1.2. NFT creation & trading
The market is so excited about NFT creation and trading. The global NFT market size is expected to grow from USD 3.0 billion in 2022 to USD 13.6 billion by 2027 at a Compound Annual Growth Rate (CAGR) of 35.0%. Major factors fueling the momentum of NFT growth include the increasing influence of celebrities on NFT adoption, revolutization of the gaming industry, and the slow but continuous rise in demand for digital artworks.
NFTs have fundamentally changed the digital asset market. There used to be no way to distinguish between the “owner” of a digital artwork and someone who merely saves a copy to their desktop. Markets can’t function without clear property rights: There has to be a seller who has the right to sell a good before another person buys it. Also, the ownership of a good has to be transferable from the seller to the buyer after the transaction. The invention of NFT has solved this problem by giving parties something they can agree to represent ownership. In doing so, they make it possible to build markets around new types of transactions — buying and selling products that could never be sold before, or enabling transactions to happen in more innovative ways that are more efficient and valuable.
- Each NFT is a unique, one-of-a-kind digital item. They’re stored on public-facing digital ledgers called blockchains, which means it’s possible to prove who owns a given NFT at any moment of time and trace the history of prior ownership. Moreover, it’s easy to transfer NFTs from one person to another, just as a bank might move money across accounts. And it’s tough to counterfeit because the NFT ownership is easy to certify and transfer.
- Blockchains are programmable, and it’s possible to endow NFTs with features that enable them to expand their purposes over time. In other words, NFTs have their own functions and they can empower their owners to make better investments or even build and develop their communities in both the digital space and the physical world.
- Major companies such as Dapper Labs, Bored Ape Yacht Club, SupDucks, and the Gutter Cat Gang are active in the market. Such investments and creations motivate artists to become a part of this booming NFT world, propelling the growth of the NFT market.
- One of the best-known examples is the digital art market and collectibles platform Dapper Labs’s NBA Top Shot. It enables users to collect and exchange NFTs of exciting videos from basketball games — digital trading cards called “moments.” Top Shot has been developing gamified challenges and persuading the potential buyers with reasons to own the cards other than their pure collectible value, even teasing that “moment” holders may eventually receive real-world benefits from the NBA.
But what’s emerged more recently is a model of active ecosystem-building around NFT-native properties — leading to novel organizations developed entirely within the NFT space. These products start merely with an NFT series but project forward a roadmap under which holders of the NFT can gain access to an expanding array of products, activities, and experiences. Revenue from initial and subsequent NFT sales is fed back into the brand, supporting increasingly ambitious projects — which in turn drive up the value of the NFTs themselves.
The Bored Ape Yacht Club, for example, comprises a series of NFT ape images conferring membership in an online community. The project started with a series of private chat rooms and a graffiti board. It has grown to include high-end merchandise, social events, and even yacht parties. Similarly, SupDucks and the Gutter Cat Gang began similarly by building communities around NFT image series and associated online spaces. The former has bridged into a boardwalk-themed metaverse game, and the latter has focused on real-world benefits like extravagant in-person events.
People often take on membership in these collectives as part of their personal identity — even using their favorite NFT images as their public profile images on social media. Every NFT community has different characteristics and purposes, and there are so many by now. In a way, NFT ownership provides an immediately shared text that people can use to connect with one another.
In many of these communities, ownership also conveys partial or full commercial rights, or even some degree of governance in how the community is run, meaning that members can build properties on top of their NFTs that add value to the brand. Crucially, this creates a channel by which engaged fandom can feed back into the brand itself. “Jenkins the Valet” is a Bored Ape member-created project that has effectively become its own sub-brand. Individual SupDucks members have created art and character identities around their NFTs that have been absorbed into the SupDucks metaverse. And community-created fan projects have built out parts of the Gutter Cat Gang story arc.
All of these benefits make owning the associated NFTs more valuable and, almost paradoxically, increase the value of ownership in a form that helps separate the value of ownership from the purely financial opportunity of reselling.
Building on this phenomenon, a few well-known brands have recently introduced NFT series that serve to identify, reinforce, and expand their existing communities of brand enthusiasts. For example, the popular streetwear brand The Hundredshas built an NFT project around their mascot, the “Adam Bomb,” directly rewarding their community of NFT holders with improved access to the brand through connections with the founders and early access to new product releases.
Meanwhile, many emerging NFT applications are seeking to blend online NFT ownership with offline use cases more explicitly. A few restaurants, like Crypto Street Restaurant in Florida and Doge Burger in Dubai, have started using NFTs for reservations. And the ticketing industry has a significant opportunity here: By issuing tickets as NFTs, venues can give a variety of benefits to purchasers, creating more of an incentive to buy, as well as providing the venues an opportunity to collect royalties on secondary sales.
Other companies are exploring how NFTs could be used in establishing and recording people’s identities and reputations online. In the meantime, both established players like Facebook (now Meta) and new ventures like POAP and koodos are providing ways for individuals to create and share NFTs around activities, affinities, and interests.
There are lots of opportunities for NFT creations and trading, including but not limited to:
- Increasing use cases of NFT in supply chain management, retail, and fashion
- Efforts of industry giants toward making the Metaverse a reality and building communities
- Personalization of NFTs