Money & Markets: NFTs are the latest cryptocurrency craze
Image credit: Dreamstime
As cryptocurrency becomes massive, a new digital revolution in digital art and media has become the next big thing. However, it could already be over.
I’m back from a deathmatch with Covid, hence my silence last month. It was not only a grim and gritty voyage towards the crematorium, it was also an expensive one. You can’t trade in a delirium and my plight took me out of circulation during a bout of wild fluctuations and rises in crypto.
I’ve written about crypto a lot here over the last year or so because I have felt it was a tremendously important developing market. I also thought it would be very interesting to engineers, as it would be increasingly something they would be dealing with, and because technologists are a big cohort of wild market speculators to which crypto plays directly. I also thought it was an arena charged with potentially huge profits and anyone who jumped on Bitcoin et al last year must surely be hodling jumbo profits.
Cryptocurrency and DeFi have become massive markets and are fast boring into all aspects of life, but while I suffered feverishly in the pit of Covid, cut off from the markets, up popped the third leg of the crypto revolution: ‘NFT’, aka non-fungible tokens. ‘Non-fungible’ means a thing is unique and cannot be replaced by something else, unlike a pound coin or a Bitcoin. For example, a one-of-a-kind trading card is non-fungible and is not interchangeable with any other.
This boom, bubble, bust has flowered and gone to seed like spring cowslips; by the time I was fit to trade again, the mania was over. It literally lasted about as long as a dose of Covid-19.
An NFT is a different kind of token from the ERC-20 tokens for which Ethereum blockchain is famous. They are in fact ERC-721 tokens. Each token is identifiably unique.
Cryptokitties, a game of owning and breeding digital cats represented by NFTs, were the first major outing for the format and ground the Ethereum blockchain to a halt, but things have moved on since then. For one thing, the cost of using Ethereum, like the value of the coin, has gone to the Moon.
NFTs allow someone to link a digital object or a digitised object to a file either on or off the blockchain (mostly off, for cost reasons) and the initial takeoff has been digital art on sites like Rarible and Opensea. The whole arena exploded into the headlines when a collection of such art by an anonymous chap called Beeple was sold at Christie’s for an unexpected and mind blowing $69m.
Even though there were 5,000 images, that’s over $10,000 a digital piccie and in total a completely jaw-dropping outcome. Boom, everyone wanted to know what NFTs were. As I always jump right in on new technology, I already had my own, available for a few dollars, which no one bought. Soon, after a rash of high-profile sales - many of which looked like self-dealing wash trades - people rushed to make their own, only to find out no one seemed to want to buy theirs.
As Douglas Adams once wrote: “Foooop”. Boom, bubble, bust.
However, for NFTs this is just the first boom/bust cycle. DeFi is on its second, Bitcoin on its fourth or fifth. 8-bit art is not the future of NFTs: your house deeds are; your employment contract is; all sorts of valuable documents are. For instance, in the modern acronym hell, imagine KYC, AML and NFT.
NFT is the third leg of the crypto revolution and the markets for the tokens of the companies involved will spiral like cryptocurrencies and DeFi projects as new and more sustainable and more valuable applications are developed with this technology.
IP, beloved of us all, is just the sort of thing an NFT can be linked into both in areas like registration, recognition, publishing, licensing and trading. It’s not just doing what is already done better; it’s the possibility of doing things that are impossible or impractical now. It’s yet another disrupter so beloved to venture capital.
NFT is another opportunity and market goldmine for tech-savvy traders or engineers prepared to start hacking in the near-impenetrable undergrowth of the jungle of crypto code.
It is another dark forest full of treasure, but the sobering thing is that soon enough there will be another crypto breakthrough to match cryptocurrency, DeFi and NFT. Then, another and another.
These will be markets, employment and venture opportunities that will last a lifetime.
Having survived Covid, I am left in awe at that potential and the way ahead.
Sign up to the E&T News e-mail to get great stories like this delivered to your inbox every day.