In this blog, I continue with my thoughts on the relentless frenzy in the crypto markets. Although Cryptocurrencies have been around for a while, I want to discuss something new in the market that exploded in 2021; the so-called non-fungible token (NFT).
I suspect many had the same reaction when they first heard the term NFT. Like me, you’ll have scratched your head and asked what the flip is a non-fungy errrm?
It hit me that NFTs are an actual ‘thing’ when I read that the first tweet by Twitter founder Jack Dorsey was sold for $2.9 million. That’s a massive wedge of cash for the words “just setting up my twttr,”.
On first look, it seems to be a lot of something (cash) for, well, nothing.
Show Me The Money
So when Sina Estavi, the CEO of Bridge Oracle, handed over $2.9 million for Dorsey’s tweet, what exactly did he get?
Well, it revolves around the words non-fungible. The notion of fungibility refers to goods that you can exchange for similar items. So, for example, you can exchange a ten-pound note for other UK notes and coins, making it fully fungible.
The digital token signed by Jack Dorsey to prove ownership and now held in Estavi’s secure Etherium blockchain is utterly unique. Unlike currency, you can’t exchange it for something similar; that’s why it’s non-fungible.
It’s a bit like the Mona Lisa. There are millions of reproductions of La Gioconda on mugs, fridge magnets, postcards and the like. But there’s only one original Leonardo Da Vinci painting, so that too is a non-fungible item owned by the Louvre.
Clear as mud, right?
Art For Art’s Sake?
One thing’s for sure the NFT snowball started rolling in early 2021, and now it’s enormous. The current record paid for an NFT is $69 million for a digital painting called The First 5,000 Days by the artist known as Beeple.
NFTs now offer a way for established artists, poets, musicians, coders and writers to sell their works for significant sums and still keep the original copyright.
For me, there’s a whiff of the emperor’s new clothes about the NFT market. Currently, it’s driven mainly by market sentiment and what people are willing to pay for something that only exists as a string of digits in an Etherium crypto wallet.
But, of course, people said similar things about Damian Hurst’s preserved shark or Tracy Emin’s unmade bed, and those artworks are now worth millions. So who knows?
But I Haven’t Got $69 Million!
No, me neither, so you might conclude NFTs are only in the gift of the super-rich or silicon valley billionaires with more money than they can spend.
You’ll be happy to find that NFTs are now making their way out of the stratosphere into the reach of everyday folk like you and me.
The best-known NFT marketplace is Opensea, where you can bid on or ‘mint’ a piece of digital art for as little as a few dollars (payable in Ether). First, of course, you’ll need to set up an Etherium digital wallet, but that’s a straightforward process.
And to prove the expanding mass market development of NFTs, in November 2021, you could buy a limited edition digital McRib from McDonalds for a reasonable $50. All to celebrate the 40th anniversary of this much-missed sandwich.
You can expect to see many more of these NFT promotions from big brands in the future.
The Non-Fungible Future
As the market develops and more creators enter the space, you’ll soon be able to buy NFTs from people you admire that may also generate long-term value. In addition, originators from all disciplines will increasingly turn to NFTs to create limited edition pieces for their fans to own.
In a year or two, NFTs will be a commonplace asset and well within the grasp of everyone as they attract more talented creators and, no doubt, a good few charlatans too.
My advice for the would-be NFT buyer is the same as if you’re investing in some physical art: buy works you like and that you can afford and always from a reputable dealer.
Then, with good judgement and a little luck, you may have an asset that’s worth a tidy sum in the future.
Call my team today on 0161 511 2153 or email me at adam@meetenso.co.ukif you need future-focused accountancy support or want to discuss your business investments, including your forays into the exciting world of NFTs.