As part of the Information Strategy course we saw a video titled: “4 Things to Know about NFTs (Non-Fungible tokens)”. This video described three reasons for why someone would purchase an NFT:
- To support the artist
- Bragging rights
- To have the rights associated with owning the NFT
When NFTs first started to become popular it appeared that the first two reasons were more dominant in determining why people bought NFTs as owning an NFT didn’t give you any particular rights other than the right to sell it to people for whatever they value it at. Nevertheless, more recent NFT projects have started to give NFT holders certain rights helping to link the value of the NFT to real life value.
For example, NFT holders of certain projects have access to a community Decentralized Autonomous Organization (DAO). Thus, the funds that are obtained from selling the NFTs go to a community treasury and members have voting rights to decide how to invest these funds. Thus, real-life value is returned to the NFT holders, making the NFTs easier to valuate and providing a stronger rationale for why one would want to buy the NFT.
It is these types of linkages back to real-life value that can transition NFTs from being seen as a collectible to being seen as an actual financial digital asset that creates value for whoever holds it, similar to stocks and bonds. In my opinion, this move towards real value, if maintained, will create strong growth in the NFT market and investing in NFTs will be a more common and accepted practice. Nevertheless, ensuring that accurate valuation methods are used to value NFTs will be imperative in order to prevent large crashes in the market in times of economic turmoil.
Finally, I wanted to point out a couple of projects that aim to create the real-life value discussed above:
- 99 Originals: This project was created by a Youtuber called Logan Paul. He went around the world for 99 days taking one polaroid picture a day. All these polaroids then became NFTs, some of which came with special perks like exclusive access to events. Moreover, NFT holders have voting rights on what to do with the funds obtained in the community treasury (which were half of all the funds collected from the NFT sales), as they become part of the DAO.
- Spectro Society: This project presents another form of DAO investing by combining Web 2 with Web 3 investments, diversifying onto assets that have a sustainable business model. Ownership of an NFT gives voting right in the DAO, as well access to a community that will include leaders of different important and emerging industries, providing networking capabilities.
