Sales of NFTs have been astronomical over the past year, but do we really know what they are? In this video clip from "The Crypto Show" on Motley Fool Live, recorded on Feb. 2, Fool contributors Jon Quast and Travis Hoium explain non-fungible tokens to investors and their place in the digital economy.
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Jon Quast: We do want to talk about NFTs today. You've probably heard about it. These are non-fungible tokens and there are so many different layers to the cryptocurrency space. There are blockchains, tokens, DAOs or Dows, and NFTs. We want to talk about these different concepts and maybe how they're different and how they fit together.
But the reason that we felt like NFTs were worthy of coverage here on "The Crypto Show" is because according to DappRadar, NFT sales in [laughs] 2021 reached $25 billion, up from $95 million in 2020. That is an outrageous year-over-year jump in sales. Bored Ape Yacht Club is currently the NFT project with the highest floor price. That means the floor price is the cheapest one that you can go out and buy today, 105 Ether, $286,000, that is your cheapest NFT in the Bored Ape project that you could buy today.
Travis Hoium: This is an expensive JPEG.
Quast: [laughs] Let's go ahead and just launch here Travis, and I actually have that written down. How is this more than just a stupid picture of a monkey? How is this actually something that people should care about?
Hoium: I'm going to try to do a lot of this discussion with analogies because I think that's where we have to start to ground this and things that we all understand. I think the best analogy for an NFT right now is a ticket to a concert or a game, somebody brought up AMC selling NFTs. That's I believe how they're using NFTs right now is basically as tickets.
If you think about, if you buy a ticket to a concert, you might print it off on your printer. You could make three copies, five copies, 10 copies, and nobody really knows which one is the real one, because they're all exactly the same piece of paper, it's just that one is scanned then it's been used.
An NFT it's literally a digital token and there is one on the blockchain we know who owns it. It is associated with a wallet. There's a lot of things that you can do with that. Right now the start of NFTs is really this high-end art market if you will. I know that we're talking about JPEGs of monkeys, but it is really art that people were initially buying and then they basically became clubs that gave you access to something, in this case, the Bored Ape Yacht Club.
The NFT itself since it's digital can then unlock certain things. So in the metaverse, I own a few digital spaces. I own a home in one digital space. I want to plan it in another and the fact that I have this NFT in my wallet when I go to the website where the app as we talked about earlier, I hit connect my wallet it reads my wallet and it says OK here, this is Travis', he can go here and he can have this kind of access.
The Bored Ape Yacht Club is doing some of those things. It's a little bit different, but what's interesting with NFTs to me is this is the start of a new kind of digital economy. It gives different ways for developers to innovate as opposed to this last, 10, 20, 30 years of the internet where like we talked about Facebook (META 0.49%) and Google [a part of Alphabet (GOOGL 0.77%) (GOOG 0.78%)] and whatever capabilities they're providing, are really the gatekeepers of what you can build on the internet.
It's a new way to give ownership to something what that ownership means, is up to the developer and that's ultimately what gives value to the NFT. The NFT may just be, well, we've heard people like Mark Cuban talking about replacing Mavericks tickets with NFTs. That makes a ton of sense for them because then they know who the owner is and, by the way, the Mavericks can say, we're going to take 10% or 20% of every secondary sale so that they then generate revenue from those secondary sales as well rather than the person on the corner who's selling tickets and the buyers know that they are real.
There are interesting applications like that. Then there's all kinds of new things like I said, in the metaverse creating completely new projects that you couldn't do without this non-fungible token that gives you access. You can also read where they are. The other thing that's really interesting is you can see where all of them are.
I wrote about this but LooksRare (LOOKS) is a marketplace that competes with OpenSea. They basically just went out and said hey, if you have spent X amount on OpenSea, we will look on the blockchain and we will give you tokens. We will basically give you money. So talk about a way to disrupt players in the space. It's like a hand out of a new fake digital money [laughs] to people who are valuable to you, who are the valuable traders and buyers on your competitor and since all of this information is on the blockchain, you can see who those people are.
There's a lot of different ways we can go with this but that's the baseline is that I look at NFTs at the start of this digital economy. As I got into crypto, it's not cryptocurrencies themselves that excite me, it's what we're going to do with them, and what that means for innovation and what things are building because that ultimately is I think where we're going to drive a lot of value, but you have to unbreak your brain from everything that we've learned not only over the last century but the last 20 years in the internet of things working the way that it works.