The Next Wave In Blockchain
NFT.NYC was one of the first conferences of its kind taking place in New York City on February 20th. The focus was on what are referred to as “Non Fungible Tokens”. Simply put, they are digital collectables that have inherent value. If you want to dumb it down even more, think of Pokemon cards, Dungeons & Dragons, Magic The Gathering, Starcraft, League of Legends and the overall gaming world and its components. In 2017, there was a tidal wave of Blockchain startups raising capital through ICOs or Initial Coin Offerings. The goal was to finance the growth of the Blockchain ecosystem and businesses that could contribute to the improvement such as scalability, interoperability, storage, etc. It got a bit out of hand and the valuation of Tokens crashed significantly causing a Bear Market to initiate.
Fast forward to 2019 and a lot has changed since the craze of 2017. Non Fungible Tokens represent a one of a kind, like baseball cards, limited edition sneakers, or anything else that people contrive the value of something from. Early on in the conference this was emphasized through the analogy of art in a museum. Why does anyone consider a Van Gogh or Mona Lisa valuable? Perhaps because of its provenance, history of ownership and of course popularity with the masses. Rare items are special to collectors and represent a form of bragging rights and just like Gold, they are a store of value with long term stability.
Michael Casey, the CEO of Streambed Media described the psychology in depth as to why people perceive value in something. The slideshow entailed the typical items people collect and our desire for “Social Proof”. Value is important to humans as it represents many facets of survivability, strength and uniqueness. When people meet other people for the first time they generally like to exhibit what they have either directly or indirectly through fashion accessories like shoes and watches, job titles, location of specific neighborhoods, connections, and collectable items that are rare and special like artwork.
But, My Stuff Is Special Also…
Digital collectables are nothing new. For years, specifically gamers have traded digital collectables to increase their status and strength within the game. Gaming has attracted many wealthy hobbyist and some are reported to spend hundreds of thousands of dollars per year on these games. I think it is fair to say that gaming is a very real addiction embraced by millions globally. I myself was a gamer in the 1990’s playing “Doom” and figuring out how to get the BFG 9000 cheat code to improve my ability and win. Another game that captured my attention was “Sim City” which I still play to this day and find it to be therapeutic.
People also like to trade Peer to Peer (P2P) because it allows relationships to grow in the field and social engagement is a big aspect to the digital collectable world. Just like any hobby, whether it be jogging, riding a bike, going to the gym, collecting is an essential element. So at this point it all should make sense to you as to why NFTs could become something important in the next few years. “Decentraland” one of the ICOs that was launched in late 2017 has been a big hit with enthusiast and backed by some major league investors. It reminds me of Second Life or Sim City but a very early version as it does not contain much content at this time. I met some publicly traded companies at NFT.NYC that intend to build their own brands within the Decentraland world, and I heard some very interesting ideas that piqued my interest.
Other companies in the Blockchain world like 0x Protocol have initiated projects for Non Fungible Tokens. One of the dominant players right now is called “OpenSea” and serves as a marketplace to buy and sell different NFT collectables. I spoke to the founders in depth about this company and I think they have a great business model. The cool thing about OpenSea is that anyone can list their NFT for sale whether it has any status or not. I expect this to eventually change if these become more popular in a few years and the market to be more competitive.
The Crypto Kitty Craze Evolved
Crypto Kitties was one of the most popular creations in the NFT arena. Digital cats were “bred” and sold to speculative traders. In early 2018 at the Ethereal Summit, a rare Crypto Kitty Sold for over $100,000. Could it have been a publicity stunt? Sure, but as of 2019 data shows that Crypto Kitties is the most popular NFT on the market, with Decentraland closely behind. As a former gamer from the 1990’s, I am well acquainted with these ideas and believe as of now the only adoption to be gained is with gamers themselves. Most everyday people do not have the time to figure out the complications of Blockchains, Crypto Wallets, and add to that the constant volatility and no real world adoption (yet).
Speaking to a wide array of gamers, I was told that “Blockchain gaming sucks, and why would I do it when I can play popular games for free” and they do have a valid argument. Is gaming currently the only use case? At this point I will argue and say no it is not the only use case and there are many types of NFTs that can be developed aside from gaming pieces.
Linda Lu used the analogy of early mobile phone games when describing the future of NFTs. Whether you believe NFTs have a future or not, the designers of them seem to think so. I was very interested in combining art with NFTs. Some of the attendees came from artistic and creative backgrounds and presented some cool ideas with digital art. One group developed an NFT based on street art, and intend to build a gallery within Decentraland. I also witnessed an interactive mural that can be constantly added to forever by different artist.
The digital collectables industry is definitely real, and will continue to grow. As for Blockchain gaming, I am still not sold on it. Blockchains present too many problems and are slow databases. They do not scale (yet) but they do have a good use case for censorship resistance and store of value. This is why I am mostly interested in the art platforms planning to launch. I’m really interested to see what other use cases NFTs have than gaming or art. I do think there is a future in them and will continue to research some of these projects and see how they evolve.