Summary Report: The Crypto and NFT World for Dummies

Background

As we navigate an increasingly digital world, understanding blockchain, NFTs and cryptocurrencies is critically important.  Here is an overview of a few pros and cons voiced in 2021:

FOR AGAINST
CNBC Millionaire Survey, June 2021: Some 47% of millennial millionaires surveyed have more than 25% of their wealth in cryptocurrencies, according to the survey of 750 investors with at least US$1 million in investible assets. More than a third of millennial millionaires have at least half their wealth in crypto.[1] Fred Ehrsam, Coinbase cofounder, Paradigm cofounder: “People are going to try all sorts of things. There’ll be millions and millions of cryptocurrencies and crypto assets, just like there were millions and millions of websites. Most of them won’t work… I go so far as to say that 90% of NFTs produced, they probably will have little to no value in three to five years.”[2]
Even with cryptocurrency trading illegal in China, people are using the internet to buy and sell cryptocurrencies with high risk, but potential for high rewards.[3] Citing risks of criminal activities such as illegal cross-border asset transfers and money laundering, China has been ramping up efforts against cryptocurrencies in recent years.[4]
 ‘Vault by CNN’ will house a select set of digital collectibles, or ‘Moments’, from CNN’s television archives, mint them as NFTs using blockchain technology, and sell them at vault.cnn.com

 

 Older millionaires are far less likely to believe in or invest in crypto. Fully 83% of American millionaires have none of their wealth in crypto, and only 1 in 10 keeps more than 10% of their wealth in crypto assets, according to the survey. None of the baby boomer millionaires or older generations has more than 10% of their wealth in crypto.[5]
The upside of blockchain and cryptocurrencies is that it is a decentralised marketplace, and that the buyers are largely independent of the traditional art market as we know it. It means that there is a potential market for your work outside of cliquish circles of art dealers and art advisors.[6] NFTs are bound to one smart contract on one platform. Similar contracts could be deployed on the same or other systems. Public blockchains are regularly forked, meaning that the tokens will inevitably be duplicated.
The big pro is that blockchain is super safe. Because blockchain is a network, rather than a central authority, you can trust the system without having to trust any individual contributor. Once data is ‘on-chain’, it cannot be deleted… This means each NFT’s scarcity and provenance are secure, which in turn amplifies demand, which in turn builds a more confident, more robust market than we’re used to seeing for digital artworks without blockchain backing.[7] The value proposition of NFTs is that the proof of work ensures your original piece has a unique token attached to it, which means that the person who owns it knows that they have the ‘original’. But the problem is that someone can take a JPG and throw it up on a different marketplace, with a different token attached to it and sell it. There is no ‘original’.[8]

 

NFT is only a tool. It is up to us to decide how to use this tool and where to go with it.

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