Since last year, the world has been a witness to the phenomenal rise of non-fungible tokens or NFTs. Two stats buttress this point. NFTs grew by nearly 300 per cent in 2020, according to the NFT Report 2020 published by L’Atelier BNP Paribas and Nonfungible.com. As per a Reuters report, NFT sales volume rose to $2.5 billion in the first half of 2021, up from a meagre $13.7 million in the first half of 2020.
In simple terms, NFTs are digital assets, backed by blockchain technology, representing things such as art, collectibles such as photos, videos and music, or even real estate. These assets are non-fungible, which means each token is unique and one cannot get a like-for-like replacement when they are traded. Think of Pokémon cards and how some cards are more powerful than others.
Lifesaver for artists
Amid the pandemic-induced global economic slowdown, NFTs have emerged as lifesaver assets for artists across the world. Sample this: In March, Beeple – alias for Mike Winklemann – sold an NFT of his art “Everydays – The First 5000 Days” for $69 million. Until October 2020, none of his artwork sold for more than $100. Winklemann, with many of his NFT artwork selling for high prices, can be termed as poster boy of the “NFT craze”.
NFTs offer several benefits to artists and digital creators. For starters, they ensure democratisation of the marketplace, where middlemen are non-existent and artists can directly sell their work. Since NFTs are not interchangeable, they are scarce, making them an expensive but valuable collectibles to own. Furthermore, several NFT contracts also help artists to earn royalties from secondary sales of their NFT artwork.
Michael Lennicx, a veteran art director and co-founder of ‘Pinazza’ NFT project, believes this is a lucrative period in history to be an NFT artist. “You can build your own audience, be your own distributor and have licensing rights to your art; sell these to collectors and even get a percentage of resale,” he says.
NFTs’ potential beyond art
While the recent buzz around NFTs has revolved around the art world, NFTs, experts believe, can be useful in several spheres of society. For instance, San Marino, the tiny nation surrounded by Italy, has reportedly come up with an NFT-based vaccine passport. While still not in use, NFTs, many believe, provide the perfect opportunity to secure important documents and help prevent any identity thefts.
A 2018 Niti Aayog report on blockchain had mentioned the possibility of using blockchain technology for maintaining land transaction records. Since NFTs are also powered by blockchain, the possibility of NFT-linked land records cannot be ruled out in the future.
Collateral security, which is a key element of the banking and finance industry, can also see a NFT disruption. “”NFTs could possibly serve as a digital alternative to collateral securities that are being used for lending activity across the finance world,” says Yasin Bijepuri, a senior investment banker at a UAE-based bank.
NFTs and Charities
NFTs have been used for noble causes too – and can potentially disrupt the philanthropy sector. Twitter CEO Jack Dorsey donated the proceeds – $2.9 million – from the sale of his ‘first tweet’ NFT to GiveDirectly, a non-profit organisation. Moreover, organisations such as Save The Children were among the first to accept cryptocurrencies/NFTs in charity.
Some NFTs such as the ‘Pinazza Project’, co-founded by Lennicx and crypto enthusiast Wiley Mathews, have a notable charitable component too. Recently, the US-based gamified NFT project launched a new series of NFTs – ‘Pinazza Pinas’. From the sale proceeds of the new NFT series, the project will donate $50,000 to mental health charities selected by community members.
Simply put, gamified NFTs are interactive and give rewards to the user.
“I wanted to support mental health research, which is similar to the pineapple fund (crypto-based charity fund), and also celebrate Bitcoin pizza day (commemorates the day when a pizza was bought with a bitcoin). Two things came together as one idea, but we wanted to create a whole world to bring people together,” says Mathews on his NFT project.