ViaBTC Capital Insight丨NFT is Changing the Economic Structure of Web3.0 Content Creation
Along with its boom in 2021, the NFT sector achieved a sales record of $2.5 billion in the first six months of the year. A series of celebrities, going from the pop singer Katy Perry to Jay-Z, as well as traditional institutions such as NBA and LV, flocked to the NFT market, enabling an eye-popping sales record of $5,591 million in the second half of 2021. As the metaverse land goes viral, the leading traditional brands like Adidas, Nike, and Disney, as well as famous NBA players such as Stephen Curry and Michael Jordan, founded NFT brands in the pursuit of their own metaverse. Looking back at its history, NFT has matured over time. In the past 12 months, the NFT sector has grown from a small ecosystem with sales of hundreds of millions to a multi-chain ecosystem backed by funding that is worth billions:
· In 2017, ØOpenSea and SuperRare were founded. During this early stage, NFTs struggled in an Ethereum-driven market.
· In 2020, OpenSea was averaging $1 million in sales per month and the tail end of the first COVID-19 year experienced growth (now considered a kindling fire) in NFT art and collectibles sales.
· December of 2020 witnessed the growing excitement of NBA Top Shots and early Ethereum card games like Axie Infinity and Sorare.
· August of 2021 saw the boom of multi-chain NFTs. The NFT market peaked, with over $4.5 billion in NFT secondary sales, likely more when factoring in art sales and non-Cryptoslam tracked NFTs (e.g., digital land).
What is NFT?
NFT (Non-Fungible Token) is a unique and non-interchangeable unit of data stored on a blockchain, a form of digital ledger. NFT can be associated with reproducible digital files such as photos, videos, and audio. NFT use a digital ledger to provide a public certificate of authenticity or proof of ownership, but do not restrict the sharing or copying of the underlying digital files. The lack of interchangeability (fungibility) distinguishes NFT from blockchain cryptocurrencies, such as Bitcoin.
NFT changes the revenue model of content creators
Enabled by NFTs, royalties could easily go up tenfold compared to traditional monetization systems of artists. Almost every artist is focused on how to issue NFTs. The reason behind this is that NFTs have brought a paradigm shift in the ownership and use rights of the Internet-based economy, thereby liberating content creators from the existing business model of royalties and revenue.
In the past, works (pictures, videos, paintings, audio, text, or other creative media) created by content creators relying on their brainpower and inspiration, on the one hand, were placed on the Internet via traditional methods such as copyright, DMCA, DRM, and watermarks. On the other hand, the economic value of such works solely depends on their copyright and commercial adoption. In terms of content dissemination, this traditional approach comes with clear disadvantages: In itself, the Internet is free, open, and unrestrained, while the traditional methods such as copyright marks are old-fashioned and limit the free transmission of online content. In terms of revenue, held hostage by Internet platforms, traditional online content creators solely rely on copyright and paid subscriptions, and most of the revenue is monopolized. In other words, most of the profit is made by platforms via advertising. Moreover, the fact that traditional online content is easily copyable significantly lowers the revenue available to creators. As such, the boundary between ownership and use rights of the traditional Internet economy is unclear. As Internet platforms and pirates abuse the economic ownership of online content, creators are unable to transmit their content on a large scale due to copyright and ownership restrictions.
NFT is born from the Internet and for the Internet. Different from the traditional royalty system, NFT is 100% native to the digital world. According to its definition, NFT is not simply the online adaptation of the ownership of physical items. Instead, it has brought innovation to the outdated paradigm of ownership and use rights. In the physical world, ownership prevents others from enjoying things you own. Likewise, my income will go down if you steal something from me and let others use it. However, NFT provides a new structure of economic ownership and use rights: My ownership of an item does not prevent everyone else from enjoying the physical and spiritual value and pleasure it brings. On the contrary, the more famous and recognized an NFT is, the more valuable it will be.
Here is a simple example: NFT creators on Cryptopunks could receive a continued stream of profits via transactions between NFT owners. In other words, their revenue goes up along with the expansion of the NFT audience. As NFTs bring creators a sense of satisfaction, their prices will also go up. As viewers, we could appreciate, use, and transmit NFTs or create derivatives based on them without any limits or even costs.
Perhaps, you don’t understand how the complicated NFTs could revolutionize the digital economy and royalty system, but digital values and ownerships are moving towards decentralization, which means that they will no longer be controlled by organizations or platforms. In light of the present circumstances, NFT has started a revolution by certifying economic ownership and use rights as a bridge between the real world and the Internet while relying on the Internet to achieve the free and wide transmission of information. In the future, the Internet will be a value-centered blockchain network underlined by NFT ownerships. It will be a network built by creators, owners, as well as viewers.
Commercial examples of NFT in the real world and the Web field
2021 saw the exponential growth of innovation centering on NFTs, and this trend may continue for many years. Right now, NFTs are no longer limited to a single category of content and medium such as MEME or paintings.
- Artworks and collectibles: People like collecting digital art, such as Cryptopunks, Bored Ape, or digital paintings, for the same reason they like physical art, fashion, and baseball cards: NFT artworks are a mix of aesthetics, patronage, status, collecting, and socializing.
2. Music: Considering the particularity of its media, music, in the physical world, can only be paid for through physical media (CDs, tapes, on-site payment), while musicians make very little revenue on the Internet through a limited range of options. The emergence of NFT will open up many more possibilities (e.g., Pianity.com, Royal) of the music industry in terms of creation, ownership, use, and transmission.
Pianity: Everyone can listen to music. Only one can own it. This is the best interpretation of the new NFT paradigm in music. At the same time, each track is minted as an NFT and comes as limited editions. Scarcity makes them extremely valuable. With the help of NFTs, music created by artists could capture more value, and musicians could earn recurring revenue every time their limited music NFTs are traded.
3. Game objects: Web2 gamers spend about $40 billion a year on virtual goods. But users don’t really own those objects, the company does. Also, game objects are always subject to unlimited additional issuance, malicious modifications, and deletion by the game company. Plus, the objects cannot interoperate across games. Most of the time, you can only pay for the in-game items instead of trading them with other players. NFTs, on the other hand, allow users to genuinely own the objects. In the future, games might be built around user-owned objects instead of users having to depend on the game. Games like Axie Infinity and Top Shot kicked off a boom of Web 3.0 games.
4. Redeemable physical goods/brand NFTs: Adidas’s metaverse project has remained as the №1 collection on OpenSea since its launch. The collection of trending shoes has moved from the physical store to the asset list of Web3.0 NFTs, which eliminates the high costs of storage, maintenance, and display. Moreover, because of these costs, few shoe enthusiasts will redeem their NFTs into physical goods.
The acquisition of RTFKT announced by Nike marks its first step into the metaverse. Inspired by Air Jordan 1 OG, RTFKT created a pair of NFT sneakers called The X Evolutions. The sneakers were sold at 22 ETH to the famous NFT collector Whaleshark, who also received physical shoes from RTFKT after the auction. In the future, you might see plenty of metaverse avatars designed by RTFKT wearing Nike shoes and clothes while playing in the metaverse. The value for branding and advertising of such avatars is self-evident.
NFT is quietly changing the ownership and economic rights of content creators:
· Jay Chou’s fashion brand PHANTACi will release the Phanta Bear NFT series on Ezek;
· The NBA superstar Stephen Curry’s 2974 NFTs sold out within 5 minutes, and the $1.46 million proceeds raised from the NFT sales will be given to charity;
· Disney will release Mickey Mouse NFT collection on VeVe, an NFT marketplace;
· Basketball legend Michael Jordan will launch HEIR (an NFT joint venture) in 2022. Heir Inc. aims to build a bridge between athletes, “cultural creators” and fans around the world. NFT will be the backbone of the new digital experience offered by Heir, a membership-based platform.
· Xinhua News Agency will issue China’s first “News Digital Collection” NFT;
· More coming …
*The above content may not be relied on as investment advice. Please make prudent investment calls.