What is an NFT and should you invest in them? Vexanium foundation is a blockchain infrastructure provider in Indonesia and a leader in the blockchain industry with a variety of decentralized finance products such as Vyndao, Vexswap, Unydex, and others, Vexanium also researches topics around blockchain technology.
One of the interesting topics in the blockchain industry lately besides Decentralized Finance (DeFi) is Non-Fungible Tokens or NFTs.
The following are some examples of NFT sales in the sports sector:
“Moment” or highlight of Le Bron James dunking through (sometimes called “hammering”) Nemanja Bjelica sold on NFT platform NBA Topshot for 208,000 USD
Memphis Grizzlies’ highlight dunk, Ja Morant against the Phoenix Suns sold for $100,000
Who buys NFT assets?
Are they fans of artists, creators who make NFT? or athletes?
Or people who are having excess disposable income from buying crypto at a low and high price recently? and is now a speculator who continues to look for a new speculation arena?
Or people with excess funds don’t know that if they buy NFT at a high price, it takes a long time to sell it again? (traders call it “stuck”)
Or are they just the same crypto investors who buy, are the ones who sell to create FOMO and stories?
Or are they a mix of those above?
Markets similar to NFT
People who buy NFT at high prices may have a similar market character with people who buy ornamental plants for hundreds of millions, sneakers, paintings, and many other art objects. And did you know the price of virtual items in games such as bandanas in PUBG, swords in Dota 2, weapons in CS Go can be up to 1000 USD? or mansion in The Sims can be up to 1 million USD.
Maybe you also need to know that the 2003-2004 edition of the Le Bron James Rookie Card could sell for 1.8 million USD, or the 1952 Mickey Mantle rookie card (legendary baseball player) could sell for 5.2 million USD. If I try to check on Wikipedia, the “most expensive most sports card list” turns out to be a 1909 transaction, then “most expensive paintings” bring up paintings that are hundreds of years old.
Then what is the “utility” of these items apart from being exhibited?
For the “sword,” there may be a certain unique power. Other? only those who bought it know.
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Is the NFT trend a bubble?
Judging from the number spent on buying NFT, maybe yes, but it’s not as easy and fast as saying it is a “bubble” if you know that there are many markets that are similar to NFT and similar markets (sport cards) have been around since 1909.
Just like the technology adoption cycle in general which has ups and downs, everyone whose IQ is normal calls it a burst bubble, but people whose IQ is too low, or too high call it a fair market correction (if you look at the history of BTC prices from 2011) and predicts the price of BTC will rise above its current high.
Before we conclude whether the price of the NFT bubble is or not, let’s first look at the prices in the primary market, for certain NFT products such as MotoGP, NBA Topshot, all of which are very reasonable. For example, the price for the MotoGP NFT pack is in the range of 9 USD to 14 USD, while the NBA Topshot is 9 USD for the common pack to 250 USD for the all-star pack.
NFT: Game changer, multifacet assets
Like most cryptocurrencies, NFTs are also confusing to understand, including by regulators.
Mark Cuban, the US entrepreneur who sold broadcast.com to Yahoo and is now an observer, blockchain investor repeatedly said: “NFT is a game-changer” when he learned that NFT could provide a percentage of revenue to its creators, no matter how many times the NFT was sold on the secondary market. – or resold by the buyer. This feature is never present in any asset type.
Meanwhile, crypto as a “multifaceted asset” can be a means of payment, it can be a store of value, it can also be a utility, for example, voting in decision-making in the blockchain system.
NFT can also collaborate and have a symbiosis with Decentralized Finance or DeFi, including:
- Can be pledged in decentralized finance (eg Vyndao.com) to get a stable coin loan
- Buying and using NFT is much easier and faster than using decentralized finance products, more people know creators/influencers than DeFi products, so NFT can be said to be an entry point for the blockchain world
- DeFi can provide a major expansion in terms of utility, functionality, and access for NFTs to complex financial infrastructure for NFTs, through the concept of fractionalization and selling at lower prices on decentralized exchanges (such as Unydex.com and Vexswap.com).
- DeFi can provide additional liquidity for NFT
- Meanwhile, NFT provides DeFi with many new types of collateral. There are several projects trying to bring real-world assets as collateral in DeFi, where NFT acts as a bridge.
NFT has a crypto-like character, plus a variety of additional functions, including future use cases such as:
- If you see a lot of historical art items that can only be stored without being used (no utility) as I demonstrated above, we can simply say that because of its rarity, NFT can potentially become a store of value.
- If applied in the music industry, imagine there is a tool/wallet/music player app that can only run if you hold (hold) the NFT of certain musicians in your app
- Special access to NFT buyers, for example, being able to watch free concerts 4x a year for the next 5 years. In this case, the NFT becomes like a “loyalty card” for the issuer
- Profit-sharing for NFT music buyers for the next 2 years, specific to the music (title) they buy
- If you save (stake/hold) you can get crypto tokens or other NFTs
- Can be played/competed and if you win you get a new NFT, the higher the level of competition the higher/expensive the reward level of the NFT
- If you don’t have time to play it? you can lend it to other people you don’t know to play, and the reward can be divided according to the agreement
NFT. Game changer technology and many are calling it a bubble because of its currently unreasonable price tag. But you have to be able to separate “the noise” and “the gem”, pay attention to the NFT features that are not found in other technologies. One of them is the ability to provide royalties for creators, no matter how many times NFT is sold in the secondary market. This unique capability will bring the NFT use case to the sustainability of the value of NFT and solve problems in the media and advertising business model that is already so massive and entrenched.
Also Read: How Metaverse Works? Here’s Why It Matters
NFT will also continue to grow in line with the development of the blockchain ecosystem. In 2022 in the future we will see the NFT ecosystem change and move very quickly, seeing the large number of investor funds spent on NFT projects.