NFTs could transform the way we all think of value. As fiat currencies are wantonly printed, devaluing them and increasing food prices, people from all backgrounds are looking for alternative ways of storing values.
Gamers in many peripheral countries, such as the Philippines, turn to games to afford food and rent. This is out of necessity. Lockdowns closed small businesses, nudging the world towards online work.
Many in the retail industry could not transition so easily. Play-to-earn games, in which gamers play a video game to earn tokens and, in some cases NFTs, are filling the gap. The digitization since COVID has the NFT industry poised for growth.
NFTs are unique digital file representations that people exchange on public blockchains. More than $1.5 billion in NFT transactions in the first quarter of 2021.
NFT come in various types. These include digital-first memorabilia, fan-favorite athletes, and moments of events, including in-game events.
NFTs offer digital scarcity, which lends to their value. An early NFT example is CryptoKitties, in which holders have their own kittens with specific attributes. CryptoPunks are another example. It’s composed of merely 10,000 unique pixelated characters.
COVID-19 and the rise in deflationary assets
The damage done to many economies globally cannot be understated. Lockdowns hurt.
In one study, port-level trade losses, with the largest absolute losses found for ports in China, the Middle-East, and Western Europe, arose due to certain supply chains collapse, including oil and manufacturing.
The study’s author concluded that the global maritime trade reduced by approximately 7% to 9.6%. During just the first eight months of 2020—equal to approximately 206-286 million tonnes in volume losses and upwards of $225-$412 billion in value losses.
Moreover, the printing of fiat currencies has created a rise in the cost of goods. Globally, inflation pressures are on, including in the U.S., where shipping has doubled in costs for many.
Digital natives are looking for alternative solutions, and deflationary financial assets make sense. What’s more deflationary than unique NFTs?
Visa joins corporate rush
Major corporations face a threat from truly open-blockchain NFTs because users are empowered to build out parallel economies based on open source technology.
Therefore, the corporations are rushing to propose their own, more centralized versions of the phenomenon. Furthermore, certain companies are themselves purchasing open blockchain NFTs so as to experiment.
Earlier this year, payments technology company Visa purchased CryptoPunk #7610 to add to its art collection. 7610 is one of 3,840 female punks.
The purchase price was $150,000. CryptoPunks largely considered an OG NFT, launched in 2017 by Larva Labs. Each of the 10,000-pixel art images has its own personality or a unique combination of features.
No shortage of NFTs
There are many types of NFTs. Covid Alien, a CryptoPunk NFT, sold for nearly $12 million. Popular brands creating NFT-based collectibles include NBA Top Shot moments. These are essentially digital basketball cards. Rather than static images, they contain video highlights from NBA games.
Artists are using NFTs to sell their work as an alternative to print and sell pieces of art. Moreover, artists can receive revenue from secondary sales or auctions rather than just the initial sale.
Additionally, NFTs provide significant opportunities for gaming. Players can own their in-game items. Billions are spent in games like Fortnite on items like skins or costumes.
Yet, consumers do not own these assets. The creator of the games says Fortnite owns the in-game items. In an open-blockchain system, NFTs would allow gamers to own assets, earn assets in-game, port them out of the game, and sell those assets elsewhere.
Visa is already a collector
Visa’s addition of CryptoPunk 7610 is merely the latest piece in the company’s growing art collection, which includes early paper credit cards, knuckle busters (a device merchants used to record credit card transactions before the advent of electronic point-of-sale terminals), and more.
Visa says NFTs will play a significant role in the future of commerce. Content creators and small and medium-sized businesses will benefit, too.
“NFTs are an intersection of culture and commerce,” says Vias’s Cuy Sheffield, noting Visa envisions a future in which crypto addresses become as important as your mailing address.
Visa’s crypto team was on the scene by 2019 with the mission of introducing merchants, brands, content platforms, to NFTs. Their primary focus? Retail NFTs.
Visa wrote a white paper on NFTs, pinpointing the rise of NFTs to COVID-19 lockdowns.
“When COVID-19 restrictions put a swift and definitive pause on live sports and entertainment, digital technologies led the way in connecting fans worldwide to the brands, teams, and personalities they love,” wrote Visa. “In this context, non-fungible tokens (NFTs) have emerged as a promising medium for fan engagement.”
“Commerce is evolving, and innovations such as crypto and NFTs are likely to shape sports, entertainment, and other communities going forward. NFTs represents a deeper and more innovative way for fans to engage and potential new revenue streams for organizations. However, there are many considerations to take into account when integrating NFTs because it is a new space,” the company says.
Indeed, in the Philippines, COVID lockdowns have harmed the economy to such a point the government reopened the economy “to spur economic activity.”
The draw of CryptoPunks
Visa’s addition of CryptoPunk 7610 to its art collection makes perfect sense from an investment perspective. As a historic memento from crypto’s early history, CryptoPunks have largely been accepted as art.
Many other NFTs are being called art, but are they art? If you are a museum curator, the line of reasoning behind showcasing a CryptoPunk makes sense. CryptoPunks are different. They were the first NFT. That’s legit. A museum would curate a piece of historical works.
Beyond its historical appeal, CryptoPunks are a rare breed amongst NFTs. The punks themselves, JPEG-based artwork, actually exist on the blockchain. Much of the “art” sold as an NFT doesn’t exist natively on a blockchain, but, rather, either on a central server or on IPFS.
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