Digital goods have taken the world by storm. Amid the recent cryptocurrency bull run and a global pandemic that has upended people’s social lives, there has been a recent craze surrounding digital items known as NFTs. NFT platforms such as OpenSea, Rarible, SuperRare, and NiftyGateway have all seen explosive growth in the past few months. NBA TopShot, a platform that allows fans to collect and trade unique NBA highlights, has done over $230 million in gross sales since its inception. Jack Dorsey is selling his first tweet. Elon Musk is selling an NFT. If you’re new to all this, you may be confused about what NFTs are and why people are paying so much money for digital stuff.
Well, what the heck are NFTs? NFT stands for “non-fungible token,” which is a token that is one-of-a-kind and non-replicable. Simply put, they are a way for anything existing in a digital space (digital art, video game items, memes, etc.) to have true scarcity. Before blockchain technology, there was no way to truly “own” something on the internet. For example, if you bought an exclusive Fortnite skin, the game’s creator could essentially “delete” the skin you own, or they could decide to sell new, indistinguishable copies of that skin. With blockchain, specifically smart contract platforms like Ethereum, people can now truly own unique digital items.
Much of the conversation around NFTs regard them as purely speculative assets. Many believe that the only reason people buy NFTs is to resell them at a higher price. That may be true for many of the current projects out there, but speculation is not the main value proposition of NFTs. NFTs, or digital goods, are often better alternatives to physical goods. In the case of the art market, crypto art is better than physical art because it is easier to show off, it does not degrade over time, and artists can take a royalty off of resells. Wealthy people are spending millions on digital art because these artworks are seen as extremely valuable products that money can buy.
In the future, NFTs will be seen as legitimate products, just like clothing or home goods. For example, NFTs are a much better alternative to physical products that are seen as “status symbols.” It is much easier to show off digital items on the internet, and people can easily verify your ownership and when you bought that item. NFTs are a game-changer for the celebrity/influencer merchandise market. Instead of selling physical products with manufacturing and shipping costs, it would be much better to sell digital items since their value is based on the celebrity’s brand power. Furthermore, NFTs will improve fundraising for charities. Who wouldn’t want an NFT that shows that you have donated to a good cause?
We’re still in the very early days of NFTs and digital goods. While it may be true that the current market is over-speculated, NFTs are here to stay. As our world becomes increasingly digitized, it just makes sense that people will continue to value digital items, perhaps more than physical ones.
About me: Hey I’m Varun. I’m the current president of Rutgers Blockchain, and I’m a huge lover of NFTs, Ethereum, and all things crypto. I’m also building an NFT startup, Fundible, where we plan to allow social media creators to sell digital items to their fans. Feel free to reach out at firstname.lastname@example.org with any feedback or questions.