Why crypto art and sports collectibles are suddenly so popular


Digital avatars listed on the non-fungible token platform CryptoPunks.

Ryan Browne | CNBC

The world of cryptocurrencies is abuzz with conversations about digital collectibles, unique virtual tokens that can represent anything from art to sports memorabilia.

People have been paying hundreds of thousands of dollars for these NFTs, or non-fungible tokens. One investor, Sheldon Corey from Montreal, Canada, told CNBC that he paid $ 20,000 for one of thousands of computer-generated avatars called CryptoPunks.

CryptoPunks is not a new phenomenon: it was launched by developers Larva Labs in 2017. But lately it has risen in popularity, generating $ 45.2 million in sales volume in the last seven days alone according to the NonFungible website, and inspiring a “crypto art broader “movement.

CryptoKitties, one of the original NFTs, generated $ 433,454 in sales last week, according to NonFungible. Digital cats, which were developed by a start-up called Dapper Labs, were once so popular that they clogged the ether digital currency network.

NBA Top Shot, a platform created by Dapper Labs in association with the basketball league, attracted $ 147.8 million in sales in the past seven days, according to NFT data tracker CryptoSlam. The service allows users to buy and sell short clips showing the highlights of the best basketball players’ games.

The biggest boost from these tokens comes as bitcoin and other cryptocurrencies have rallied significantly in recent months, and at a time when people are spending more time indoors due to coronavirus restrictions.

What are NFTs?

NFTs are non-fungible tokens, which means you couldn’t trade one NFT for another, which run on a blockchain network, a digital ledger that records all cryptocurrency transactions like bitcoin.

However, the difference with bitcoin and other tokens is that each NFT is unique and cannot be replicated. Each accumulates value independently. Crypto investors say that NFTs get their value from how rare they are. They are stored in digital wallets as collectibles. Beyond art and sports, people have also found uses for NFTs in virtual real estate and games.

Nadya Ivanova, COO of BNP Paribas-affiliated research firm L’Atelier, says that collectible digital assets can be seen as a better version of an MP3 file. Musicians have struggled to profit from their work in the digital age, and Ivanova says some are turning to NFTs to prove ownership of their work and find an additional source of income.

“It is allowing content creators to own the property rights in what they create, allowing them to benefit from it in different ways that they cannot with physical art,” he told CNBC, adding that crypto art is the fastest growing subsection. of the digital collectibles market.

The total value of NFT transactions tripled to $ 250 million last year, according to a study by NonFungible and L’Atelier. The number of digital wallets trading them nearly doubled to more than 222,179, while some merchants were able to make a profit of more than $ 100,000.

“We are seeing a new generation of traders within the NFT market; people who are digitally natives looking for digital native asset classes outside of established asset markets,” Ivanova said. “They are people who have built up reputations and wealth and want to invest them in purely virtual assets like NFTs.”

Ivanova says that the NFT market has been maturing. Famous auction house Christie’s auctioned off an NFT-based artwork created by Beeple, a well-known digital artist who has created videos and graphics for celebrities like Ariana Grande and Justin Bieber.

Crypto mania

An NBA Top Shot featured video featuring LeBron James recently sold for a record $ 208,000. But sales can be volatile: NBA Top Shot and CryptoPunk’s operations have fallen in the last 24 hours, according to NFT data tracker CryptoSlam.

Rising prices for these virtual items have sparked fears of a repeat of speculative cryptomania. Some investors are reminded of the initial coin offering bubble, or ICO, in 2017, when various startups issued new digital tokens to raise money. Almost none of the ICO projects exist today, with some even defrauding investors with millions of dollars.

There are some parallels to the ICO frenzy; for example, celebrities like Lindsay Lohan and Mark Cuban have recently sold NFT.

“We had a very similar moment in 2017,” Billy Rennekamp, ​​grants manager at blockchain research firm Interchain Foundation, told CNBC. “All the galleries were considering an NFT. All the top artists were considering it. But there was too much risk when the market fell and it was embarrassing to be involved in NFT when prices went down.”

“I wouldn’t be surprised if we go through another bull and bear market,” Rennekamp added.

Still, the companies behind these tokens don’t think it’s a fad.

“NFTs are here to stay,” Caty Tedman, director of partnerships for Dapper Labs, who spearheaded the NBA Top Shot project, told CNBC. “Flow will be the blockchain that enables mass consumer adoption. The future is now.”

NBA Top Shot now has more than 100,000 active collectors and has earned $ 215 million in sales to date, Tedman said. He is working on a digital collectibles game based on the UFC mixed martial arts league and has also attracted support from Warner Music to develop NFT for music fans.

“The billions spent on Fortnite skins point to the importance of our lives and characters online, and how valuable they are to people,” Matt Hall, co-founder of Larva Labs, told CNBC.

“What NFTs offer is a formalization of digital ownership and a way for that ownership to be permanent beyond the life of any company, game or platform.”

Hall said that Larva Labs does not charge fees to users of its marketplace, although it does pay blockchain processing fees. “We own CryptoPunk like everyone else,” he added. “So, as the overall market grows, the ones we own also become more valuable.”

The cheapest “punk” available on CryptoPunks is currently worth $ 36,000, Hall said. Larva is working on a successor to CryptoPunk, Hall added, without elaborating on the company’s plans.

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