Open Access Ventures is a private equity firm for seed-stage entrepreneurs. Naturally, we are constantly on the lookout for the next big thing, and right now—we’re just going to come out and say it—NFTs are the future. As we like to say, this is the Renaissance 2.0.
A recent story that Time ran demonstrates the potential that NFTs have to transform the art world. Right now, teenagers are creating digital art and selling it for tens of thousands in cryptocurrency.
What are NFTs, how big are they, and why are they taking off now? Let’s take a closer look.
What are NFTs?
NFT stands for non-fungible token.
In economics, a fungible asset is interchangeable with other assets of the same type. Take cash, for instance—what’s the difference between the dollar bill in your pocket and the one you gave to the cashier? Sure, you might find a rare example that’s worth more than a dollar to collectors, but essentially, a dollar is a dollar is a dollar.
A non-fungible asset cannot be so readily exchanged without the risk of losing value in the trade. Think houses, land, jewelry, and even baseball cards. Each individual asset in these categories is unique, and the value reflects that.
Non-fungible tokens are so revolutionary because they take something that is infinitely replicable and make it unique. A digital file can be copied over and over again, so possessing, say, a music file isn’t really a big deal beyond your enjoyment of the music.
A non-fungible token, therefore, is a digital asset that shows provenance. In context, NFTs are blockchain-encrypted digital assets that represent something—either in the real world or in the digital space—that is unique.
This is how Twitter CEO Jack Dorsey sold the first-ever tweet on his platform for $3 million. Anyone can download that tweet, but only one person can own the NFT of the original digital asset. To a private equity firm like ours, this is revolutionary.
How big are NFTs? Just look at the numbers.
In 2021, we have witnessed explosive growth in NFT sales. In Q1 and Q2, trading volume topped out at $1.2 and 1.3 billion respectively. According to a report by DappRadar, those numbers multiplied by nearly 10x in Q3—$10.67 billion, to be exact.
We are currently living through the first use case of NFTs, cryptocurrency, and blockchain, and the numbers are very good.
Why are NFTs so big right now?
It may surprise you that NFTs have been around since 2014. Why all the fuss now, all these years later? Simply put, the answer comes down to UX and UI.
People are now getting comfortable with these digital assets because they are getting comfortable with the user experience (UX) and the user interface (UI) of bitcoin, blockchain, and NFTs. In previous years, traders were not always comfortable with the concepts of digital wallets and keys, which store and protect NFTs and other digital assets. People were not comfortable with cryptocurrency, either, but now you can use fiat currency and stablecoins, which are less volatile than cryptocurrencies like Bitcoin and Ethereum.
In short, people are catching up to a genius idea.
Why Our Private Equity Firm Sees Huge Potential
It should be clear why NFTs have such huge potential. For our firm specifically, which focuses on emerging technologies and how they can benefit underserved communities, NFTs represent a huge opportunity. Up and coming artists and musicians now have a way to significantly capitalize on their work by offering their work for sale as NFTs. It may be the financial push that allows them to go big.