Will NFTs Promote Growth of the Metaverse?

Non-fungible tokens (NFTs) are surging in popularity with over $23 billion in value created during 2021, according to Cointelegraph. [1] What are NFTs?  How may they facilitate further growth of the metaverse?

 

What Is An NFT?

An NFT is a digital asset representing either digital or real-world objects such as art, music, in-game items, videos, and virtual real estate.  Think of them as digital deeds of ownership.  The term non-fungible means that each is unique and cannot be substituted for another asset. An NFT is stored on a blockchain [2] and may include information including the identity of an asset, ownership, asset history, sale and resale information, royalties, etc. 

 

Is It Art?

NFTs are often used to facilitate the sale and ownership of digital art.  For example, during 2021, an NFT representing a piece of digital art by artist Beeple sold at a Christie’s auction for $69 million. [3]

 

NFTs are especially effective for facilitating the purchase and sale of digital art as they represent an immutable record both indicating authenticity and ownership. To illustrate, anyone can own a copy of a Picasso, but only one person owns the original.  An NFT indicates the original work of art and its owner.  An NFT can also record its history and be programmed to pay the artist a royalty every time it changes hands.

 

Other Uses?

Some popular uses for NFTs in the metaverse include:

  • Music & video files – As with art, NFTs may be used to authenticate music and video recordings.  Kings of Leon was the first band to release an album as an NFT. Other popular artists like Meek Mill and Akon are also planning to release NFT albums.
  • Writing – Books, articles, as well as social media posts may be sold as NFTs.
  • Sports – NFTs have been used to create digital trading cards, tickets to events, and even social media posts of famous athletes. Famed NFL quarterback, Tom Brady, recently started a NFT platform featuring other sports icons like Tiger Woods, Derek Jeter, Naomi Osaka, and more. 
  • Collectibles – NFTs may be used to buy and sell collectibles, such as the Cryptokitties that gained popularity during 2017. 
  • Real Estate – Purchase and sale of real estate in virtual worlds can be facilitated by NFTs.  In June 2021, one key plot of land in the virtual world Decentraland sold as an NFT for over $913,000. [4]
  • Gaming – Items to be used within online gaming, such as skins, weapons, etc., may be purchased as NFTs.

 

Basically, just about any asset can be purchased or sold as an NFT.

 

Use Cases Will Likely Expand

As the metaverse expands, uses for NFTs will likely expand.  NFTs may be used in education to represent diplomas or certificates.  They may be used in the healthcare industry to represent a patient’s medical records.

 

NFTs, backed by blockchain, provide immutable records of authenticity and ownership that may prove superior to existing methods and, therefore, facilitate the future expansion of the metaverse and the commerce that may be transacted on these platforms.

 

How May Investors Gain Exposure to the Metaverse?

 

The Fount Metaverse ETF (MTVR)

The Fount Metaverse ETF seeks to provide investment results that, before fees and expenses, generally correspond to the performance of the Fount Metaverse Index.  The index was designed to measure the performance of companies that develop, manufacture, distribute, or sell products related to metaverse technology.

 

 


[1] Tiwari, Anirudh, NFTs Find True Utility With the Advent of the Metaverse in 2021, Cointelegraph, 12/31/21

[2] Blockchain technology may be defined as a decentralized, distributed ledger that records the provenance of a digital asset.

[3] Hammer, Sarah, How NFTs Can Move Beyond Arts and Entertainment, Wall Street Journal, 2/22/22

[4] Deep Dive: Why NFTs Are the Keys to the Inevitable Metaverse, Subspace, 7/22/21

profile
Bong-Geun Choi Chief Economist

Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 855-425-7426 or visit our website at www.fountetfs.com. Read the prospectus or summary prospectus carefully before investing.

Exchange Traded Concepts, LLC. serves as the investment advisor to the Funds. The Funds are distributed by SEI Investments Distribution Co., (SIDCO) 1 Freedom Valley Drive, Oaks, PA 19456. SIDCO is not affiliated with Exchange Traded Concepts, LLC. or Fount Investment Co. Ltd.

Risk Disclosure:

 

Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated objectives. In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. The Funds’ concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors. The Funds are non-diversified. The Funds are new and have limited operating histories for investors to evaluate. New and smaller funds may not attract sufficient assets to achieve investment and trading efficiencies. In addition to the normal risks associated with investing, investments in smaller companies typically exhibit higher volatility.