The Rise of Digital Land and NFT Investing
A digital investing revolution is underway; the invention of the blockchain has catalyzed disruption of the fintech sector to break down the barriers of ownership and investment models.
NFTs have emerged as a salient feature in the latest phase of innovation on the blockchain, enabling new functionality for ownership of and investment into digital assets.
It’s a market that’s quickly surging to new heights: between 2019 and 2020, NFT market value shot up by nearly 300% to reach over $250 million, according to L’Atelier BNP Paribas and Nonfungible.com’s NFT Report 2020.
And after artist Mike Winkelman, or Beeple, sold an NFT in March this year for the third-highest price ever achieved by a living artist – $69.3 million – the world took note; the possibilities for digital assets as an investment or collectible were there for all to see.
The creative, sports and online gaming industries have been making moves into NFTs, seeking the best inroads to capture the transformative power of this blockchain-enabled technology.
Some of the best-known attempts to do this so far include Dapper Labs’ collaboration with the National Basketball Association to create a marketplace for digital highlight clips – N.B.A. Top Shot.
They have been leading the charge in adopting NFT sales in the multimedia industry, with this never-before-seen joint venture enabling the ownership of video clips of outstanding moments in basketball. The venture has achieved gross sales of over $230 million.
In the world of online artists, Elon Musk’s partner Grimes raked in nearly $6 million in under 20 minutes after joining the NFT marketplace to sell her digital art collection. Meanwhile, Jack Dorsey capitalized on the digital collectibles trend by selling the first tweet ever as an NFT for $2.9 million.
NFTs and their unprecedented financial potential for artists, musicians, and creatives may be hogging the global headlines, but there’s another burgeoning use case with the potential to transform a sector far bigger than these industries combined: NFTs as an investment in digital land and assets in video games.
The disruption of monetization models in a global, digital industry that attracts 2.6 billion gamers worldwide and is expected to surpass $200 billion in revenues by 2023 is no small opportunity.
But before we delve into the possibilities of NFTs to transform digital platform-based business models and investment, let’s backtrack to understand the nuts and bolts behind NFTs and how they work.
What are NFTs and why are they valuable?
In short, NFTs are a steadily growing digital commodity for the new generation. In technical terms, a non-fungible token (NFT) is an asset that’s digitally verified using blockchain technology.
To make this happen, a network of computers records transactions and provides proof of authenticity and ownership to the buyer, acting as an immutable repository and record of ownership of digital assets.
NFTs expand the functionality of blockchain technology to create a much broader reality for digital industries. They enable scarcity and uniqueness for digital assets and represent a new way of ownership and distribution.
NFTs are still very new as digital commodities and investment opportunities. They first hit mainstream awareness just five years ago in 2017, when CryptoKitties – a site that allowed people to purchase and breed limited-edition cats with cryptocurrency – attracted an estimated 1.5 million users and $40 million worth of transactions.
Since then, use cases for NFTs have expanded quickly to include a wide variety of digital assets. Blockchain-certified computer files are now used to monetize and market an ever-widening range of commercial, cultural, and personal items.
And just five years after NFTs entered the mainstream, we’re seeing a wide range of online markets for NFT trading, startups, and new projects that will continue to broaden the possibilities for verification of ownership for both digital and real-world assets.
Some of the biggest NFT markets which allow you to create, sell, and buy NFTs include OpenSea, Rarible, CryptoSlam, AtomicAssets, and SuperRare. Most NFT marketplaces are hosted on Ethereum’s blockchain and have become an integral component of Ethereum’s fast-growing, $51 billion ecosystem of dApps locked in the DeFi (decentralized finance) ecosystem:
Across NFT marketplaces, the trading volume of the nascent market has skyrocketed since its 2017 inception to reach over $561 million.
A token is the digital equivalent of a certificate of ownership, recorded permanently on a blockchain, so NFTs create rarity and scarcity – two qualities needed for a digital asset to increase in value. In an increasingly digital world, NFTs are valuable because they allow authentication of digital assets such as artwork, music, and virtual land, and real estate.
Beyond verification, NFTs create massive value by enabling the online rental economy to move towards ownership; if you own a piece of land in a video game, digital artwork, multimedia, or music, you could make money when you sell it, build on it, or lease it out.
When NFTs are used with digital platforms they hold huge promise to decentralize profit and business models. This provides powerful additional utility and incentivizes users to contribute to platform development and growth. Company shareholders no longer have complete ownership of the platform IP and its profits – with NFTs, this is spread out among the user base.
Why is this significant?
Looking to past internet and digital transformation trends gives us a framework for understanding the future and the pivotal role of NFTs as a blockchain-based application.
In a Bitcoin magazine interview, Mark Pascall, Co-founder of BlockchainLabs New Zealand (NZ), explained why blockchain-based applications such as NFTs, rather than the blockchain itself as a decentralized ledger, are where the real value lies.
In the 1980s, he says, the original creators of the internet didn’t make money out of it. It was the inventors of the ‘fat applications’ – companies like Google, Facebook, and Amazon – that are now extracting massive value from the layers of ‘fat’ they have been able to build on top of the original internet protocol.
NFTs and smart contracts are the first significant ‘fat applications’ to have emerged on the blockchain protocol. The new functionality that they enable offers transparent, automated, and decentralized ownership and trade.
This differs from the previous ‘dot com’ revolution because businesses can enable their user-base and communities, rather than the company shareholders alone, to become shareholders and benefit from platform growth.
These are the second-layer, foundational elements of blockchain technology-based innovation that are still in the early stages of maturation, but which could have a transformative impact on the way we play, work and earn – just like the emergence of social media, Amazon, and Google permanently transformed the way we operate today.
Jan Strandberg is the Chief Growth Officer and co-founder of the digital wealth management platform Yield App.
He has leveraged his passion for digital assets and decentralized finance to drive the success of Yield App, which reached $400 million of managed assets within six months of its public launch in February 2021.
Prior to joining the company, Jan was the Head of Marketing at crypto company Paxful, where he worked for over four years after joining as only its fourth member.
During his time there he oversaw the growth of the customer base from 50,000 users to more than 4.5 million, and expansion of weekly revenues from US $100,000 to over $44 million as he managed a team of more than 45 people and established offices around the world.
A well-rounded online marketing professional, Jan specializes in SEO, SEM, and content marketing and uses creative analytics, research, and cutting-edge strategies to drive results – turning impressions into visitors, visitors into leads, leads into customers, and customers into advocates.
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