You are currently viewing The Bullish Guide to NFTs: Are the Digital Assets Overhyped??

The Bullish Guide to NFTs: Are the Digital Assets Overhyped??

For nearly the entire history of digital assets — and cryptocurrencies like Bitcoin and Ethereum — one criticism has consumed the economy of thought: the pretense that digital assets aren’t real, aren’t backed by anything, and therefore are not worth anything at all. 

In truth though, there have been few asset classes or investing opportunities that have taken the growth curve of cryptocurrency and digital assets. To most investors, it doesn’t matter that crypto is backed by nothing but sentiment — they’re making money anyway. 

Perhaps that’s what’s fueling a burgeoning new class of digital assets called non-fungible tokens (NFTs). NFTs are tokens which represent ownership of limited-run digital assets or collectables like art, music, trading cards, shoes or even items in video games. 

The idea of fungibility is where NFT gets its name. Bitcoin (BTC) or Ethereum (ETH) is considered fungible because the coins themselves are interchangeable; all currencies are indistinguishable from each other and have the same value. Non-fungible refers to the way in which each token (and the asset it represents) is unique from one another.

For the crypto-skeptics who think BTC and ETH are already unorthodox, NFTs and other digital assets push convention even further. However, the NFT market might feel like familiar territory for gamers and digital natives. The idea of “digital collectables” are the backbone of some of the world’s biggest video games. Counterstrike: Global Offense, League of Legends, ROBLOX, Team Fortress 2 and Fortnite boast bustling digital economies. Some even allow users to craft, buy, sell or exchange digital goods. 

The gaming industry has been crucial to the history of NFTs. However, unlike the guns or gear you get in your favorite video game, NFTs are verifiably scarce and cover more use-cases. It might be used as a means for content creators, companies and other players to monetize or trade assets. 

The NFT space is in its infancy. And as such, many people are bullish on its prospect to enable new means for creators, companies and other parties to monetize virtual items, digital content and more. 

So, Bullish is breaking down and demystifying the current NFT ecosystem:

Blockchain Games: CryptoPunks, CryptoKitties, Decentraland, Upland

The first meaningful use-case of NFTs came with the launch of CryptoPunks in June 2017. CryptoPunks was one of the first blockchain games to launch, allowing users to collect art of unique, randomly generated eight-bit characters. All 10,000 characters were originally available to claim for free. Unsurprisingly, early adopters quickly snatched them up. 

Their scarcity gave rise to a secondary market where people could buy, sell or trade the characters. CryptoPunks was a monumental success for its developer, Larva Labs. As of February 2021, more than $99 million worth of transactions have been exchanged over these 10,000 CryptoPunks.

Image via CryptoPunks website

Though CryptoPunks inspired the modern NFT ecosystem, it wasn’t until the launch of another highly acclaimed blockchain-based game that NFTs started to get some love from the public. In November 2017, Dapper Labs released CryptoKitties. CryptoKitties had many of the same elements which made CryptoPunks successful — users could collect digital cats and “breed” them in an effort to make rare combinations. What made it markedly different was that there were seemingly unlimited, randomly generated cats. 
Because more people could get in on the action, it became a smash hit. CryptoKitties became an overnight success: the number one app on the Ethereum blockchain. Since then, the project has boasted over $40 million in sales on its digital cats.

854Image via CryptoKitties

The blockchain game sector is just starting to take off, empowered by the NFT craze. Upland, a game which allows people to buy, sell and trade virtual properties mapped to the real world, has allowed people to channel Monopoly energy. However, these web-based blockchain games might soon evolve even further into 3D games like Decentraland, a digital “virtual world owned by its users.”

Trading Cards: NBA Top Shot, SoRare

Though somewhat tangential to “blockchain games,” trading card sites such as NBA Topshot and are knocking down the walls between the digital domain and the world of sports. Unlike online blockchain games, trading card sites like NBA Top Shot and are essentially financial extensions of real-life sports.

NBA Top Shot, which is created by CryptoKitties developer Dapper Labs, might be the premiere case of how NFT trading cards are coming to market. Top Shot is version 2.0 of trading cards. Users can pay to unpack cards and then buy, sell or trade them on a market. What makes them so “next generation” is that every card belongs to a player and a real moment from a play. They call these cards “highlights.” As you’d imagine, the more prized a player or moment… the more it’s worth. Moments are made scarce based on their importance or relevance to a player’s career or game — on a scale from normal, to epic, to legendary. 

So do the cards have any value? Well, a group of investors dropped $208,000 on Feb. 23 to pick up a legendary LeBron James highlight from 2019. It became the biggest transaction in the platform’s history, which opened in October 2020. Unsurprisingly, Top Shot has taken off in beta, with thousands of people vying to buy the precious cards. There’s also a robust secondary market for the cards. Developer Dapper Labs claims that they have topped over $120 million in collectible sales since launching.

On the other side of the pond, SoRare is doing for fantasy soccer what NBA Top Shot is doing for basketball collectables. SoRare falls at the cross-section of fantasy soccer and finance. Players can buy, sell and trade cards of players from soccer teams all over the world — using them to build and manage their own virtual team. Unlike NBA Top Shot, the fantasy element adds another layer of gamification — considering the real-life performance of players, rather than just the social standing of players. The platform also doesn’t boast the “highlights” from Top Shot. However, the rest of SoRare feels familiar to a sports better, a fantasy enthusiast or crypto nerd. Like with Top Shot, certain cards have different levels of rarity.

There are other applications for NFT trading cards, albeit these two have collected the economy of attention given their relationship with real-world sports. In February 2021, YouTuber Logan Paul announced he would be auctioning off sets of authentic, first-edition Pokemon cards worth millions. Those who want to get a shot at winning a pack of these elusive, multi-million dollar Pokemon cards have to make an incursion into the digital domain. Specifically, they have to buy one of 3,000 NFT trading cards from Paul. This only glosses over how extensive the applications for NFTs could be. 

Art & Media: SuperRare, KnownOrigin, Foundation, NiftyGateway, Rarible

One of the most prominent applications of NFTs right now is in the art and media space. Given the interest, a handful of blockchain marketplaces dedicated to minting, selling and trading these creative collectibles have cropped up. Sites like SuperRare, KnownOrigin, Foundation and NiftyGateway are allowing artists to lean into the robust interest for collecting these assets. Energized by a healthy blend of FOMO, excess wealth and insanity, digital creators have become the primary benefactor in a mountain of money rushing into NFT art.

Anyone who browses these marketplaces is sure to scratch their head at the astonishing volume of money being funneled to (mostly) unknown artists for their digital work. On the Rarible marketplace, one artist named Satman sold nearly 29.5 ETH (approximately $48,600) worth of art in one day. What’s even more wild is that this isn’t an extreme outlier. In these spaces, it’s the norm. On SuperRare, one piece of art called Latent Space of Landscape Paintings #1 has run up an offer worth 50 ETH (approximately $82,000). The original creator of the Nyan Cat tokenized his creation on Foundation, where it would go on to sell for 300 ETH (approximately $490,000).

Latent Space of Landscape Paintings #1

It’s not just smaller, niche artists jumping into the ring either. Grammy-award winning artists such as Deadmau5 and RAC were among some of the first major artists to hop into this space. Both artists have sold digital collectibles on sites such as Zora and NiftyGateway. In May 2020, RAC minted 70 NFTs representing real cassette tapes. He sold them on Zora for $20. Something special about the BOY Cassette Tape is that it can be redeemed for the same tape in physical form. However, that same $20 tape is worth almost $7,000 as of February 2021. In December 2020, Deadmau5 sold over $100,000 worth of NFT “mystery packs” on Rarez. The packs offered buyers a chance at collecting various rare collectibles.

 BOY Cassette Tape

Besides all the new marketplaces cropping up dedicated to NFTs and tokenized art, some old players are looking to cash in on the craze, as well. In February 2021, auction powerhouse Christie’s sold off its first NFT work from artist Beeple. The piece, a digital collage of over 5,000 images the artist made from 2007 to 2021, started bidding for hundreds of ETH (the current bid price is not public-facing at the time of this writing).

Where Are NFTs Going? 

If the history of blockchain is any indication, NFTs are still in their infancy. It’s untold whether NFTs are a passing fad or here to stay. But billionaires like Mark Cuban, Chamath Palihapitiya and Gary Vee are jumping in on the action. 

Some creators and artists are leaning into the interest for crypto collectibles. Big artists such as RAC and Deadmau5 are selling interactive art, videos and even music in NFT form. Independent artists have started selling snares to raise money for a fund that is helping artists mint their first works and collect their own bags. Even a handful of companies like Nike are hopping in the fold, filing a patent involving “NFT shoes.” The odds that Nike drops digital Jordans are looking higher and higher, given interest and conviction in NFTs. At this point in the game, there’s some evidence to show that NFTs invigorate (and mystify) the hypebeast and investors markets.

But are NFTs an investment? We have a few thoughts on the matter, but crypto nerds who jumped aboard the altcoin fad in 2017-2018 know full and well that not every crypto or digital asset investment prints. There might be some truth in what crypto fans are saying — that NFTs are going to “change the world.” However, if you have any healthy amount of skepticism, people might find sage advice in what naysayers have said about crypto and NFTs: value is arbitrary.


Noah Weidner

Noah Weidner is a restless self-starter with a vehement interest in all things that make the world go around: culture, politics, economics and all the people in between. He writes the Bullish Rippers series and covers other interesting trends and happenings at Bullish.

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