NFT art will never become a mass market – NFT licenses can be

Visa got a fancy new Twitter avatar in August, and even though it didn’t stay up long, the 8-bit-styled image of a visibly rude woman with a stylish mohawk still created dozens of headlines. It was not just about the relatively hefty price tag of $ 150,000. The mere fact that the financial giant bought a nonfungible token (NFT) representing the image from the CryptoPunks collection set off fireworks in the media. It was the best marketing expense Visa has made all year – the ROI on news articles alone must have paid for the purchase tenfold.

Yes, even Visa “monkeys in” on NFTs these days, to use a term NFT collectors are falling heavily in an era where the wealthy are pouring millions into JPEGs of monkeys. But even though the technology’s journey from memes to riches has led it into the digital art world, I do not think this will be its mass market use.

Name my monkey! Throw in your suggestions below @BoredApeYC #BAYC #BoredApeYachtClub # NFTs pic.twitter.com/pwFynGy9QJ

– jimmy fallon (@jimmyfallon) November 17, 2021

Gradually, everyone knows that NFTs basically bring uniqueness and scarcity, a function associated with traditional fine art, into all forms and forms of digital art that are otherwise infinitely reproducible with the good old copy-paste. A link to a specific image, sound clip or video is sent to the blockchain as part of a transaction, and there we are – even though the file can still be copied, only one wallet owns its token. This is where it gets a classy thing: Taking an NFT photo like a Twitter avatar is like wearing a Rolex watch with your name engraved on it. It is a status symbol to be appreciated by those who know it.

That said, high art and luxury are by definition anonymous to the mass market, as high price and uniqueness are their main selling points. Someone who bleeds money can buy a link for millions, but that’s because they might as well burn their money for fun, and they want to show their wealth to the world. Good luck charging a regular Joe $ 150,000 for a link to an image. The focus on NFTs as art by definition limits a promising technology to a relatively small, albeit undeniably posh and eccentric niche.

The good thing here is that the huge NFT sales of digital art are making headlines, which is helping to bring NFTs into the mainstream. However, this will not be the main use of NFTs further down the road, but rather a new and expensive toy for the wealthy and some particularly ardent crypto-personalities and communities.

The real deal

First of all, NFTs already have a mass market use – they are very much at home in games where CryptoKitties are collecting a ton of headlines back in the day. From Axie Infinity to all the more recent titles, NFTs are driving an abundance of digital economies, and there they bring more than just unique to the table.

Yes, it’s nice that your NFT sword is unique and has your name on its token, but what’s nicer is that it can decapitate a dragon in one turn, unlike any other, non-unique weapon. And decapitated reptiles are what people are willing to pay for. Fortnite, a free game, brought its publisher $ 5.1 billion by 2020 in sales of in-game cosmetics, and players are already paying for non-unique weapons, mounts, castles and spaceships in dozens of other games. NFTs are just the next step in this direction. And believe it or not, in some developing countries, NFT games have already become a valid source of revenue.

What looks just as promising is the idea of ​​using NFTs in business as part of traditional business processes. The fields where NFTs are likely to pick up speed if not become the new standard way of doing things are not as sexy as sophisticated luxury. However, they will greatly benefit from the key feature that NFTs bring to the table: the ability to verify the authenticity of the associated digital asset. This could, for example, be as simple as the hash of a financial document stored as an NFT on a private or a public blockchain to check if it has been tampered with later.

Software licensing and authentication seems to be one of the areas where NFTs will shine, given enough time, with the bonus of possible interoperability. Both companies and individuals could purchase licensed pieces of software on a single platform and lease it for as long as necessary. This would reduce costs while maintaining the peace of mind of information managers as they have an extra layer of security in knowing that any digital asset can be authenticated securely and quickly.

Related: Non-fungible tokens: A new paradigm for intellectual property assets?

Those of you who are as old as me remember that they bought copies of Windows or Adobe CS3 and had a sticker on the back of the box with your serial number. Lose the box and that was it. This was replaced by SaaS log-ins that stored your serial number, or platforms like Steam and Apple’s App Store that held your digital asset – except of course unless Apple decides it does not have the rights to “Goonies HD” in the store and removes just your purchase. Did you buy it? Too bad. Same if the platform was shut down or if the company decides that you have somehow violated their 2,000-page terms of service that you agreed without reading through. The point is that with subscription-based SaaS, you own nothing, even if the solution is implemented on-premise.

NFTs may be able to solve this

Let’s say you buy an asset, any digital asset – music, a movie, a software license, limited use rights to an image, no matter what. At the time of purchase, the platform features a non-fungal token that points to the original file or download location. The tokenet serves as your proof of purchase. You store the asset locally and most likely access it via an app that will use your token to verify ownership (or, for example, if the license period has not expired) when you try to interact with it, which would prevent copying. paste distribution and other IP infringements.

With the right design, such a system would even allow the transfer of ownership rights as long as they are legally embedded in the NFT. This way, after enjoying your copy of “Goonies”, you can give it to a friend or resell it, potentially with a small royalty to be paid either to the person who owns the rights to the film, or to the original selling. The latter also addresses in part the problem that fueled the switch to SaaS in the first instance. Companies do not want a secondary market because it competes with their sales, but with royalties built into NFTs, they would have a share in each subsequent resale. In other words, every copy of a movie sold becomes a gift that keeps on giving.

Related: We have not even begun to exploit the potential of NFTs

Granted, however, the ownership part is the one that requires more work, especially on the legal front. None of these concepts have been tested, but they must be, whether by an artist or a collector, just to set a precedent and begin designing a playbook for this terra incognita. Technical expertise and business or legal expertise are not the same. Some of us remember the EOS token sale and how much of the funds raised had to be withheld until the SEC completed their investigation. Projects that talk about their legality and prove their legality in court are two different things.

While the NFTs are not without their shortcomings, at best it is premature to dismiss them as an inherently toxic and fraudulent technology so early in their development. What the field needs instead is more regulation on the one hand and more entrepreneurship on the other. Arts and business go hand in hand these days, and as NFTs mature, their journey from memes to riches will most likely similarly lead them into business.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Liam Bussell is Head of Corporate Communications and Investor Relations at Banxa, an internationally compatible fiat crypto gateway. Prior to joining Banxa, Liam worked as Chief Marketing Officer at Diginex, Chief Marketing Officer at BC Group and Chief Marketing Officer at World First (acquired by Alibaba). Liam is a marketing manager with 18 years of experience in building Fintech & Technology companies from bootstrapping to IPO.