The Great Flippening
Interest in non-fungible tokens (NFTs) continues to snowball. There are a lot of moving parts to wrap your head around. Think of it as part of a Decentralized Finance (DeFi) trend.
Let’s review a working definition of what NFTs are:
NFTs are blockchain-based records that uniquely represent pieces of media. The media can be anything digital, including art, videos, music, gifs, games, text, memes, and code. NFTs contain highly trustworthy documentation of their history and origin, and can have code attached to do almost anything programmers dream up (one popular feature is code that ensures that the original creator receives royalties from secondary sales). NFTs are secured by the same technology that enabled Bitcoin to be owned by hundreds of millions of people around the world and represent hundreds of billions of dollars of value. (From: Chris Dixon)
DeFi Disruption
Traditional investing got disrupted. DIY investing, speculating, and trading went mainstream with apps like Coinbase and Robinhood. Fungible alternative assets went fractional with apps like Rally for cars and sports memorabilia; and Arthena for fine art.
Move over, the flippening was first observed by Howard Lindzon in 2017. Bitcoin mentions overtook the S&P 500 on StockTwits. Fuel to the fire was the 24/7 365 tradability of alternative investments. A new paradigm is emerging: “Due to gains (not realized) in crypto in just the last year I have more capital in crypto and tokens and funds than I do in the stock market.” says Howard. “More importantly, I think that will continue for my lifetime. Software did indeed eat the world now that it has eaten the actual markets.”
It’s noteworthy crypto is the first asset class to start out retail and go institutional. As Howard points out, the institutions embracing crypto by pitching it to their “Wealth Management” clients in a ‘special report’ continues to be the biggest investing story of 2021.
Most of this brave new world is made possible by blockchain technology. Blockchain technology is so important, rather than piggybacking it on Next Generation Internet, legendary investor Cathie Wood made it a separate theme for her funds. She has an army of super-smart analysts covering it.
Creator Economy
DeFi discussions tend to center on fungible tokens. This is because bitcoin and other cryptos are analogous to money. Every token is the same as every other token. NFT tokens are all unique. Think of this as rare, one of a kind collectibles.
According to Chris Dixon, NFTs will offer better economics to creators in three ways: First by removing intermediaries, second by enabling pricing tiers, and third by making users owners. Chris acknowledges interest in NFTs is still in the early stages and will continue to evolve. He notes someday every internet community may have its own micro-economy. Digital assets users can own, use, trade, and collect.
Conclusion
Jessy Walden, founder of Variant, says we’ve entered a paradigm shift where everyone is an investor. No longer do you need to be a public market expert to have an edge. While we’re in the midst of an NFT bull market, he notes there will eventually be a correction. The good new is market cycles make fundamentals stick. Developers will continue to bet on the space and the technology will improve.
If, like me, you’re new to DeFi, consider opening a Coinbase account. Use this link and we both get $10. You can also take lessons on Coinbase and earn another $37 in cryptocurrencies.
Pete Weishaupt owns crypto. Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. The AI Investor has a disclosure policy.
