A New Frontier: Lessons Learnt From Exploring NFTs, The Metaverse, And More
The evolution of the blockchain in the form of images, both moving, and static has been expected, but the speed is the surprise.
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I put a down payment on a property in 2007 that doubled in price within one year. I was on a roll. So, in 2008, I put another down payment on an off-plan property. But this transaction did not follow the same trajectory as the former- nothing but a sign was put up on the land. I lost all the money on the down payment, as the "developer" disappeared with all the cash. And I was one of the lucky ones, because others had put in much bigger amounts.
What is the difference between the first property and the second? A trustworthy company with visible management and a reputation for delivery.
But what does any of this have to do with NFTs?
For starters, let me state that I am very excited about the possibilities of where NFTs are taking us in the worlds of branded goods, verified ownership, and community building. And, having been scammed before, I am being as careful as possible about buying virtual property, because that's equivalent to an off-plan property, in my opinion.
I'm writing this piece as I believe that you'd rather learn from someone who's made mistakes so that you can avoid them in your own endeavors. Therefore, here are some of the insights I have had while on this journey.
For starters, it's important to understand that non-fungible tokens are permanent contracts, not just JPEGs. To drive this point home, someone sold their house in Alabama as an NFT worth US$650,000 (pun intended).
Then, treat an NFT project like a startup. Like with any investment you make with your money, make sure that there are real people behind it, and look at their plans; otherwise, you are betting. Is there a clear team with professional backgrounds and a track record of success in something they have done? This means they will most probably want to deliver on their promises and continue to be a visible part of society. Will you have access to a community, or receive a physical item? What is the price? Is it too good to be true?
An NFT is a permanent digital record. The permanence of an NFT can be understood if you compare it to a tweet. There are many examples of celebrities and even presidents tweeting the wrong thing to the internet only to find that it is impossible to erase or "covfefe" it up- the reason is that millions of devices have already "saved" that tweet. In a loosely similar way, once an NFT transaction is made, it is secured and verified as real by a large network of devices around the world that are also incentivized financially to save this information. If someone thus tries to change the NFT record (or a tweet), the network simply rejects the change as false. This is how decentralization gives a permanent record, and thus, security to every owner.
So, other than images, where are NFTs changing fortunes? The globally successful DJ Steve Aoki has stated that he earned more from his NFT launch last year than from 10 years of traditional music royalties. Back in March 2021, for example, Aoki's Dream Catcher NFT art collection sale made over $4 million, with $888,888.88 paid for a single NFT by former T-Mobile boss John Legere. Now, Aoki is now stepping up his activity in this space, with the launch of a new NFT membership and metaverse platform called the A0K1VERSE.
Another use case is selling tickets as NFTs. The creation of tickets as NFTs gives more control over the resale market, more secure storage of tickets, and the opportunity for tickets to be viewed as digital collectibles. NFTs are most valuable when there is utility and community. Gary Vaynerchuk has famously added a real world utility of sending a copy of his book to buyers of his NFT, in addition to allowing the NFT to act as a ticket to his conferences. His company made $90 million from the release of his NFTs, and it continues to make recurring revenue from re-sales.
The best NFT collections are becoming media and entertainment companies in the making, by launching characters that people can buy that then become characters in a cartoon for which the owners earn royalties, with the ability to even sell merchandise and earn licensing fees. All built into the NFT contract, with no meddling middlemen. As for art, let's agree that it is subjective to say the least, and people will pay what they think something is worth. For example, a canvas painting called Black Fire 1 by Barnett Newman sold for $84.2 million a few years ago. It is a physical canvas that is painted half black and half white. But I'm not here to judge.
Related: Five Things A Metaverse Sceptic Learned By Buying Real Estate In A Virtual Universe
Contrast that with the artist, Beeple, who was creating a digital artwork everyday for 5,000 days straight without a clear end goal. When NFTs came along, he put all his 5,000 days of work up for sale as one image, and it fetched $69 million. A historic sale by Christies that put NFTs on the traditional art map. Which is worth more? What matters is that if there are buyers who agree on a price, our opinion doesn't. However, here are a couple of points of difference between physical and virtual works:
- Consider the "certificate of authenticity" use case. I had worked with a gallery to mint a collection of physical works for this year's edition of Art Dubai, where the NFT image will act as a digital certificate of authenticity, and we are including an image of the original, written certificate of ownership to be a permanent record. So, the paper certificate can be damaged, but the digital one cannot.
- It will give you the ability to show off. In an age where we spend hours of our day looking at life through screens, doesn't it make sense to showcase our prized possessions or interests through proven ownership of digital products or images?
The next point to consider is that gaming is the sleeping NFT giant. Roblox is an existing game that has 45 million users who spent 45 billion hours on the platform last year, and it is valued at over $40 billion. Separately, in the world of crypto, people spent over $40 billion on NFTs in 2021. So, you already have virtual worlds and now you have NFT markets, so what happens when you combine the two?
Here's the bit that most people have not understood yet: NFT games pay the players in tokens that have real dollar value- this value can make people wealthy (note: this is not investment advice). In fact, a game called Axie Infinity has earned players in poor towns in the Philippines life-changing wealth in 2021. They call it play-to-earn, and major projects are being developed with billions of dollars already invested. Even investment bank JP Morgan has come out with a report saying the metaverse is a $1 trillion opportunity. The bank also opened a virtual branch inside of a virtual land called Decentraland. Its MANA token rose 4,000% in value from 1 Jan 2021 to 1 Jan 2022.
It is not all virtual sun and rainbows though. Most of these projects, or virtual crypto lands, have only a few thousand active monthly users. One of the main issues is that friction is very high for new users. In plain English, this means that you need to learn a few new technical steps to take part, and people don't generally like to click more than three times to get somewhere online. This includes the learning curve that is required to set up wallets and accounts to buy crypto tokens using real money. In my case, I began my cryptocurrency journey as a learner and then teacher in 2014 with a friend who had launched an early practical crypto product- a way to top up your phone credit using crypto. I was then lucky enough to be a founding member of the Dubai Blockchain Council in 2015.
The evolution of the blockchain in the form of images, both moving and static has been expected, but the speed is the surprise. It is not just a new technology, it is something that enables people to own part of what they are buying and to grow with it. So, if you would like to grow at the speed of the internet, try exploring it with an NFT in the metaverse. And maybe fly by and say hello. See you there.
Related: Four Key Areas Forward-Thinking Countries Need To Focus On To Build Blockchain-Aware Populations