What are NFTs, and should you get into them?

Anyone else overwhelmed with the frenzy around NFTs? And does the word ‘crypto’ immediately cause your eyes to glaze over? Same, same. But we did some research so you don’t have to. Read on...

Every day it seems there’s a new story about NFTs. All in one week, Hello Kitty rolled out digital collectibles, Miramax sued Quentin Tarantino over “Pulp Fiction” NFTs, and the NFL offered commemorative NFTs. The IRL crypto-meetup NFT.NYC drew a record crowd of 5,000 [and a 3,000-person waitlist] for a conference devoted to NFTs, and even the local North Fork of Long Island Mexican restaurant, Lucharitos, got in on the game. Phew, what a week!

With updates happening nonstop, it’s tough to figure out what an NFT actually is, not to mention A) the larger purpose of NFTs, B) what exactly the investment in them yields and C) if they’re a bandwagon to jump on, or a minefield to avoid. And of course how they fit into a larger digital strategy and what a strategy like that looks like.

This quote from Sterling Campbell from Forbes.com really sets us up as we dive in, “The rise in NFTs is a bridge in understanding the power of provenance, digital scarcity, and smart contracts. Some people think they’re too late. Some people think it’s stupid. Most people don’t get it at all.”

With that sentiment in mind, let’s start at the beginning...

What is an NFT?

An NFT is a non-fungible digital token which means that it’s unique, original, and can’t be copied. A good example is a U.S. dollar, which is fungible - swap a dollar for another dollar and you’ve ended up with the same thing. A Picasso painting, however, is non-fungible. It’s one-of-a-kind art and if you traded it for a different Picasso, you have an entirely different painting.

NFTs can be anything digital, for example, memes [like Nylon Cat and deal with it sunglasses], music, drawings, x-rays of William Shatner’s teeth as trading cards, a sword in World of Warcraft, a New York Times article about NFTs, or Jack Dorsey’s first tweet [which sold for over $2.9 million, wtf], though right now the hype is mostly around NFTs as digital artwork sold through online marketplaces.

How do they work?

At the moment, most NFTs are stored on the Ethereurm blockchain. Ethereum is a cryptocurrency, like bitcoin, but its blockchain, or digital ledger, also happens to support NFTs and the added information required to power them.

What can I use at a party to sound like I know what I’m talking about re: NFTs?

The standout NFT artist you need to know is Beeple, aka Mike Winklemann, a graphic designer from South Carolina who became one of the world’s most valuable living artists when he sold an NFT from his series titled Everydays. As part of the series, he starts and finishes a new piece of art every day, and a collage of the first 5000 sold for over $69.3 million dollars in 2020. Prior to creating NFTs, he had “never sold a print for more than $100,” according to an interview with CNN. Insane.

Funny enough he’s making the transition back to physical art with his latest piece titled “Human One,” which is a 7-foot tall box of aluminum, wood, and four LED frames depicting a man in an astronaut suit walking through a dystopian landscape. The piece will be visually updated throughout the artist’s life. And yeah, it sold at Christie’s Auction House for $29 million.

And he’s not the only one connecting NFTs to real-world objects, especially as a sort of authentication or verification method. Nike holds a patent for blockchain-based sneakers called ‘cryptokicks’ where when you buy a pair, you’ll also receive a digital asset attached to a unique qualifier of that shoe. If this isn’t a precursor to the metaverse and the future of buying and selling digital goods, we don’t know what is.

At any rate, if you’re not a regular at Christie’s and you’re looking for NFTs, there are plenty of marketplaces to buy and sell them -- including Beeple’s artwork -- online. Popular ones include OpenSea, Rarible, Nifty Gateway, SuperRare, and Foundation.

But wait, didn’t I hear NFTs were “over”?

Yes, you might have heard that. Over the summer, NFT activity dropped significantly. The number of people that had been using the marketplaces peaked at around 650,000 in February 2021 and was down to around 128,000 in June. It has since leveled, but there’s also been controversy around NFTs and the environment [according to Rosanna McLaughlin in The Guardian, the annual energy consumption of Ethereum is estimated to equal that of Iceland], which is enough to motivate some artists to boycott their use.

However, don’t let the overall volatility or dramatic headlines fool you. Neither have slowed the torrent of celebrities and brands jumping into the NFT game [adding in Paris Hilton, Snoop Dogg and Lindsay Lohan too, for good measure]. It appears that music is the next space for NFTs as evidenced by the recent announcement of NAS and the Chainsmokers joining a $55 million raise for the NFT music platform Royal [Royal helps artists create and sell NFTs, but also offers a new business model where fans can invest in an artist's work and receive royalties in return], or The Kings of Leon tokenizing their latest album. In an industry where rights issues and middlemen have long plagued artist work and royalties, NFTs could be a very welcome evolution.

So yes, it’s safe to say that NFTs are not the most stable investment, yet they still could be the right fit for you and your brand.

So then, how exactly should I be looking at NFTs?

There are two distinct perspectives to consider. Creators and buyers.

Potential creators...

If you are a digital artist or graphic designer, awesome, you should definitely consider making NFTs out of your artwork. Just as often as stories around celebrities like Jay Z and Katy Perry making NFTs are published, so too are stories about emerging artists, like Beeple, or Amrit Pal Singh who earned over $1 million from selling NFTs of his artwork in 9 months.

Along the same lines, if the digital strategy for your business aligns with working with digital artists, creating NFTs in partnership with them as artist x [insert your brand] could be a great marketing play. As Campbell writes in his Forbes.com piece, “Ethereum has become the currency of culture, and NFTs are a major entry point into mainstream blockchain adoption.” But just like any kind of experimental investment, however, it’s important that it be part of a larger initiative with a clear objective, plan and measurable goals to track along the way.

Making actual money is an entirely different story. That would be a nice result [the ultimate really], but just like you can’t plan for a video to go viral, planning for your NFT to yield a huge payday isn’t reasonable. This is a content and marketing exercise, and for artists, it simply can’t hurt.

Potential buyers [or eventual collectors]...

This area is more precarious. As you can see in the marketplaces, there’s no shortage of NFTs available to purchase, and many have sold for millions of dollars, but there is no guarantee around what will happen over time. Tons of people are buying them, from high spenders like Stephen Curry who bought a Bored Ape piece of digital artwork for $180,000, and Vignesh Sundaresan who bought Beeple’s Everydays, down to “normal” people.

Eloisa Marchesoni, a blockchain enthusiast and tokenomics expert in New York toldLegalZoom, people buy NFTs “for their aesthetics, design, the emotion that comes from the thought of showing it to a circle of followers. If there is also a possible gain, even better."

Our best advice for this is the same as it relates to buying real artwork. Make sure you love and value it no matter what, and that you can afford it. If those boxes are checked, you won’t go wrong [sorry, wish we could be more direct with this!].

Our take on incorporating NFTs into your digital strategy

At this point in time, we are into it. NFTs can be a relatively low lift, fun, and innovative way to extend your brand as long as it makes sense business-strategy-wise. And while the endless press around NFTs feels daunting, they are still incredibly new and far from mainstream yet, so by participating in the trend, there’s an opportunity for that “cool by association” vibe we all love.

That being said, NFTs are NOT a reliable and consistent revenue stream. They are literally the wild west and as digital content pours into the marketplaces, it’s impossible to forecast what will take off and what will fall flat. So beware of dumping tons of money into them. Be cautious and be realistic.

Again though [is your head spinning?], the environment is in its infancy so this can and will likely change, and becoming an early adaptor with anything can be a smart move. So if you’re interested, take Gary Vee’s advice and don’t hesitate! NFTs are certainly not a trend disappearing anytime soon. [brb going to start searching the marketplaces now].

Everything you need to know about NFTs