MIAMI BEACH, Fla. – Even if NFTs are a flash in the pan, cryptocurrency investors are betting that the underlying blockchain technology is here to stay.
Crypto enthusiasts and venture capitalists flocked to Miami Beach, Florida this week during one of the world’s premier art events. For the first time, Art Basel Miami featured multiple NFT exhibits. But the city also hosted upwards of 200 other events, where the focus was more on the technology behind these digital collectibles.
Musicians, artists and celebrities are clamoring to launch NFTs, or non-fungible tokens, which are unique digital assets with ownership rights verified and stored on a blockchain. It’s a way to have ownership over content that’s been historically easy to replicate online.
The new asset class is raking in roughly $2 billion per month, up from $400 million in January, according to recent estimates from JPMorgan. Analysis by DappRadar shows NFT volume skyrocketing 38,000% year-over-year to $10.7 billion in the third quarter.
“Certainly there’s a lot of hype,” said Mike Shinoda, musician and co-founder of the band Linkin Park, who launched a new NFT mixtape this week. “Most people believe there’s some version of a bubble happening. But most of us who are in the space think that whether it goes up or down, it’s a new thing that’s here to stay in some version of itself.”
Gateway to crypto
Tristan Yver, head of strategy at Miami-based FTX U.S. said the hype benefits all corners of the crypto industry, even if parts are overvalued. Digital art can be a less intimidating way to introduce people to blockchain technology, according to Yver.
“We all have some basic understanding of art. We don’t all have a basic understanding of cryptocurrencies and blockchain — it’s the next step towards mass adoption,” Yver told CNBC. “NFTs are the first time a lot of people create a connection with cryptocurrency and blockchain.”
Blockchain technology used to be synonymous with bitcoin. But in the past few years, a variety of other blockchains have popped up that now support things like finance applications and video games.
Also known as distributed ledgers, the main draw for building on a blockchain is that they’re “decentralized.” There’s no central authority controlling these networks and no single point of failure. Advocates say it’s more transparent. Some tech investors see it as the next wave of the internet, dubbing it “Web 3.0”.
Adam Judd, head of crypto at LionTree, said some specific NFT projects feel “somewhat bubbly.” But he still sees room for growth in the category and new use cases around identity, community incentives, start-up funding, entertainment and fashion. He pointed to the cultural phenomena of the Bored Ape Yacht Club, and Beeple’s record $69 million NFT sale driving “immense interest” in Web 3.0.
“One of the biggest opportunities right now is around user-friendly interfaces and experiences for the everyday person that make NFTs approachable, valuable, and economical,” Judd said. “Once the everyday person feels as comfortable purchasing an NFT as they do buying a coffee, the rest of Web3 will benefit.”
Packy McCormick, founder of Not Boring Capital, was also in Miami this week and said NFT events were the key catalyst for getting like-minded people in the same room. But conversations were drifting more towards decentralized autonomous organizations, or DAOs, a new type of governance system, and other new use cases for blockchains.
“Once people get into NFTs, they want to learn about everything else going on in blockchain — it’s impossible not to go down the rabbit hole,” McCormick said. “There’s going to be a ton of people coming in to speculate. But the important projects will have staying power and over time, quality will win.”
Watch: Art Basel 2021 begins as NFT, crypto enthusiasts descend upon Miami