We are moving towards a liberal digital Economy, where undoubtedly crypto–assets such as non-fungible tokens (NFTs) will play a pivotal role in the new world.
As we can see today, demand for the tokenization of commodities across various industries is growing massively and rapidly. NFTs have unlocked a new arena in the crypto industry with historic value generation. Figures of the growth rate of NFT markets are just jaw-dropping. A massive growth rate of around 299% has been observed in 2020 itself. Whereas in a single day in February 2021, the transaction figures crossed the entire trade figures of the year 2020 with $22 million sales.
Segment-wise sales report of NFT market in 2020 shows the significant share of Art industry with $12,947341 m i.e. 24 % of the total sales volume. Especially the music industry has been rocking with massive sales of NFTs.
Subsequently, speculations are making rounds whether NFTs are just a bubble that can burst over time?
Well, let’s understand the very concept and the ambiguity around it.
What Are NFTs?
NFT is a highly hyped but poorly understood concept as yet. NFT simply is a digital ledger on which the musical or any other content is stored in the form of digital data. This ledger or blockchain contains a smart contract including the terms and conditions & certification of authenticity and ownership to the buyer. Interestingly this content can be copied, sold, or shared with anyone around. The artists hold auctions of their art collections and the highest bidders can purchase the tokens by paying through Ethereum or Polkadot. Artists also offer NFTs as takeaway bounties to their fans as part of the promotions.
Role Of NFTs In The Music Industry
In recent months, music artists, singers have made millions by selling NFT collections through auctions. NFTs can include images, songs or videos, GIFs, concert passes, etc.
In February 2021, ‘Grimes’ sold an art piece through NFTs & earned $5.8 million in just 20 minutes.
‘Ozuna’ made $800,000 through the sale of NFTs. Steve Aoki sold his NFTs at $4.25m,
‘3LAU’ sold his NFT collection worth $11.6m, and the latest of all ‘Kings of Leon’ have released their album as an NFT earning approx. $2 m.
The reasons behind these whooping sales are interesting to understand.
At the onset of the pandemic, artists across the world were income-less, surviving on meager royalties, and the cancellation of their live shows and tours compelled them to explore new revenue sources. NFTs thus offered them a relief to earn income in a short time without any intermediaries.
NFT – Another Trend?
In the last 30 years of the internet, we have been made to believe that the internet will bring more liberty and earnings to the artists and the music listeners will get more free stuff. The Internet has been phenomenal and beneficial up to some extent.
Over these years, we also have witnessed the rise of Napster in the 90s, then iTunes, and then Spotify, Amazon music. Streaming channels & music companies have been taking a maximum share of profit & approx. 12 % of the revenue goes to the artists. With the entrance of the NFTs in this industry, speculations are buzzing around if this is another bubble?
Well, NFTs promise more than the previous trends by offering unique opportunities for revenue generation to the artists as well as to the buyers. Moreover, they bypass the chain of intermediaries such as music companies, streaming channels, marketing organizations, etc. cutting down the basic production cost of music albums. Additionally, music lovers can get at least a fraction of the mementos of their favorite artist like never before. Also, a big number of music lovers can be exposed to transactactions through cryptocurrencies.
Pondering over the problems in this industry, a major issue in NFT sales was the final high cost due to the high gas fees of Ethereum blockchain which has been resolved after the recent Ethereum up-gradation.
NFTs allow the buyers to resale it which can unlock revenue sources to music lovers as well. Big scope for community-based business models awaits through NFTs changing the ownership behavior.
Also, a new set of enterprises including the online social media influencers, marketers, fan communities with a huge youth base are emerging as supportive to the NFT markets. NFT industry is shifting towards a long-term value generation industry & this new ecosystem is ready to offer new opportunities to the artists, fan communities, and the rest of the world.