NFTs have arguably been the hottest new investment trend of 2021. The digital tokens, usually representing ownership in a digital good, have primarily been used to sell digital works of art and caught mainstream media attention with a US$69 million sale by auction house Christie’s.
Beyond digital art, however, there are plenty more digital assets you can buy, bet on or invest in. As general interest in NFTs has been booming, most of these alternative digital assets have also seen an increase in price, in some cases dramatic increases. Proponents of the industry believe digital currencies, goods and collectibles have enormous potential and will be crucial as we move to a world where more immersive digital experience will be the norm. In a future where virtual reality is the new reality, we may need anything from land, clothes and even perfume to complement our digital persona.
Skeptics, on the other hand, see the goods as nothing more than a risky gamble. As an emerging industry, it remains to be seen who’s right, but whatever your take it’s certainly interesting to look at what’s happening in the industry today.
Digital real estate has a history that started long before the birth of crypto and NFTs. Perhaps you remember “Second Life”, the “virtual world” game that took the world by storm in the early 2000s. At its height, the game had 20 million users, who could buy virtual currency that were only usable in the game. By 2009, Second Life’s “GDP” amounted to US$567M. Whereas plots of land could be bought as an investment, many users bought it as it enhanced their experience in the game, similar to any other in-game purchase..
Today, the market has evolved and the coin of the biggest virtual world crypto-project, Decentraland (MANA), currently has a market cap of over US$2 billion (May 2021). In short, Decentraland is a highly flexible virtual reality platform that allows users to create and monetise their own applications on top of it, while allowing buyers to consume content, buy virtual land or wearables. All transactions happen via Decentraland’s MANA coin, and the price of the coin goes up with the popularity of the platform. Over the past 12 months, the price of MANA has risen by almost 2,000%, which made it a very lucrative investment for those who came in early.
Owning a racehorse for status, profit or as a hobby has long been a favorite pastime of the elites, and betting on races started in the UK as early as the 1600s. As owning and maintaining a racehorse costs tens of thousands of pounds, it used to only be for the very wealthy. Like with other asset classes, new businesses have emerged that now allow everyday investors to own and profit from successful horses, with Commonwealth being the primary example of this.
However, the rise of digital currencies and NFTs has brought a new twist to the market with initiatives such as Zed Run popping up. While it’s more of a game than an investment, many users do certainly buy a digital horse with a plan of making money. The game's users can buy digital racehorses (in NFT form) with different characteristics that then compete in races with prize money at stake. The future looks bright for Zed Run, with a Discord channel currently hosting over 50,000 members, 10,000 horses sold and the most expensive horse selling for over US$100,000.
Another NFT-based game that has made headlines recently is digital trading cards platform Sorare. The company based in France, has raised US$48M earlier this year from some of Europe’s most prominent VCs and total sales as of May 2021 have reached over US$75M.
Partnering with many of Europe’s top football clubs, Sorare lets users buy digital sports cards that can be used in game, as well as traded with other players. The better your team (better players are more expensive to buy) the better your chances of winning the game and earning prizes. Moreover, as the popularity of the game increased, so has the value of the cards, with the most expensive card traded now standing at $290,000 (!)
Perhaps the most famous NFT phenomenon outside of digital art has been NBA Top Shot. The platform lets users buy digital moments in NBA history and has recently crossed the one million user mark. To date, it has already done over US$700 million in sales and often new drops sell out in seconds. As users are able to re-sell their moments, many users get in on the platform with a goal of making money by reselling their moments at higher prices. Critics have scrutinised the platform for the fact that buyers have limited ownership and don’t, for instance, own underlying copyright to the clip; clips that can also be viewed for free on YouTube.
The most mind-boggling recent example of digital goods we’ve come across is Look Lab’s recent virtual perfume launch “Cyber Eau de Parfum”. While the NFT will come with a physical collector’s item, it’s the addition of the digital NFT that makes this perfume unique.
According to the project’s founders, there is potential use in the metaverse: "Potentially if we have a machine that can convert back those molecular reflections, we can recreate the scent back or, we can have an AI algorithm that can 'decode' the scent and reproduce it in the near future," Katzarov explained As such machine seems to be far away, today we can consider it concept art.
The market for digital collectibles is evolving rapidly and new projects pop up everyday. Websites like NonFungible can help you keep track of this fast-moving market, enabling users to benefit from trend analysis and getting involved in new projects early. However, keep in mind that digital collectibles are a very high-risk investment: it’s important to do your research and find out how easy it is to find a buyer for your collectible, if your goal is to make a profit.
At Koia, we allow you to start investing in tangible assets for as little as €50, via fractional investing. Our experts make sure to source and buy the best assets, and we take care of authentication, storage and insurance. All of the benefits, with none of the hassle.
The articles and information made available on Koia are provided for information and educational purposes only and do not constitute financial advice. You are advised to consult with an independent financial advisor for advice on your specific circumstances.