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Non-Fungible Token (NFT):EXPLAINED

Portland, Oregon, Moda Center, the first round of the 2019 NBA Playoffs, Game 7- score-115-115.  With about 10 seconds left on the clock, Dame Dollar, aka Damian Lillard, Portland Trailblazer’s point guard, pulled up to shoot, 37 feet from the basket, and sunk a 3-point shot as the clock expired.

The Portland Trailblazer won the game 118-115 to advance to the second round of the NBA playoffs.  Lillard finished up the game with 50 points, including 10 three-pointers.

That’s the shot or a moment in basketball history that I would love to own. If my pockets were deep enough, I could own that shot or that scary Lebron James’ Game 6 look in the 2012 NBA Playoffs against my beloved Boston Celtics thanks to non-fungible tokens (NTFs).

What Is a Non-fungible Token?

Using the blockchain, an open ledger system that allows every transaction to be recorded for all to see, content creators can tokenize all aspects of their work, including NBA clips, images, videos, songs, and more.  The unique identification code validates their authenticity; in essence, it creates a non-fungible token or NFT.  The value of NTF derives from its scarcity and authenticity.

For example, the NBA can attach an NFT to Damian Lillard’s shot and sell it as an authentic digital asset.  The NBA launched NBA Top Shot, which facilitates the buying and selling of NBA highlights’ digital collectibles.    Every transaction for every token is recorded for all to see.  NFT owners don’t get any royalties, but their ownership is indisputable.

What Do Non-Fungible Tokens Mean for Content Creators

NTFs provide content creators another way to monetize their work. A Youtuber, Tik Toker, digital artist, or radio show personality can assign unique identification codes to their video clips or digital arts and auction them.  The tokenized works also give their staunch fans a way to show their support.  Content creators can use this step-by-step guide to create their own non-fungible tokens.

Should You Invest in NTFs? 

A non-fungible token is a highly speculative asset class.  Investors need to do their due diligence before putting their money in NFTs.  Sport NFTs are like the digital version of sports cards. There are countless shoeboxes of sports cards in attics and basements across the country that are worth nothing.

Unlike precious and industrial metals, NFTs have no storage fees due to their digital nature.

This year alone, digital art by Steve Aoki, Twitter CEO Jack Dorsey’s first tweet, and a Lebron James highlight was sold for $69 million, $2.9 million, and $200,000, respectively.  Steve Aoki crypto art title Beeple sold at Christie’s Auction house last month. NFT is a new asset class, but it already has bubble-like characteristics.

Cheap money and yield-seeking investors are propping up new and old asset classes, including special purpose acquisition companies (SPACs), digital currencies (Bitcoin), and non-fungible tokens.

Investors can explore NBA Top Shots for all NBA highlight NFTs and Niftygateway for others.

The Bottom line

A non-fungible token or NFT is a highly speculative asset class.  Some might argue that it’s more of a collectible item than an asset class.  Any reasonable collector knows that many collectibles don’t age well–Beanie Babies.

If I could afford the Dame Dollard’s shot, I would buy it just so that I could brag to my friends that I own it.  Asset appreciation would be icy on the cake.

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