Non-Fungible-Token’s, yep its a term and it’s a thing. A dabble into the vast corners of crypto & blockchain twitter reveal a scene that’s gone completely banana’s, making Bitcoin almost look like the iPod Nano of the Crypto space. With all the commotion however, despite the odd reporter checking in from time to time its seems that the UK is pretty disinterested, or at least behind the hype curve, is it only a matter of time?
Let’s start with the necessary question, what is an NFT? Well simply, its token that identifies ownership of a digital asset which can be attributed to digital images, gifs music (not limited to but of current popularity). Non Fungible means that it cannot be replicated, it is unique, one of a kind, therefore guaranteeing the token holder ownership of the asset that their token is associated to. It leverages blockchain technology, a decentralised digital ledger which is known to be “impossible” to cheat or change, making the very concept of NFT’s possible. This is hugely important as without this perceived trust in the technology, NFT’s would carry no value at all, any proof of true ownership would not exist.
A quick scan on Opensea (one of the more popular NFT marketplaces) see’s a PudgyPenguin (certified) listing for 3,000 ETH, an equivalent of roughly $12,080,310.
So how is this even a thing and why should we care? If its a “digital asset” that means I don’t actually have anything I can hold, it’s just on my laptop screen or phone. This much is true. Our friends could quite easily take a screen shot or copy and do what ever they like with it and post it anywhere they like. This is also true (at least in its basic form). But the point is without the token it means nothing. The most relevant comparison would be the basic conventions that underpin the fine Art world, NFT’s are essentially the provenance of an object. Like with the audit trail of the Christies auctions and physical documentation of sales, NFTs with Blockchain provide the sequence of ownership and thus can certify true ownership of an item.
Whether or not you would care about ownership of a digital asset vs a genuine John Constable that you hang on your wall is an entirely different matter. The reality is many people do.
Lets firstly head across the Atlantic to our friends in the US and where the NFT market has gained real pace. A Monkey here, a Bear there and maybe a Penguin is thrown in for good measure too, these are the hot NFT properties and some which are exchanging hands for serious crypto coin. A quick scan on Opensea (one of the more popular NFT marketplaces) see’s a PudgyPenguin (certified) listing for 3,000 ETH, an equivalent of roughly $12,080,310. Now that is a listing price and whether this is achieved is unlikely, however there is evidence of previous transactions of circa $15,000 for such penguins. With asking prices of this level, NFT’s are clearly no joke. The driving force behind this market place (much like crypto currencies in general for now) is the hype generated by mainstream social media channels. We saw evidence of this in the great meme stock movement of 2021 in March. This was put down to bored furloughed individuals with a bit of extra cash on their hands wanting to sh*t on the big bankers of this world and “pump” a randomly trending stock. And it worked, kind of, some people got rich and Melvin Capital took a scraped knee in the playground. Although some would argue that the NFT community is much more sophisticated, and I would largely agree, the principles behind what drove the price on Gamestop that week are largely behind what we see today in the investments being made on digital art. Speculation, hype and frantic tweeting are all criteria that make up the credentials of those who are really looking to make a quick buck. Don’t get me wrong, it has been simply unbelievable what people have been able to achieve, Forbes even threw out an article to claim how Gen Z’ers were showing up the Pro’s, but amongst the weeds there will be some serious losers.
So why do it? Well because people want to buy a Tesla of course (I jest but this is quite often the single goal). What I would say there is an element of control that people crave when being able to manage their money and make decisions in this way, apps like Robinhood have truly democratised investing in finance to allow for the retail investor to get amongst it and people have gone all in. Why these apps are so successful are much to do with the ease of access than the service that is being provided. Investing isn’t new, but the challenges behind setting an investment account, proof of ID, income, national insurance etc was painful, very few retail investors existed 20 years ago in comparison to today simply because of the barriers to entry. Robinhood solves this. The danger is that the experience becomes the on the other end of the spectrum as apps of these experiences gamify the stock market. What we see with these products as a result (and this is where I put my old man hat on) is the rise in addictive behaviour of a similar nature of that which is created by gambling. Trends such as #stocksonlygoup for many is simple laughable and a tongue in cheek nod to the investment sphere, but there are true believers in this. You dont have to look far to find commentary where “you sell when the stock goes down and you buy when the stock goes up”, and with media channel algorithms set to push the “get rich quick” scheme theme, there is no doubt that there will be some more casualties along the way.
Now I may have tarred the NFT space with the Crypto brush but there are definitely parallels that can be drawn from the mindset of those who operate in this space as there is a substantial amount of cross over. Do not get me wrong like with any sector there are some serious players in this space, but these are the people who go quietly about their business and do not shout about it from the rooftops.
As Web 3.0 looks to take decentralisation to the mainstream it’s hard to bet against the movement.
So why in the UK do we not necessarily see this trend? It’s not that access is a problem, NFTs are primarily traded on any Ethereum marketplace(the crypto currency in which NFTs primarily rely) and we in the UK have a wealth of access to these channels. So why the lack of interest? Is it because conventional methods are enough to keep us busy and quite frankly we’re just getting used to apps like Nutmeg and Hargreaves Landsdown to invest in ETFs, if Bitcoin is beyond us then NFTs certainly are. OR maybe quite simply our passion for real tangible ownership is not diminishing any time soon. Our British national reserve educates so many areas of our society to focus on the traditional routes such as establishing that foothold in the property ladder or topping up your annual ISA allowance. So the idea of dropping a house deposit on a multicoloured monkey seems extreme. The epidemic of the short termist day trader is yet to gain traction amongst the UK Gen Z population, at least for now.
Although NFTs are yet to truly make ground in the UK, It is wrong to say that the technology has great potential, because it is and has been making waves for a few years and the faith and interest in the market is growing. Perhaps where the greatest potential in NFTs lie, not in the market that they facilitate but the technology that it represents and the underlying trust that is building, this remains to be seen. But by establishing a global standard of validating authenticity, it doesn’t take much thought to consider how and where such an attribute could be beneficial. As Web 3.0 looks to take decentralisation to the mainstream it’s hard to bet against the movement.
Technologists may scoff at this idea of “Trust” by claiming that the technology itself is enough proof, but like with any consumer offering, people need to collectively buy into the movement and this does not happen overnight. Force = Mass x Acceleration and in the wider context the mass is negligible and the acceleration facilitated by the technology is few and far between to suggest that NFTs are a true force in our lives. NFTs right now are for the bold who will become the pioneers of this space and those that we will look back on as the tried and testers, but right now, you guys across the pond knock yourselves out with the Monkey Zombies, we’re quite happy with The Hay Wain.
