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There has been a great deal of popular interest around crypto-currencies and blockchain technology already in 2021. With all the talk of Dogecoin’s sky-rocketing value, or Mastercard’s decision to accept Bitcoin payments, one could easily overlook what may end up being the biggest development in the world of Blockchain today. That major development is the growth in popularity of Non-Fungible Tokens, or NFTs.
NFTs are a type of cryptocurrency token that are tied to a digital asset, such as a piece of art or music album. The purchase of the NFT provides proof of ownership for the digital asset, which is usually rare or unique.
The reason this is so important is that it’s a potent example of how blockchain technology can directly impact and alter the way we value and market digital products. Ever since Napster lost its legal case to share copyrighted music on its peer-to-peer software client in the year 2000, the traditional entertainment industry has been grappling with how best to monetize and regulate music, film and television in the digital age. Streaming services, such as Spotify and Netflix, are seen to be the “least worst” option as of 2021. But this does not overlook the fact that the 1.2 million artists and bands that lease their music to Spotify only stand to earn $0.005 in royalties every time someone streams a track of theirs.
What has been missing in the intervening years between the advent of the internet and the present day, is a way of creating value out of digital objects. This is because in order to create value in a capitalist economy, products need to be tied to scarcity. It means nothing distinctive if I own the first, or the 10,000th instance in an infinite series of digital copies.
All this is now changing with the arrival of NFTs, which leverage blockchain technology to create truly unique and identifiable digital products. This has led to a huge surge of excitement and interest over the potential applications of NFTs. Analysts pointing to the inherent parallels with the “dot com boom” of the late 90s are skeptical of the rapid uptake and popularity of this new phenomenon, with some sources speculating that NFTs could cause a bubble crash. This is certainly possible, especially if enthusiasm for the model outstrips its tangible value. However, with any prospective new economic paradigm, some inflation is an unavoidable by-product of speculative investment.
One area where NFTs have already hit the ground running is the professional arts scene. As digital artists have hitherto been unable to accrue value around their work in the same way physical artists can, there is enormous excitement around digital artists who have begun to publish and sell their work as NFTs. Digital artist Beeple, who is known for creating a piece of art every day, sold his entire collection of over 5000 original pieces to a collector for $69 million. This made Beeple one of the most highly valued artists in the world, overnight.
As testimony to the breadth of application for NFTs, the NBA has been selling classic basketball video clips from its history to collectors as tokens. To date the association has raised $230 million in sales of this kind. Even parts of the internet’s own history are being valued and sold off to digital collectors, with Twitter CEO Jack Dorsey recently selling the very first tweet, made by him in 2006, for $2.9 million.
Perhaps the sector that stands to benefit the most from the arrival of NFTs is the music industry. As previously stated, artists and labels have been unable to put forth a satisfactory alternative to streaming until recently, causing them to have to rely on touring and merchandise as primary revenue streams.
Rock band The Kings of Leon has become the first band to release an album as an NFT. The album, titled “When You See Yourself” has already raised over $2 million in NFT sales. Buyers of the album, in a sure sign of things to come for the music industry, are awarded special perks along with their token. These include limited edition vinyl’s and VIP access tickets to Kings of Leon shows. Already many musicians are diving headlong into the potentials afforded to them and their fans by way of NFTs, with Calvin Harris, Grimes and Gorillaz all offering NFT releases and incentives to customers.
