As prices for art and tweet-related non-fungible tokens (NFTs) reach dizzying heights, the questions remain: What lies beyond the hype, and where might NFTs prove their value in everyday commerce?
However, those in the know say that as NFTs get ready to enter the mainstream, creators, platforms and marketplaces can work together to monetize content in a way that protects artists (and their intellectual property).
And one of those in the know is Circle CEO Jeremy Allaire, who told PYMNTS in an interview that viewed through his lens of more than two decades of work focused on monetizing content and digital media, there are “fundamental new capabilities that blockchains can give us around provenance and digital scarcity.”
“But what I actually see happening is that for the first time, there’s a model for creators, for artists, to monetize their work in a patronage form,” Allaire told PYMNTS.
He explained that stablecoins, as they make transactions more fluid and cost-effective, provide a bridge that will bring NFTs more into the mainstream. Since the USD Coin (USDC) is pegged to the dollar, they are less volatile than other digital currencies.
“A lot of the entities that are out there in the NFT markets today struggle a little bit with usability because they’re priced in a digital commodity like Ether,” said Allaire.
So, in a hypothetical transaction, the person who wants to buy a piece of digital art rendered as an NFT needs to go onto a (digital) exchange, buy Ether, move that Ether into a digital wallet with a mechanism akin to a browser plugin, and then pay high transaction fees to get the deal done. To reduce those frictions, Circle said in late March that it has enabled NFT providers and platforms to connect to existing payment instruments, such as debit or credit cards, moving money across existing rails into digital currencies (where USDC itself interacts with the NFT markets).
Valuing Intellectual Property
NFTs offer a way to value intellectual property through a fundamental shift away from traditional models, where content creation/monetization has been dependent on large aggregator platforms, explained Allaire. Well beyond the confines of bitcoin and digital currencies themselves, the public blockchain infrastructure is spurring people to issue other assets on top of those networks, taking advantage of both scarcity and security. This was the inspiration behind the creation of USDC in 2018.
“We thought, ‘What if you could take the liability of the central bank, and you could represent that as an issued asset, as a form of digital currency on these public networks?’” Allaire said. “Then you could actually create a protocol for money on the internet.”
At the same time, blockchains make it possible to issue other forms of property, with NFTs, for example, as a vehicle. Allaire said Circle has developed its platform business with such issuance in mind, offering application programming interfaces (APIs) that enable companies and developers to speed the growth of what he termed digital content commerce.
NFTs also represent a way to link artists to their work. The musician who creates a new album or song may indeed make it available on Spotify, but they can also convey foreign property rights to a fixed number of people, or patrons. Along the same lines, a sports franchise can create and issue an NFT associated with a team that conveys specialized access to content or other privileges for its recipients.
Writ large, Allaire maintained that just about any type of asset can be represented and issued as an NFT: property, land titles, drivers’ licenses, and, as he mentioned to PYMNTS, “a digital copy does not have to have provenance in the real world.”
Digital property might exist solely in the context of electronic media, such as in electronic games. Gaming is a multi-hundred-billion-dollar industry, Allaire pointed out, and there’s an enormous aftermarket that exists within gaming economies in which players buy items and services and build online economies with one another across the globe. (Minecraft is predicated, for example, on building out “multiverses.”)
“What we’ll see is a convergence of digital assets, with virtual assets that exist in those online worlds,” predicted Allaire.
Fungible Tokens, Too
There is also room for fungible tokens (FTs) to continue to take root in the digital currency arena, said Allaire, who noted that the total market cap of USDC is now crossing the $11 billion mark, up triple-digit percentages from just a year ago.
“If you think about the ‘quote unquote’ real world, a barrel of oil is a fungible token — it’s just a barrel of oil,” explained Allaire. “Commodities by definition are essentially fungible goods. We’re seeing the early stages of currencies becoming tokenized. USDC is a great example of that. And so, you have both of these models — NFTs and FTs — obviously very much supported by blockchain infrastructure.”
And with a nod to the continued rise of NFTs, Allaire told PYMNTS, “I think we’re going to see more experimentation to connect culture to values and exchanges. That’s really what is at the core of NFTs.”