Non-fungible tokens or NFTs are gaining momentum in contemporary society. These non-fungible coins or assets are often presented in the form of artwork as part of a whole collection (e.g. Bored Ape Yacht Club). The main question is if the insane price for acquiring an NFT is worth the benefits. In this article, we explore what NFTs are, the benefit of buying an NFT and the opportunities this purchase can have for your business. Moreover, we provide tips and risks needed when intrigued by this new investment phenomenon.

Introducing NFTs and the operational method

The NFT or Non-Fungible token is a token within a blockchain (digital ledger) connected from an account to a unique and digital item via a smart contract. Most NFTs are part of the Ethereum blockchain, a cryptocurrency, and are currently seen in the rise of buying and selling digital art using this blockchain technology for multiple reasons (e.g. investment). In simple words, the NFT is a unique link between an account and a digital item that assures that said item is uniquely yours. This blockchain technology is non fungible which means that the item or artwork is unique and cannot be replaced with something else. As the trading dynamic can be seen as investing just like is the case with bitcoins and altcoins, the difference is that the NFTs are one of a kind. Whereas you can trade a bitcoin for a bitcoin, the NFT is distinctive and can never be fungible for the same artwork.

The uniqueness and function of the NFTs

The NFT gets seen as the new era of art. Both art collection and art investment are considerable motives for buying an NFT. As mentioned before that every NFT is a unique piece of artwork including the corresponding blockchain entry (proof of authenticity) plus the fact that these tokens are limited and tradeable, making all the NFTs depend on the supply and demand principle. NFTs are nowadays often seen as pictures and videos, but can also cover the realm of music and other forms of art. The next paragraph will thoroughly explain the four motives for purchasing an NFT.

Four motives of buying an NFT

Knowing the technical information and the uniqueness of the NFT, the question might arise why someone wants to spend money on NFT artworks.

Firstly, the NFT is currently in a hyped-up phase. Newspapers, NFT creators and NFT purchasers are trying to start the momentum of this “new era” to get more recognition among the people. This triggers the Fear Of Missing Out (FOMO) effect that stimulates the demand of the NFTs – as these groups wish. This is noticeable in the fact that NFTs are sold from hundreds to millions of euros worth of Ethereum. Exemplifying the prices of

Figure 1. NFT properties of Bored Ape Yacht Club #9355

NFTs,  this video made by the famous creator Beeple got sold for 6.6 million dollars (5.8 million euro). Further, NFTs within a specific group like the TrendyTigers or Bored Ape Yacht Club have different characteristics that make them more special and more valuable to stand out from the crowd. Here we can think of background, clothes, eyes, fur, hat and mouth as depicted in figure 1.

Secondly, you get complete ownership of the work. Instead of downloading the video or picture, the purchaser owns the artwork including proof of authenticity. This can be seen in the way that copying (downloading) a Van Gogh painting is still possible, but only one person can have the original. However, on par with physical artwork, the artists can still retain copyright and reproduction rights.

Thirdly, the purchaser can show off their new asset and try to fan the flame for interest in NFTs and in particular the purchaser’s artwork. Owners of an artwork change their profile picture to their acquired NFT to show the everyone that they own an NFT, brag with their latest purchase, and show the world they are part of a particular niche or group. This phenomenon of showing-off is mostly visible on Twitter.

Lastly, and maybe the least concerned with investment, is that the purchaser can (financially) support the creator of the art.

Opportunities for you

As the hype is getting a boost by the media and the groups associated with the NFTs, the incentive to buy might seem bigger than it is. Knowing that an NFT can be an investment strategy – just like cryptocurrency – we should be careful with the post-hype stage, as this might be unpredictable. The NFT market including the price of the NFTs -without the hype- can collapse and result in loss after this high gamble. While this is part of investment in general, we should look at the other main benefit the NFTs give over for example cryptocurrencies: the community.

Pudgy penguins, CrytoPunks, TrendyTigers or Bored Ape Yacht Club are examples of NFTs with a community around the ownership of their NFTs. The latter is a project concerning, as the name suggests, 10.000 NFTs of Apes. Only 10.000 proud ape owners can be part of the clique. Important is that the Bored Ape Yacht Club functions like a family. The occasional networking events among the Apes are used to get to network and to get beneficial connections for the business. Furthermore, this nepotism is noticeable in the example of producer and songwriter Timbaland searching for Bored Ape Yacht Club owners to form an artist-owned entertainment company Ape-In Productions.

Conclusion

In short, the price for NFTs can be feasible when being able to network with celebrities, business leads, or new friendly contacts. In case you are intrigued by NFTs, please be aware that many individuals and/or corporations are trying to hop on the bandwagon of the NFT hype. This means that thorough research in this particular NFT community/club is absolutely necessary. Always look at the benefits, the listing date and amount of followers. Do not forget to analyse the follower-to-like ratio on social media to notice, as is often the case, fake and bought followers. NFTs are often listed on the trustable platform OpenSea.io where Ethereum is mostly used as currency to purchase the NFTs.

Finalizing, NFTs as investments bring the known risks of (heavy) value fluctuation just like cryptocurrencies and comparable investments. However, while NFTs can be pricey, these revolutionary blockchain technologies assure ownership and bring an additional opportunity to network and make contacts in the NFT clique or group. As mentioned before, when you are part of this community, the nepotism and proudness of the NFT ownership can possibly result in great opportunities.

For more information about personal advice regarding international business advice, tax situations or consolidation, Global Connect Admin B.V. can assist you with these challenges due to the rich experience and framework of connections.