69 million dollars. That’s what artist Beeple’s NFT sold for in early 2021. By now this is old news, but for the majority of people, it is still wildly confusing. How can a piece of art, that is online for anyone to see, be auctioned off at such a high price?
Without delving too deeply into blockchain technology, NFTs are tokens that designate exclusive ownership of a digital asset. For example, the entity that bought Beeple’s art didn’t actually buy the picture. They bought the Token that shows they own the picture. For most people, the concept still does not make much sense. Who cares about the owner of a digital asset that anyone can have or see, for free? If you can’t exclude anyone from having the image, why even buy it in the first place? While there is undeniable hype behind NFT’s, the concept is still largely misunderstood by the mainstream. I’m here to tell you that in the next decade, that is going to change.
Creating Digital Scarcity
What’s the number rule of Economics? Supply and Demand. Items and resources derive value from the fact that they are limited. In a digital environment, it has always been impossible to make things like art scarce. NFTs are here to change all that. An NFT token’s primary function is to display ownership. Essentially creating a kind of digital scarcity. Collectibles in the real world are valuable only because other people can not have them. Pokemon cards, baseball cards, exclusive watches, gold, and diamonds. All of these are valuable only based on the fact that someone else wants them. NFTs allow for this same kind of function to existing in a digital world. It’s true that anyone can have the picture, but only one person can own it.
Connection to Video Games
In the majority of video games today, players have the option to buy skins. Custom designs for their characters, clothing, weapons or anything of the sort. Skin’s are so prevalent that some games are able to rely on these skins as their only revenue stream. Fortnite is the biggest title with this model in place, and in 2020 they were able to rake in $2.5 billion in revenue.
To facilitate these transactions games have players buy virtual currency. Every game has a different currency, Fortnite has V-Bucks, GTA has shark cards, and NBA 2K has the creatively named VC (Virtual currency). Players have to use real-world funds to buy these currencies, and all of these currencies only work in one game. NFTs can replace all of these digital economies, and bring in a host of new benefits.
NFT’S and the Metaverse
If you’ve read our article on the metaverse, you already know that it’s the future of gaming, and likely the world. A fully connected digital universe that all the major tech companies are pushing to create. Imagine if every video game, classroom, movie theater, and the job was hosted in the same place. That’s the metaverse.
When the metaverse comes to fruition, having a different currency for every single game is going to become a massive hassle. In a world where digital assets can be transferred from game to game, it would make sense to have a uniform currency or some way to make these transfers easier. That is where NFTs come in.
NFTs allow an individual to show proof of a digital asset. By having everything in the metaverse tied to an NFT, these goods can be easily traded across games and worlds. The best part is that there won’t be any more need for games to create their own currency. NFTs will be purchased with cryptocurrency, or directly with traditional currency. The combination of these two technological innovations will create the most robust and advanced digital economy the world has ever seen.
How Far Away Are we?
How close are we to seeing these two worlds collide? Currently, Google, Facebook, Microsoft, and Epic Games are investing billions of dollars and massive amounts of human capital to pursue building the metaverse. At the same time, major companies like the NBA and Tik Tok are selling their own NFTs and helping creators develop NFTs as well. These two innovations together will create one of the biggest moneymakers the world has ever seen. With all of the pressure from major companies to make it a reality, the NFT Metaverse economy is going to be here before you know it.
Or Briga is a contributor, a veteran gamer, Forbes 30U30 alum, and the CEO & Co-founder of NOVOS.gg, an online training platform for gamers who wish to take their gaming skills to the next level.
Forbes Israel Contributors are independent writers that were individually picked by Forbes staff. The writers are experts in their field and they provide professional commentary and analysis of current events. The Contributor’s content isn’t sponsored.