Depending on who you talk to, non-fungible tokens, or NFTs, are going to upend the digital world as we know it or become this century’s Tulipmania. The founder and president of Culture Group Michael Patent believes it’ll be more of the former. We get his bullish opinions about NFTs.
How would you explain NFTs to a five-year-old?
See those matchbox cars or those baseball cards that you collect? It’s a physical item that has a lot of value to you.
Imagine if you owned a digital version of an extremely limited item, and you can keep it as long as you want or trade it to your friend who lives in another country for something of greater value. That’s an NFT in a nutshell.
What do you think is contributing to the craze of NFTs? Are they mostly people who hope that the price will increase? Or do they genuinely want to support an artist?
There are many collectors out there. Some of them buy NFTs solely for investment reasons, with a belief that they will increase in value. Others are genuine forms of pop culture history that people want to own.
The NyanCat meme NFT sold in auction for US$580,000. It’s like buying a trading card or a limited edition comic book. That meme holds genuine nostalgia for people who grew up with it, and they bought the NFT because comic book fans buy first editions of Batman.
There’s also an entire segment of NFTs from artists and more recently musicians that carry additional benefits. Purchasing these NFTs enables more direct interactions between creators and their fans, helping fans better establish a relationship with the artist. NFTs are essentially really smart digital assets that can carry additional rights to future benefits. For example, a musician could release a piece of music or a piece of art, and the owners of the NFT could have continuing benefits such as privileged access to concert tickets or a virtual meet and greet in the future. In this way, it becomes a secure and direct connection between the creator and the NFT owner.
(Related: The NFT effect on Singapore art)
How do you think NFTs will branch out to create more revenue streams for artists?
Social media democratised pop culture and allowed creators to communicate directly with fans and create fan communities. Similarly, NFTs now add a direct commerce element, where creators can directly transact with fans and have continuing commercial relationships with them. Access to digital or physical merchandise, concerts or event access, or content pre-release can all be facilitated via NFTs.
The other element would be artists monetising their future work. Much in the way David Bowie had Bowie Bonds, artists could sell rights to a portion of their future revenue to a large group of individual investors. It’s highly likely this will happen, and this will enable artists to bypass many aspects of the traditional recording industry entirely.
“In the longer term, blockchain and all that it enables – NFTs included – will be a transformative advancement in our society, and owning digital assets is a trend that will soon reach its tipping point and become the norm.”
President of Culture Group Michael Patent
The environmental impact of NFTs are massive. How is this sustainable, especially considering the climate crisis?
There are two sides to this. The first is how to more efficiently mine cryptocurrency and many stakeholders have a financial and reputational interest in this. The other side is exploring how heat waste from the process can be converted into other uses. This discussion is still in its early days, and I think the attention from end users will drive a lot of change and innovation here.
While we work towards this, as an intermediate step, some artists are working to mitigate the impact of what they produce. There’s been a lot of talk around carbon offset, which works much in the same way that carbon offsetting for flights does. When you buy an NFT, you donate money to a campaign that will neutralise its carbon impact. Beeple, a major NFT artist, has already pledged to make only carbon neutral NFTs from now on by using the proceeds from his NFTs to invest in renewable energy, conservation projects, or technologies that mitigate the impact of climate change.
Do you think NFTs are a bubble?
In the longer term, blockchain and all that it enables – NFTs included – will be a transformative advancement in our society, and owning digital assets is a trend that will soon reach its tipping point and become the norm. Gen Zs and Millennials already own fewer and fewer physical assets and it’s clear their attention has shifted to the digital and virtual world. Not to mention, the ease of purchasing and trading NFTs will push it further into the mainstream. The core idea of the NFT is powerful, and it is definitely here to stay.