This February, The Fintech Times is taking a deep dive into the world of gametech. Grab your headsets and controllers and plug in to hear about the latest tech and celebrities influencing the market to the development of eSports and much more.
Having established what the metaverse is and its relationship with gaming, we now shift our focus towards the rise and potential fall of non-fungible tokens (NFTs), and particularly how this correlates to the technology’s relationship with celebrity culture.
From the moment the foundations of any new technology are laid down, there This was true of cryptocurrency and other forms of paytech, and such doubt is often substantiated by the yet-to-be realised potential of the technology.
This is also true of NFTs, a topic that frequently breaks headlines in the industry. And they’re a tricky business to wrap your head around. In some ways, it’s a branch of the traditional art industry, whereby others see it more in the form of a digital asset. Having grossed almost $1billion in sales in the last week alone, now’s a really interesting time to ask ‘will the NFT bubble ever pop?’
From the evidence provided by our industry experts, the answer to this is a firm no. In fact, we can see that on a whole, the global NFT market has actually managed to amass wind in its sails thanks to the recent onset of industry partnerships, acquisitions and celebrity endorsements. In this light, it is almost certain that NFTs will become commonplace within investment portfolios within the next five years, as Nigel Green, CEO of deVere Group explains:
“Over the last year, the NFTs market has exploded, with a digital-only piece of art selling for $69million in 2021. Since then, an ever-growing number of celebrities and artists, and fashion, music, tech and sports brands have been creating, buying and selling tokens.”
He continues: “Investors have been piling into NFTs for three main reasons. First, this new digital asset class has value due to the blistering pace of the digitalisation of our world. Millennials and Gen Z especially have digital lives and it’s natural to want to take digital representations of, say, luxury brands, music, sport and art into these worlds – and now they can with NFTs.
“Second, NFTs are making business models, especially in the creative sectors, more profitable and rewarding. Artists and musicians for example can provide enhanced virtual experiences for collectors and buyers, they can prove if their works are counterfeited, and they can include criteria to get royalties every time their works are re-sold in the future.
“And third, this asset class can act as a major diversifier in investment portfolios.”
This last reason, says Green, is arguably the most important for the majority of investors: “Proper diversification of a portfolio across asset class, sector, region, and currency is the best way an investor can best position themselves to mitigate risks and to seize opportunities when they are presented.
“NFTs have a very low correlation to other assets, such as stocks and bonds, and can, therefore, lower your portfolio’s overall risk and volatility levels.”
He concludes: “I believe 2022 will be the breakout year for NFTs and, due to the diversifier factor, within five years the decade’s hottest emerging asset class will become a standard feature of investment portfolios.”
NFTs in the trajectory of the art world
For as long as the technology has been about, there have been questions regarding NFT’s ability to redefine the lines of art ownership, and how this ability could facilitate its future use cases.
As Sam Tyfield of Shoosmiths law firm explains, it’s this unique ability to store subject-exclusive information that could not only prevent the bubble from bursting but could lend itself to reinforcing its walls: “There are differences between NFTs and other new or radical artforms, of course, but perhaps not as many as those who are either prophets of its doom or prophets of its glory would be willing to admit.
“NFTs are minted – that is what makes them unique and ensures they do not become just another portable graphics format or .png file. It’s easy enough to copy and paste an NFT from a screen and produce a .png – but the .png is not the NFT, it’s a copy of the NFT.
“In old skool nomenclature, the minting of an NFT should be the artist’s signature and an unassailable provenance for the art rolled into one. NFTs are art, capable of being unique. That unique art carries with it some intrinsic value. It’s a truism that the market value of ‘unique art’ depends on a huge number of external factors, including market appetite and that artists go in and out of fashion.”
“Decentralisation is the driving factor here”
This idea of art, ownership and NFTs was something that remained central to some of the technology’s more avant-garde forms, like in the creation of Robert Alice‘s ‘Alice’ iNFT.
But as Anthony Georgiades, Co-Founder of Pastel Network points out, the sustained success of NFTs largely depends on the accessibility of the market itself, rewiring how modern art is created, sold, shared and enjoyed: “We’re clearly in the middle of a massive NFT art boom, and the primary reason is the market’s accessibility. Decentralisation is the driving factor here. It allows anyone and anywhere to create or collect original works from artists – both large and small – without the stuffy and high brow red tape that cordons off the traditional art market.”
Great art has always been word of mouth, and as Georgiades goes on to detail, the spread and success of NFTs falls back on a dedicated community around the technology: “Unlike the traditional art space, NFT art is driven by the entire community – not a select few who can make or break artists’ works. This community aspect has brought creators, who were previously unknown to the world, to the forefront of the NFT ecosystem.”
Whilst speaking about her collaboration with Steve Aoki at the Token 2049 event ‘NFTs: From Zero to One’ in October last year, the digital artist pplpleasr cited meme culture and social media as the fastest accelerators behind the growing worldwide popularity of NFTs, saying: “I think memes are part of this journey because it’s the fastest way to spread information, and when you think about it in an advertising way, every time one of these memes is successful, you see it and have the intuition of ‘I want to share this with my friends or as many people as possible.’
“And so, creating a good meme is an element of calculating what the hit rate of the NFT going to be amongst like the average person, and then on top of that, there’s that tiny element of serendipity and luck, which nobody can grasp; that’s the hardest part.
“So sometimes, a meme just starts but then sometimes it’s totally random, and so that’s why I think it’s actually an extremely valuable to study what people are doing and seeing, because it can be the best way for people to advertise; a cornerstone of the digital token industry.”
The ability to relay identity in an exclusive yet accessible manner is an element that could give rise to the next generation of NFT technology; a mix between celebrity, collectables and fan culture.
NFTs and celebrity endorsement
From the onset, developers have been dreaming up new ways in which NFT technology could relate deeper with their audience, a task that would prove to be critical to both its potential rise and fall.
Although their existence is closely intertwined with gametech use cases, NFTs have now expanded their net to facilitate things like song releases and celebrity encounters, as Galina Likhitskaya of HashEx explains: “NFTs have been largely associated with the world of art and collectables, and those celebrities who have to do with the art industry have the fan base and professional skills to use the opportunities of the NFT market. As the market has started to grow and attract the mainstream audience, celebrities have started to see it as a potential opportunity for additional income and alternative business models.
“Some of the mainstream culture companies have followed suit. Thus, the famous filmmaker Universal has launched a metaverse for its artists in a partnership with Genies – a company specialising in digital avatar technology that in April of 2021 signed a deal with Warner Music Group. In the Universal metaverse, artists will be able to offer NFT-based merchandise including music releases and unique wearables for their fans who will be able to buy them to fashion their own avatars.
“By the way, in the music industry, the distribution of revenues to artists often looks unfair, which is the most glaring case with Spotify. Therefore, many music artists and record labels have started to turn to NFTs as a potential medium for selling copies of music. Thus, Kings of Leon were the first band in March 2021 to announce they would release their album titled ‘When You See Yourself’ as an NFT. This could help reinvent the distribution of music and allow musicians to get much more revenues from their work.”
The bottom line to any long-term growth plan is founded on sustained value and interest, something the emerging celebrity use-cases for NFTs could seek to facilitate.
“Although major brands, such as Samsung, GameStop and Adobe have been contributing to the hype by endorsing ‘cryptospeak’, this foretells a larger story,” comments Caleb Applegate, COO at Enjin, “one started by exuberant valuations but perpetuated by a corporate understanding of the potential of NFTs. As technological vehicles that can tokenise culture, amplify creativity, and facilitate collaboration of people on a global scale, I predict that 2022 will be the year of practical NFT use cases.
“This is not so much a bubble popping, as a change in focus – from speculative art investments to genuine utility, starting with NFTs that offer new gaming experiences, as well as new financial, insurance, and escrow options. Much of the resistance to introducing NFTs in gaming involves criticism of NFTs as merely a way of making money. However visual design and exclusive collectivity are aspects that have always existed within gaming – NFTs just extend and expand their function for 2022.”
“Lastly,” closes Georgiades, “let’s not forget that digital art as NFTs is just the tip of the iceberg for this technology. In the near future, NFTs will be used for identification, ticketing, IP, property rights, and so on. NFTs are here to stay in multiple forms.”