NFTs are selling for millions of pesos. This week, an NFT artist earned around P4 billion after hosting a sale. To buy a collectible NFT from Bored Ape Yacht Club, one of the most popular NFT collections right now, you’d need to spend almost P11 million to own the cheapest, which was once priced at less than P20,000. In the gaming world, several players of NFT games such as Axie Infinity are earning six figures a month.
The NFT industry is undoubtedly very profitable. What does it all mean and why are people buying them?
NFT stands for Non-Fungible Token. Put very simply, an NFT is a digital token that can be owned exclusively by one person, and anyone can check whether that token is an original and whether one actually owns that NFT. The token can represent a digital asset like a photo, video, or an item in an online game. Essentially, exclusive ownership over digital things. If you own an NFT, you exclusively own that digital asset.
For instance, Bored Ape Yacht Club NFTs are represented by digital photos of illustrated apes. It’s initially difficult to comprehend why people would “buy digital photos [or jpegs]” when anyone can right click and save photos for free, but three factors seem to appeal to those who can afford these NFTs: utility, community, and exclusive ownership.
First, utility. As for “photo NFTs,” many collectibles come with real-world utility. Some NFTs entitle owners to exclusive events, international flights, physical items like clothes, and for one project, even access to any Disneyland worldwide. A recently launched collection called Alpha Girl Club, supported by Pia Wurtzbach, allows its NFT holders to have free access to a mental health app, psychotherapists, a chance to win a flight to Japan, and even access to exclusive events like cooking with a Michelin-starred chef. It’s sort of like a membership card to an exclusive community that rewards its holders, so what was once worth P20,000 can be worth millions of pesos in a span of weeks or months. Most “photo NFT” collections that succeed for a long time have this kind of real-world utility that appeals to buyers.
Furthermore, other than “photo NFTs” the technology behind NFTs has led to the creation of NFT games like Axie Infinity, which is currently the most popular play-to-earn NFT game globally. Axie Infinity allows players to earn cryptocurrency by playing, and the cryptocurrency they earn can easily be converted to Philippine peso. The digital characters used in this game are NFTs. Thus, players can buy stronger NFT axies for better chances of winning and therefore, higher chances of earning more.
Second, NFTs appeal because they create communities. NFTs aren’t usually sold alone. They tend to be part of collections, wherein owners of NFTs from a collection become members of an exclusive community of fellow owners. For instance, the Bored Ape Yacht Club collection has holders such as Stephen Curry, Jimmy Fallon, and Mark Cuban, so owning an ape from that collection means the ability to network with these personalities. Being a part of exclusive communities means access to good networks, helpful friends, and even a bigger following.
Lastly, exclusive ownership. NFTs per se, being digital, don’t really have physical-world use unless the project grants utility. But some NFTs are really just collectibles, and collectibles, such as physical paintings or Funko pops, aren’t meant to be useful. They’re meant to be originals, and most of the time, they are status symbols or just something we enjoy owning. Just look at the physical art collection industry. Originals are certainly more valuable than copies, and NFTs have allowed the creation of original and limited digital assets. The NFT world has created huge potential for artists to earn. Many photographers, painters, and digital artists sell NFTs of their photos for six to seven figures in a few months.
NFTs are slowly becoming mainstream, with brands such as Pepsi, Adidas, and even Miss Universe already making their own. We can earn from NFTs by buying them low and selling them high, also called “flipping” NFTs. There are good and bad sides to this flipping culture because it can often end up like a game of hot potato when the projects aren’t made to last, leaving some at a loss with expensive NFTs worth nothing anymore. But NFTs have huge potential when used ethically—good utility, community, and support for artists, without taking advantage of anyone.
It’s a technology that may seem intimidating from afar, but the best way to learn is by actually starting. NFTs come with a high risk, as in all profitable endeavors, and there are certainly many scammers in the space, the same way there are many in industries in the physical world, so it’s essential to do diligent research and to find someone to help you out to enter this industry. FOMO or ‘Fear of Missing Out’ is rampant in the space, so researching projects and the teams behind them is key before shelling out money. Maybe ask: is this project actually good or is it overhyped and susceptible to a pump and dump?
NFTs live on different blockchains, so this is one essential consideration, too. The most popular NFTs are based on Ethereum, which is expensive and currently has earth-friendly issues. But there are other blockchains such as Avalanche, which claim to be cheaper and better for the environment, so they are also something to consider.
Concededly, I initially had my doubts about the industry primarily because of the potentially harmful effects of short-term flipping and pump and dumps, and the environmental damage of some blockchains. But I researched more and learned about the other side: there are projects meant for the long run which build helpful communities and genuinely and financially support causes such as mental health and education, and there are moves to improve the technologies to make them significantly better for the environment. Plus, I’ve seen the lives of good people being changed because of the good side of the industry. The cool thing about this technology is that users decide which practices, projects, and blockchains succeed. If more good people come in, the culture changes for the better. The technology becomes a force for good. Each purchase is really a vote for what kind of future NFTs will have.
The NFT industry is at its early stages, so there are inevitably more changes, improvements, and debates to come, but whether or not we intend to join the industry, learning the technology and the cultures behind it will allow us to understand the market, opportunities, and future of the digital world. Nothing beats doing our own research and deciding independently based on what we learn.
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