Media NFTs
Research: JD Scribner
Originally published October 22, 2021
NFT’s, or non-fungible tokens, are the latest and most exciting use case for blockchain technology. Non-fungible (unique and irreplaceable) tokens (a unit of data) are the digital assets that are changing the landscape of media as we know it today.
NFTs can represent multitudes of things, but some of the earliest significant examples of NFTs are of digital art and digital collectibles. In March 2021, digital artist Beeple auctioned off a compilation of his works as an NFT for $69 million, and a video of a LeBron James dunk sold as an NFT for $200,000. Thanks to the blockchain, the digital ledger upon which NFTs exist, it is possible for these digital assets to be authentic, unique, and contain a public record of ownership. Its “proof of work” model and decentralized nature allow the details behind the NFT to be public, making it transparent as to who owns the original piece and the price point at which it was bought or sold. So even though you can screenshot Beeple’s art or screen record LeBron’s dunk, when that digital asset becomes an NFT, there is a digital signature attached that is legitimized through the blockchain which makes it unique and one of one. This idea of scarcity is the reason for the high cost and high demand. NFTs are continuing the digitization of media: Rather than owning a physical painting or physical sports card, you own the single digital item.
Ethereum, the underlying blockchain technology for NFTs, is the cryptocurrency that allows smart contracts to operate on its network and is the reason NFTs are so transparent and trustworthy. Smart contracts are coded, multi-party agreement that can facilitate agreed-upon terms without the need for middleman services. NFT’s operate solely on Ethereum and can be traded on every Ethereum marketplace in the world. They are also valued using Ethereum’s own cryptocurrency ether (ETH). Writing smart contracts into NFTs can allow creators to do things like retain some ownership over their work, or claim resale royalties directly, giving creators true digital ownership.
Beyond digital art and digital collectibles, these smart contracts make it possible for essentially anything to become an NFT. In essence, a token is just a fancy word for information. A song token can provide royalty payments. A concert ticket as an NFT can provide access. Even a vaccine card could become a token. NFT’s are simply an on-chain token, representing an off-chain digital asset. With Ethereum being the driving force behind making this all possible.
For the future of media, understanding NFTs as non-fungible information will be how this technology stays around and becomes implemented into the framework of media.
Entertainment
Entertainment is one of the first sectors being transformed by NFTs. We’ve seen artists tokenize all sorts of audio and visual art in forward-thinking ways. Content creators will now own and manage their assets from inception, and be able to distribute it freely. For now NFT’s are exciting and new, and the hype for this new technology has driven the value of these prices up as the crypto community continues to invest in these assets with high demand. But as with most physical art, most NFTs will eventually have very little value.
NFTs will be as valuable as their communities allow them to be.
For digital artist Beeple, his 2.1 million Instagram followers prove that he has an existing community that is invested in his work. For LeBron James, as the face of the NBA he automatically has a community willing to buy any digital collectible. Without a community, NFTs will be no different than regular paintings in the window of a shop for the majority of artists and creators.
News and Information
Rethinking non-fungible tokens as non-fungible information is where NFTs will become a customary commodity. The ability to tokenize all things is where the real value will lie. Having tokenized tickets to any event will allow you to know who owns the ticket, when the ticket has switched hands, and whether or not the ticket was used because that information will be transparent and immutable on the ethereum blockchain. Within journalism, a space that isn’t known for being very profitable, New York Times writer Kevin Roose sold his column about NFTs for $560,000. As exciting as this is, articles sold as NFTs won’t be a consistent revenue stream for journalists. Early 2021 was the pinnacle of demand for NFTs, which is why Roose’s article went for six figures. The only desirable NFT in journalism would be a distinctive magazine cover or historic front page of a newspaper, when the NFT has some sort of value beyond the publication or author. People don’t want to own articles as much as they want to own artwork.
Positioning
As NFTs are still a nascent technology, we now have to watch and see which industries and companies embrace this technology, and which don’t. Within sports, last fall the NBA launched its digital collectible site Top Shot, which has had a major impact on the exponential growth and excitement surrounding NFTs, with their sales growing fivefold in January to February from $44 million to $232 million, and reaching around $500 in April, and more than $2 billion being spent in the NFT market as a whole during the f irst quarter of 2021 — representing about a 2,100% increase. The NFL and MLB are in the process of launching their own respective NFT collectible sites, but the NBA was the first major sports league to allow the digital collectibles within their league to be a part of this explosive NFT craze.
DAOs, or decentralized autonomous organizations, are a new type of company that go hand in hand with NFTs and will play a role in positioning for the next era of media companies. A DAO is an organization that exists on a set of smart contracts on the Ethereum blockchain. It’s decentralized, non-hierarchical structure allows for all members of the companies to have decision making power. Since DAOs run on Ethereum, DAOs use tokens to vote on topics within the organization. Within many DAOs a member’s voting power can vary based on how much they have contributed to the project. An exciting example of this is Audius, a music streaming platform structured as a DAO. Each week, users who create the top 5 trending tracks and top 5 trending playlists are rewarded with $AUDIO signifying ownership of a piece of Audius. The more you use the platform and contribute to its community, the more you are rewarded with owning a piece of the platform itself. More media companies will emerge that are structured like DAOs because they are transparent, decentralized, and use smart contracts, and the integration of DAOs into the media is inevitable.
Additional Resources
- NFT Canon, Andreeson Horowitz
- Every Media Company Needs an NFT Strategy — Now: NFTs Are Not Art, They Are the Ownership Layer of the Internet, Coinmonks
