With NFT talk flying at us from all corners, I was tempted to write about how, yes, there is a lot of hype but the main message is the cultural shift supported by technology. And that is the case – our lives are now digital, so it was inevitable our cultural spending would be, too, and for younger generations the concept of ownership is more about experience than possession.
But while that’s interesting, and ties into what I’ve written before regarding the massive impact the younger lens will have on our concept of investing, there is more going on here. So instead of a cultural/generational take, I’m going to look beneath the froth to what this trend says about how markets are evolving. It matters.
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It’s not just the new markets springing up for digital artwork, video clips, music, tweets, etc. It’s not just the new types of financial assets that can benefit from the NFT tailwinds, such as tokenized securities and liquid insurance contracts. Those are all potentially transformative, but what I’m especially intrigued by is the emergence of a market for something that hasn’t been possible to value before: emotion.
This could give rise to much more than a new market as well as a new way of communicating and relating to peers. It could change entire business models, not just of culture but of any service, and could solve some of the inequities and vulnerabilities of the current web stack.
First, for a primer on what NFTs are, check out my colleague Ollie’s excellent explainer, and Jeff Wilser’s compelling synopsis of the cultural forces at work. In brief, they are non-fungible blockchain-based tokens that can represent just about anything digital that has unique characteristics.
CryptoKitties ignited mainstream interest in 2017 with collectible and breedable cats, and the concept’s developer Dapper Labs has recently been making headlines with the success of its NBA Top Shots packs and its recent $250 million raise at a $2 billion valuation. Just over the past seven days, we’ve seen athletes, fast-food joints and mainstream media join the expanding throng of NFT creators. And on Thursday, a digital masterpiece was sold by the 250-year-old auction house Christie’s for over $69 million.
Many have likened this level of froth to the ICO craze of 2017, which saw crowdsourced token sales hailed as the next revolution in capital markets. With projects raising millions on ideas that hadn’t even made it to the back of an envelope, who needs stock markets or bank loans?
Although reminiscent of those hectic times, with the same aura of disbelief from some quarters and excitement from others,…