By Jack Cheng, CEO of GazeTV
At the beginning of March, musician Grimes sold an NFT bundle for $6 million. Canadian-artist Krista Kim recently sold an NFT backed digital home for $512,000, and music producer 3LAU sold the naming rights of a song for $1.33 million.
It’s safe to say most of us aren’t going to buy these things.
Yet NFTs are often pitched as the bridge between crypto enthusiasts and those who don’t know the difference between Ethereum and Cardano. The idea that the mainstream retail investor will start buying these non-fungible tokens, however, is a bit far fetched. The majority of people still don’t understand what an NFT really is, or what it means to own these real or intangible items—such as graffiti or a tweet. Once the hype dies down, however, NFTs will bring real value beyond the budding blockchain economy.
A creator’s aim is to expand accessibility to the art they produce. Exposure means more eyeballs on their creations, a crucial step toward achieving the purpose of art: to give people a sense of emotion. Accessibility, however, is one thing, and ownership is quite another. For artists to earn compensation for their work, ownership rights to their pieces must be limited. A piece of artwork is scarce and one-of-a-kind, but if people are making copies of the piece, the original work begins to diminish in value. When artists use NFTs to sell their work, they can divide the full artwork into pieces and each person can own a unit.
It’s becoming increasingly popular to buy non-portable pieces of art, such as graffiti, with NFTs. Spanish artist Felipe Pantone, “PANT1” in the graffiti and art world, for example, recently released a series called “Graffiti Collection” as his first NFT release on Nifty Gateway. As these artists begin to sell their collections on the blockchain, however, it’s becoming more evident that NFTs are of more immediate value to collectors than to average people.
How do we bridge the gap?
Hype is driving the NFT boom right now, partly because of the current round of colorful headlines. When listening to two crypto enthusiasts talk, they don’t always fully understand the real meaning behind NFTs. Ifsomeone purchases a tweet, or a clip from a sporting event, these NFTs are not private and the world still has access to them. So do the owners get royalties, or what exactly does “ownership” of these digital collectables mean? Many can’t fully explain.
Once this initial bubble bursts, NFTs will eventually re-emerge. When they do, they will have real utility—similar to the ICO boom of 2017 and the crypto resurgence we see today. In a digital economy in which artists have struggled since the dawn of the internet, NFTs have the potential to ultimately be able to help artists secure royalties.
Street artist Alec Monopoly and Latin musician Ozuna began collaborating on artwork that features both of their brands. They believe that as more mainstream artists move to an NFT format, their fans move there as well—buying pieces of art and buying music rights. But as we’ve discovered, many NFTs are too expensive for most people. A Lebron James highlight, for example, sold for $200,000, while the HomerPepe cartoon frog sold for $320,000.
The average person doesn’t have hundreds of thousands of dollars to spend on a graphic or tweet. Once the craze cools for the collectors, and if NFTs are more affordable, other people will want to join the movement.
Stability is a major deterrent for many concerned about the NFT space. The stock market is volatile, but it’s been around since 1792. The market has changed but never disappeared, and people seem comfortable with that reality. There is a sense of security, even in times of crisis.
Even cryptocurrencies, such as bitcoin, Ether, and Cardano, are better established than NFTs, and as volatile as they are, the name-recognition factor and over a decade of existence as a concept makes a difference.
The stock market is also regulated—people essentially understand how and why it moves. Crypto has no central authority—the main pull for those involved—and is known for its rampant volatility, which is concerning to more conservative spenders. This decentralization is the idea behind NFTs, too.
There is also a misconception of cryptocurrency as an abstract construct with no tangible value. Most average people don’t understand how cryptocurrencies work, as not everyone has the patience to really dive into the nitty gritty of tokenomics function. As businesses increasingly begin to accept Ether and other cryptocurrencies that are exchangeable for NFTs, more people and businesses will be willing to use the currencies. Considering most NFTs these days are sold on Ethereum, the rise of DeFi networks could fuel an NFT boost, or vice versa.
Another deterrent for many are the gas fees on Ethereum. The fees are high and will have to be lowered, or NFTs will move to other blockchains, as they have already begun to. It’s rather daunting for a teacher in Iowa to buy a $100 NFT if the gas fee is another $60-100.
The faster crypto moves into the mainstream, the more likely people will follow—similar to fashion trends, music, and art. NFTs will follow. It’s less a question of if, but more a question of when NFTs will become more affordable to the soccer mom in the suburbs, or the all-american high school quarterback. Once prices stabilize, NFTs will break into the mainstream market. It remains to be seen if this will happen in the next year, or the next 20.