ARE NFTs DISRUPTING THE TRADITIONAL BUSINESS MODELS?
Non-Fungible Tokens (NFTs) are somewhat of a buzzword in today’s world, as the emerging concept has been attracting attention from all around the globe. It is no coincidence that recently, Mark Zuckerberg, the founder of Facebook, announced a change in the social media platform’s name to ‘Meta’, signalling another shift in the digital world. NFTs could well become an integral part of the digital world is exciting. Jake Aquilina explains.
NFTs provide a new medium for digital artists to share their work and receive payment for it. Given the shift from painting on canvas to one’s tablet or drawing pad, there does seem to be an argument to be made by digital artists to earn what they work for. However, the shift has been morphing into more areas and fields beyond the argument of just paying for digital artists. The market cap of NFTs has been seeing a significant surge year on year, while the total cryptocurrency market cap has been valued at over $2.5 trillion. Although specific NFT projects are seen as a bubble waiting to burst, many other projects seem to have a longer-term future.
One such person who believes this is Luca Arrigo, a Maltese who delved into NFTs has been serving big-name DJs and artists hosting virtual events and art galleries in Decentraland. He is also the founder of Decentraland Architects and is involved in the project TMC Games.
Arrigo said that to analyse how the traditional business model is changing, one must understand innovation. “In the metaverse, we can create all kinds of innovative business models. Innovation can be described as a new solution using a creative idea. This can be through the application of existing technology in new ways, industries and paradigms,” he said. “For example, NFT technology has been with us for years now, but it is suddenly gaining traction in video games. We are sure that there are many more such use cases that are yet to be explored,” he said.
Indeed, if one looks at the gaming world and its relation to cryptocurrency and NFTs, the business model has seen a significant – and literal opposite – shift. Games used to be Pay to Play (P2P), while some were Free to Play (F2P). Now, the cryptocurrency and NFT era has allowed a new mode to be introduced: Play to Earn (P2E). The latter notion allows players to potentially earn cryptocurrency for playing games, completely altering the business model as we have known it for the past few years. Projects such as Axie Infinity attest to this new mode of playing, a game that has seen its market cap almost skyrocketing to $10 billion in October 2021. Arrigo also noted that the traditional way of defining a business is morphing due to a heightened digital shift the world is moving towards; innovation is simply switching from the physical to the virtual space.
Luca Arrigo
“Even though innovation is a big fancy action and difficult to achieve, it can also be simple, quick and elegant. By looking at blockchain in new industries such as gaming, we can easily get people with skills to innovate. For example, many architects who are blockchain savvy are now designing virtual spaces for events, galleries and festivals on the metaverse,” he noted. Furthermore, he attested that the shift is already up and running, and the move towards cryptocurrencies will also enable this shift only to get stronger. “In short, we are already in the metaverse. The use of blockchain as the infrastructure for the ownership of digital assets is the only ethical way for us to create and manage a real metaverse that we aspire for,” he remarked.
Although NFTs are still at their conception, many tout them to be one of the following steps for businesses to adapt to. With the virtual space morphing more rapidly than before, it might be high time businesses started to embrace NFTs and how they work, such as Visa did with its bold move when it bought a CryptoPunk NFT for $150,000 in Ethereum (ETH)*. “In the long term, we believe that decentralised systems will win market share. So, the future is Decentralised Apps (Dapps),” Arrigo said.
Another Maltese who dipped his hands into NFTs is Zack Ritchie, an illustrator whose cartoonish artwork attracted sales as NFTs. Ritchie believes that NFTs have made it possible to bring “scarcity and proof of ownership” to the digital landscape. “Now digital files, art, formats are digital assets, depending on the perceived value the creator brings.” The illustrator also compared this period to the creation of the internet and the dot-com era. “Fast forward to today, and every business has a website/eCommerce. NFTs have a lot of potential, but at the moment, they still have to be developed.”
Zack Ritchie
Ritchie also mentioned certain success stories in the NFT space, such as Gary Vee’s using NFTs as admission tickets to his VeeCon event. He also gives exclusive benefits to holders via free Pre-Launch Program (PLP) airdrops. “Bored APE Yacht Club is another successful pioneer in the NFT space, where APEs are social statues due to the popularity and demand for these limited APEs. Primarily they serve as a badge to show you are part of a community, offering members exclusive benefits, events, and meetups,” he said.
Regarding their future, he said that he has “no doubt” that NFTs “are here to stay”. “I’ve only been in space since January, and things are developing very fast. NFTs are now attracting the music industry, the gaming sector and large businesses such as Nike and Facebook, which has now rebranded to Meta,” he said. “It’s hard to say where things will go, I imagine the digital world becoming more virtual as the above industries are explored. It might come to a point where our lives will be crossed between the metaverse and real-life, just like social media and tech are a part of our lives,” he concluded.
*www.bloomberg.com/news/articles/2021-08-23/cryptopunk-nft-prices-visa-buys-digital-avatar-7610-for-150-000-in-eth
“In the metaverse, we can create all kinds of innovative business models. Innovation can be described as a new solution using a creative idea.”
What Are Non-Fungible Tokens (NFTs)?
Non-fungible tokens aren’t actual cryptocurrencies in the same sense as Bitcoin. Cryptocurrencies utilise the blockchain to track financial transactions between parties and were designed as a digital currency for use on the internet and in a digital-first world. NFTs are also built on a blockchain but instead are used to guarantee ownership of an asset. Think of it as a certificate like an auto or real estate title stating the legal owner of a car or home, except that an NFT is proof of ownership in digital form. Most NFTs are based on Ethereum. An NFT is a unique asset that is not directly replaceable with another asset (thus the name “non-fungible”). A fungible token, by contrast, is replaceable with another one identical to it. For example, Ether is the fungible token that trades on the Ethereum network, meaning one Ether is identical. The same goes for Bitcoin. One Bitcoin can be exchanged for another Bitcoin because they have the same value. Physical currencies work this way, too. For example, a one-dollar bill is the same as another dollar bill. But each NFT is unique; there isn’t another one exactly like it out there. Digital code is written into this digital token and recorded using the blockchain network it’s based on (again, usually on Ethereum) to prove a list of historical ownership and the current owner of a unique digital asset. An NFT can represent any digital creation: music, videos, writing, etc.
Zak and Benji Borg, co-founders of ANCHOVY. plc and James Abela and Matthew Sammut, co-founders of NIU Ltd. have announced the formation of a comprehensive technology and digital services group, known as Capital 9H Ltd., with the goal of creating the largest digital services offering in Malta and paving the way for an international growth programme in the rapidly growing sector.