually tied with an image or a video. The selling point is that an NFT is “digital art”, and by using crypto technologies within the art it essentially authenticates it as the original piece.
You wouldn’t buy a Banksy if it wasn’t authenticated, and similarly digital art will now be in the form of NFTs to ensure you own the original.
There are other benefits to NFTs, too. Like when you resell the NFT the original creator can earn a percentage of the sale, you can make use NFTs as keys for digital clubs, and other interesting things.
The key flaws with NFTs 📉
There’s a couple of issues with the current NFT market I can see.
Firstly, the whole “digital art” concept has its own issues. Don’t get me wrong, there is a place for digital art, but whether it’s currently priced fairly is another issue caused by people flocking to try and purchase NFTs to make a quick profit.
Physical art and collectibles have real world application. You can hang an art piece and wear sneakers.
Sure, you can hang a monitor with an NFT on it, but if you lose access to your NFT it’s probably not a straight forward process to recover.
Whereas you can insure art and physical collectibles. As far as I’m aware, there is no insurance available for NFTs yet.
The other benefit of physical collectibles is that if you’re an artist yourself you can customise and change them to increase or reduce the value. You own the art, and it’s your decision what you do with it (including ruining it).
The same can’t be said about an NFT. You can’t buy an NBA clip as an NFT and alter it into a deep-baked meme.
Additionally, the comparison between physical and digital art also loses significance when thousands of an NFT is released.
Sure, thousands of NFTs from certain artists makes sense. For example, if Kanye was to release only 10,000 of his next album as NFTs it would be on-brand for him. However, thousands of NFTs being released by Logan Paul which were drawn by some graphic designer he hired doesn’t really hold the same significance.
Ultimately the quantity of pieces should dilute the value, whereas in many cases the NFT is priced like it’s one-of-a-kind when many exist.
Finally, NFTs also have a huge carbon footprint. I cannot speak on this properly because I am not an expert in the science, but blockchain transactions actually have a huge climate impact, which potentially hints that the longterm value may be… volatile.
Should NFTs be your next side-hustle? 💰
NFT is a blanket term at the moment, so to discount all NFTs as bullshit would be a bit daft. Investing in NFT releases from artists like Beeple obviously has more value than the Logan Paul drop.
The issue with new opportunities such as NFTs is that the initial hype inflates prices on otherwise worthless assets. So if you just plan on buying and reselling NFTs, I wouldn’t without fully understanding what you’re purchasing and its longterm appeal.
Buying some influencer’s NFT is probably not a great longterm investment, for example. You don’t know what scandal they might have in the next 5 years that will make the NFT valueless. Think Jimmy Saville collectibles, for example.
If you’re an artist (whether it’s music, film, writing, illustration, etc) and you’re looking for a way to monetise, NFTs are looking like a very promising opportunity.
Even if it’s a short-term opportunity, artists should try to release an NFT simply as a “at least I tried”, otherwise you could miss out on an opportunity that generates revenue longterm.