No question that in 2021, there have been two terms that have dominated the digital industry: “Metaverse” and “NFT.” As is nearly always the case with the latest in-vogue terms, there are a few people who know, really know, what they’re talking about and the overwhelming majority who either pretend to know what’s up or have no idea what’s going on—and only know they should know more than they do. Today, we’re helping all of you still in the dark on the latest tech mumbo-jumbo and giving you an NFT crash course to help you get in on the game while you still can.
If you happened to use the internet within the past 6 months, there is a 99.9% chance that you’ve come across NFT. Standing for non-fungible token, NFTs made headlines, primarily for their role in the sale of million-dollar works for digital art. The hype spread like wildfire with big-time brands, such as Nike, the NBA and a host of major European soccer clubs getting skin in the game quickly. But what are NFTs exactly? How have companies used them thus far for marketing purposes? And how can smaller-scale companies or private individuals get in on the trend? That all seems to be the great unknown. So let’s start at the top.
The place to start is the metaverse
If you want to understand NFTs and their rise to prominence, you need to grasp what the metaverse is in all of its delusions of grandeur. One year ago, OMR Editor-in-Chief Roland Eisenbrand and I published an exhaustive article on the metaverse, its history, present and future. The Cliffs’ Notes version is the term originates from the 1992 science fiction novel Snow Crash, which centers on a future dystopian society, in which tech companies run the world. The metaverse is a fully formed, neverending parallel world where people flock to flee from the sad reality. It has its own eco-system, currency and those inside can meet with friends and engage in and consume all the virtues and vices reality offers.
The concept of the metaverse inspired many of tech’s biggest players. Google co-founder Sergey Brin, for example, said Snow Crash is one of two books that influenced his life. Just a few weeks ago, Mark Zuckerberg openly announced plans to transform Facebook into a “Metaverse company” ; shortly thereafter, Facebook launched “Horizon Workrooms,” virtual meeting rooms that can be accessed with Oculus Rift. And US tech investor Matthew Ball has said that the metaverse is the “gateway to the most digital experiences.”
The more digital the world becomes and the more our activities take place online, the closer the idea of the metaverse becomes reality. Now, that doesn’t have to mean persé that we’re on the cusp of a dystopian age of evil tech corps. Thankfully, not all science fiction is reality. At the moment, the current form of the metaverse is gigantic free-to-play game worlds such as Fortnite and Roblox, where the name of the game goes beyond play— going to concerts, movies and even actual weddings are all things people do here. However, these are primarily places, which takes us back to our main topic: where cryptotechnologies such as NFTs come into play.
Still sounds like a lot of “what-ifs” and “things that are yet to come.”
Fair point. Go ahead and try it out for yourself. In addition to Fortnite and Roblox, there are a host of other worlds that you can explore immediately. Decentraland is one of the biggest and most well-known virtual platforms where even famed British fine arts house Sothebys recently opened up a gallery.
Crypto Voxels, on the other hand, provides a good overview of the advertising options available within the metaverse. Crypto Voxels is the world’s largest crpyto marketplace where players can buy, sell and build land and advertising spaces in the form of NFTs—but you don’t have to buy anything. You can just go for a virtual walk, look around and get a first impression of how the metaverse feels.
Ok, got it. Virtual world with all the jazz and razz-a-matazz as the real world. But what are NFTs?
They are digital goods with programmable scarcity that can be traded within the digital space. Thus they enable ownership of unique digital goods. NFTs can be outfits for your avatar, trading cards of your favorite soccer players, video highlights of NBA games, digital albums or artefacts of random collectables like a screenshot of the first ever tweet. Furthermore, NFTs can be digital sneakers, works of art or an old internet meme.
The most important aspects of NFTs are, as the name non-fungible implies, they cannot be exchanged. If, for example, ten people each have a bitcoin, there is no practical difference between the coins. They are in form, function and value the same. The value of bitcoin can rise and fall as it may, but those fluctuations apply to each and every coin. To take the example further, if those same ten bitcoin owners also have a one-of-a-kind trading card, those ten cards are unique to one another in form and value. The value of individual NFTs varies greatly and applies to that one specific NFT. For example, if you have a collection of 100 identical looking cards, there is a strong possibility that the value of those 100 cards fluctuates greatly from one another.
The other key aspect of NFTs is that each has a unique, verified owner. This is due to the fact that all NFTs are built using cryptocurrency and the blockchain, in the majority of cases the ethereum blockchain. To go into detail here would take too long and probably create more confusion than clarity, so, in short: blockchains are databases simultaneously operated by millions of people. Since blockchain data cannot be destroyed, the information saved on them can be retrieved forever.
What that means is that if you purchase an NFT (or any cryptocurrency) and then sell it tomorrow, that transaction is saved to the blockchain, thus ownership is easily verifiable by anyone on the planet. As I mentioned before, the majority of blockchains are ethereum-based. This is due to the fact that they are easily programmable (for people who know about such things, like Sorare CEO and founder Nicolas Julia, who told me as much on the OMR Podcast we recorded back in February) and are not limited to currencies. That’s why the bulk of NFTs are traded as Ether, the ethereum cryptocurrency.
The prices of NFTs range from a few bucks to several million dollars. The most expensive NFT sold thus far is the work of art by American artist Beeple entitled “The First 5000 Days.” It was auctioned off in May by Christie’s to a long-time crypto investor named Metakovan who paid 42,000 Ether for it. At the time, 42K ETH was worth a cool USD 69 million.
Wowsers. That’s a lot of money. Still, prolly just a passing fad and it’s better just to wait for it to blow over.
The numbers would suggest otherwise. In just the first half of this year venture capitalists invested roughly USD 17Bin crypto globally—three times as much as the year before. The global crypto industry has a current volume of USD 1.9T. Not quite the EUR 2T market capitalization that Apple had, but still enough that it will not vanish tomorrow.
But that’s not all the numbers suggest: Especially digital currencies—and their price fluctuations of up to 20,000% in a year– attract aggressive speculators who are betting on quick wins with high investments. Many financial experts are therefore regularly warning of an impending crypto bubble about to burst. Regardless of the risks, institutions and companies are increasingly accepting crypto payments. In Switzerland 85,000 merchants are already accepting payments in either Bitcoin or Ether.
So if it’s not going anywhere, can I get rich quick with it?
Realistically speaking: not likely. There are only a few NFTs so far that have been sold for more than USD 1M. The most valuable of them are connected in some way to the history and culture of the internet. Beeple’s “The First 5000 Days” is a collage of 5000 digital graphics, one of which he produced every day over the course of 13 years.
Other valuable NFTs include a couple of Cryptopunks, which were one of the first NFTs created and sold on the ethereum blockchain for USD 7.9M. The first-ever tweet by Twitter CEO Jack Dorsey netted USD 2.9. So if it so happens that you are not a meme legend or related to WWW creator Tim Berners-Lee, it might be an uphill battle to get rich quick with NFTs. Lo siento.
Sadly, I’m not a meme legend. But I’ve read about all these companies doing this, that or the other with NFTs. What’s up with that?
Early adopters of NFTs are, for the most part, large companies, who have invested a portion of their advertising budgets in crypto-art. There are two common interpretations of what crypto-art is: either works about the culture or digital works of art stored directly onto the blockchain. For the purposes of this explainer, we are dealing with the latter. Crypto-art is then put up for auction on online platforms like Opensea and Rarible.
However, success here seems to be very hit or miss among crpyto-campaigns. Shoemaker Buffalo, for example, released a virtual sneaker it created together with digital fashion agency The Fabricant. There are a grand total of 139 posts using the official campaign hashtag #burningfor. Coca-Cola raffled off digital refrigerators and threw a virtual launch party taking place on a “can-top“. While the fridge is on sale for a sticker price of ETH 1000 or about USD 3M, the only current offer is less than a cent. Suitcase maker Rimowa created a virtual cabin light for airplanes and a loud speaker NFT. There are a total of two bids for the cabin light.
While companies have been struggling in the NFT game, professional sports teams have found more success. On marketplaces like Sorare (here’s the OMR breakdown) and NBA Top Shot fans can collect and trade different types of NFTs. NBA Top Shot let users “Collect and trade moments in NBA history,” while on Sorare players can not only collect digital trading cards of their favorite soccer players, but also use them in the platform’s fantasy football manager game. Sorare and Top Shot are both bolstered by the deals they have struck with major football clubs and NBA super stars, like FC Liverpool and Lebron James, who have all seemed to recognize how lucrative license deals with NFT platforms can be. If you’re scoring at home, the most expensive Sorare card ever to be sold is a one-of-a-kind Cristiano Ronaldo and the most expensive Top Shot moment was a Lebron James Dunk. Cristiano sold for USD 290,000, while ‘Bron got 390,000.
So it sounds like it makes sense to invest a portion of a multi-million-dollar budget into crypto. And if i don’t have that at my disposal? Can I get in on the trend or not?
To be as honest as possible: I don’t have a clear answer for you. And since the technology has only really been on the mainstream’s radar for the past year, there isn’t exactly a lot of literature on NFTs or strategies on “How-to-NFT.”
If you’re starting off, however, I wouldn’t recommend splurging on a piece of property with a billboard on Cryptovoxels or Decentraland. Take a look at the different marketplaces, take a stroll through the various open blockchain games or find an artist who has experience in minting crypto-art and collaborate with them.
There is a chance that you will be an early adopter of one of the biggest tech trends of the future as it is just getting started. But there’s also a non-zero chance that the grand vision the metaverse never comes to pass and NFTs disappear never to return. With risk comes opportunity.