NFTs: Why Are People Paying Millions For Them?
By: Derek Mahler
Have you ever had the urge to buy a LeBron James highlight for $200,000? What about a limited edition Kings of Leon album package for $2,500? Unless your name is Jeff Bezos or Elon Musk, you probably laughed at that question. How & why would anyone purchase a highlight that anyone can watch on YouTube or an album that you could just listen to on Spotify? With the recent surge of NFTs (non-fungible tokens), these absurd concepts have become a reality.
If you’ve been anywhere near social media in the past few weeks, you’ve almost certainly heard of NFTs. In short, it’s a way for consumers to purchase a crypto-collectible. These NFTs, like a LeBron James dunk, have a unique and secure certificate of authenticity. In layman’s terms, companies like Top Shot and Rarible are giving NBA, music, and art fanatics the opportunity to purchase and own highlights, unique album packages, and rare art.
If you are still confused about the concept, you’re not alone. The first question I had was “why?” If you can just watch the highlight online for free, what’s the point of dropping $200k? It’s almost like purchasing sports memorabilia. A signed Kobe Bryant jersey is worth around $7,000 - in a similar sense, one could argue that you could just look up a picture of the jersey. Obviously, the big difference here is a jersey is a tangible object. The bigger concept behind these NFTs is authenticity and uniqueness. Mavericks owner Mark Cuban compared Top Shot’s model to trading cards; he praised the blockchain model behind the NFTs that guarantee their safety and authenticity.
NBA Top Shot has generated more than $230 million in sales thus far - this includes consumers reselling NFTs. Similar to how sneaker enthusiasts buy and sell limited & exclusive shoes, some Top Shot users have been making hundreds of thousands in profit by reselling NFTs.
While NBA Top Shot has established itself as a pioneer in the booming NFT market, other industries within entertainment are taking the concept to reality as well. Musician and producer 3LAU recently sold an NFT collection for $11.6 million in just 3 days. The most valuable? An NFT that included the opportunity for the buyer to record a song with 3LAU. His manager put it this way, “At a time when artist income has been severely impacted due to the loss of touring income and other factors during the COVID-19 pandemic, NFT auctions offer an exciting opportunity to monetize new aspects of creative output.”
Here are a few more NFT transactions that have made headlines:
A digitized version of Banksy’s artwork sold for $380,000.
Taco Bell launched a collection of taco-themed crypto art that resold for >$3,000.
Animated artwork by digital artist Beeple sold for a whopping $69.3 million.
The concept of NFTs has certainly taken the digital trading market by storm. Don’t be surprised if other industries and sports leagues soon follow suit.