NFTs, or non-fungible tokens, have recently garnered significant attention, whether through articles about artistic monkey avatars or new crypto opportunities emerging online. The media is filled with stories of fortunes made from NFTs, with celebrities investing in NFT art and even schoolchildren creating their collections. But how do NFTs fundamentally work, and are they more than just the latest craze?
NFT stands for "non-fungible token." This concept is part of a recent wave in crypto design, where developers create new sets of tokens. These tokens have a finite design that ascribes value to them as currency. Each token is associated with a digital identity and typically attached to a visual element, such as a piece of art. As collectors seek out rare prints, buyers increasingly purchase NFT artworks. You can own a unique token from a limited set for the right price.
With certification, NFTs can be bought and sold on the crypto market, offering new ways to trade and invest online. While some critics view them as a volatile investment, this hasn't stopped NFTs from gaining popularity over the past few months. This surge in interest has provided developers with new opportunities to create revenue streams. Stories abound of developers making significant earnings from NFTs, ranging from thousands to even millions of dollars. For instance, Justin Bieber joined the Bored Ape Yacht Club, an exclusive community for holders of 10,000 unique Bored Ape NFTs on Ethereum's (ETH) blockchain, by purchasing Bored Ape NFT #3001 for $1.3 million.
NFTs: Beyond Monkey Jpegs And Flipping
NFTs became a buzzword in 2021, selling some pieces for millions of dollars. Here’s a rundown of key events leading up to the present:
2012: The concept of NFTs is first mentioned in a whitepaper describing "colored coins."
2014: Kevin McCoy creates the first NFT, "Quantum."
2015: The first blockchain-based game, "Spells of Genesis," is launched.
2016: One of the earliest popular NFT collections, Rare Pepes, is released.
2017: CryptoKitties is launched, becoming the first major NFT project.
2021: NFTs go mainstream, reaching $25 billion in sales.
2021: The most expensive NFT sells for $69.3 million.
2023: Jack Dorsey's NFT tweet, initially sold for $2.9 million in 2021, is auctioned for $280.
The hype around NFTs has diminished, and several reasons exist for this rapid decline. The technology is still in its early stages, and it will take time to realize its benefits and address its disadvantages fully.
NFTs offer numerous benefits, many of which are still untapped, such as proof of ownership, interoperability, security, and transparency for digital assets. Contrary to popular belief, NFTs are not just limited to Bored Apes JPEGs or a get-rich-quick scheme. There's much more to explore and develop.
Monkey Business
The Bored Ape Yacht Club (BAYC) is one of the most successful NFT projects in the world, with sales surpassing $2.3 billion. The collection consists of 10,000 unique tokens featuring apes with a bored expression, representing a new era of digital art that has skyrocketed in popularity. All tokens sold out within 12 hours at their launch price of $190 or 0.08 ETH. Celebrities like Jimmy Fallon, Steph Curry, and Post Malone have added credibility to the project by purchasing these NFTs. Today, the cheapest Bored Ape costs around 91 ETH, approximately $140,000.
However, BAYC is more than just a collection of digital art. It offers a sense of community and exclusive perks to its owners. This began with Ape Fest 2021, a weeklong celebration for NFT holders that ended with a lavish warehouse party in Brooklyn featuring performances by Lil Baby, Questlove, The Strokes, Chris Rock, and Aziz Ansari. Owners of the Mutant Ape Yacht Club (a spinoff project) and their partners were also invited to this 2,000-strong event. The exclusivity of these gatherings is evident no NFT, no entry.
BAYC is not just about owning digital art; it offers membership to a club that provides exclusive events, concerts, and even its streetwear brand.
NFTs Aren’t Just Digital Monkeys: What They Can Do for Travel
NFTs can significantly benefit the travel industry now and in the future. Here are two examples to get you started:
Collectibles As A Marketing Tool
Digital art isn't just for art enthusiasts. People have always enjoyed collecting souvenirs from their travels, sending postcards to relatives, and sharing memories with loved ones.
By generating NFTs on platforms like Camino (a process known as "minting" in the industry), travelers can collect NFTs from different hotels as a form of "proof of travel." These digital souvenirs can be pictures or other memorabilia they can manage in their online collections.
This concept resembles how Starbucks offers only collectible cups in certain locations. These NFT collectibles would be exclusive to certain hotels. Even major streaming services like Spotify are exploring NFT-enabled playlists, showing the broad potential for NFTs beyond traditional uses.
NFTs As Tokenized Representations Of A Booking
What do we sell to customers when they make a booking? Essentially, we sell the right to board an aircraft or stay in a hotel room. These rights can be easily tokenized into digital assets like NFTs. By doing so, ownership is recorded on a single, tamper-proof source of truth.
All parties involved, the hotel or airline, the travel agent, intermediaries, and most importantly, the customer, access the same data entity, the NFT, instead of relying on their individual data sources. This ensures a seamless experience, reducing the risk of errors, such as booking a suite with a sea view and ending up with a room facing a wall.
Additionally, all payment processes can be handled on-chain, creating a more cost-efficient ecosystem for everyone involved. This method is even more secure since the payment for the digital asset and its transfer are handled within a single transaction. The traditional phases of exploration, due diligence, and trust-building in the travel industry could be significantly minimized or eliminated.
The creation of the digital asset, its transfer through intermediaries, and finally to the end customer, along with all payment processes, are managed by smart contracts.
The Story Behind the Art
Despite their intangible nature and the questions surrounding their value, NFTs have generated significant hype and achieved luxury status. The monkey NFTs of the Bored Ape Yacht Club have become iconic within the crypto industry, attracting a circle of wealthy owners.
Among these high-profile investors are Snoop Dogg, Eminem, and Paris Hilton. Some celebrities have even ventured into NFT development. For instance, Ozzy Osbourne partnered with a coding team to create a series of NFTs called CryptoBatz, a collection of 9,666 blockchain-based bats.
What makes NFTs more comprehensible is their art representation. Images, animations, and GIFs are some of the most common tokens, serving as the digital goods attached to NFTs. For example, singer Grimes sold $6 million worth of digital art as NFTs after creating a series of surreal animations set to original music. Like investing in stocks, the rush to buy NFTs is driven by the hope of future value, and many believe that NFTs have significant growth potential.
Exploring NFT Use Cases
Digital Art And Collectibles
Previously, digital artists struggled to prove ownership of their work, especially when shared online. Duplicates would spread without credit or monetary value for the original creator. In 2017, photographer Cath Simard faced this challenge when a picture she took went viral on social media. She authenticated the image by uploading it to the Ethereum blockchain as an NFT and has since monetized her work this way. Many artists, like Cath, now use NFTs to authenticate and sell their work, earning royalties from secondary sales.
Gaming And Virtual Assets
In gaming, NFTs earn rewards and facilitate trading, allowing players to own and sell their assets across different gaming platforms. Decentraland is an example of a virtual world using NFTs to enable user interaction and collaboration. The full potential of NFTs in gaming and virtual assets is still being explored, with more innovations on the horizon.
Music Tokenization
NFTs allow artists to tokenize their music rights, earn royalties, and even transfer those rights by selling NFTs to fans. This gives artists full ownership of their work instead of receiving partial payments from streaming platforms. Some musicians have also used NFTs to offer exclusive content to fans, creating a stronger community.
Real-World Assets
Real estate investors can provide liquidity by tokenizing physical assets on the blockchain, allowing people to buy fractions of these assets. This strategy can also be a marketing tool for realtors, targeting a wider online audience.
The Future Is Bright
While celebrities are taking their slice of the pie, does that mean everyone else should follow suit? If the performance of other cryptocurrencies is any indication, it's clear why many are eager to get involved in NFTs from the start.
Bitcoin serves as a great example. Despite the fluctuating global markets affecting its value, Bitcoin's general trajectory has been upward. In March 2018, Bitcoin was worth approximately $8,200. By March 2022, it reached as high as $47,000, with analysts predicting it could soon hit $100,000. Those who feel they missed the Bitcoin opportunity are now more vigilant about purchasing NFTs.
Beyond investment and art, NFTs are paving the way for new business models. Hotel chains are exploring using NFTs and tokenization to secure financial stability and growth. For instance, the five-star hotel Ca’ di Dio in Venice is auctioning off a night’s stay through NFT bidding. This approach helps address the revenue fluctuations caused by the pandemic. By digitizing assets through blockchain technology, hotels can offer fractional ownership to investors, creating a new way to generate short-term cash flow.
Moreover, Secret Island Club (SIC) plans to acquire exclusive plots of land within various metaverse worlds to create a chain of SIC Hotels, highlighting the innovative potential of NFTs in the hospitality industry.
Conclusion
The future of NFTs is undeniably promising, extending far beyond digital art and celebrity endorsements. As demonstrated by the rising interest in NFTs and the historical performance of cryptocurrencies like Bitcoin, early adopters stand to gain significant advantages. NFTs are not just transforming the art and investment landscapes; they are also revolutionizing business models across various industries.
Hotels, for example, leverage NFTs to stabilize and grow financially, turning to innovative solutions like fractional ownership to ensure steady cash flow in unpredictable times. Projects like the Secret Island Club’s metaverse hotels illustrate the expansive potential of NFTs to create unique and profitable ventures.
As NFTs evolve, they will likely open up even more opportunities, offering new ways to invest, build businesses, and engage with digital and physical worlds. The future is indeed bright for those willing to explore and embrace the myriad possibilities NFTs present.
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