You might have heard of the buzz word lately "NFT" which stands for "Non Fungible Token" which probably doesnt mean a whole lot to you at the moment. Non Fungible means that it's unique and can't be replaced with something else. For example, a Bitcoin is fungible- you can trade one bitcoin for another bitcoin, and you'll have the exact same thing. Think a "One of a kind" like the original Mona Lisa is a one of a kind. It can also be something that is very limited meaning there isnt that many out there (1 of 10) which increases its value. That my friend is NON FUNGIBLE.
In a nerdy explination NFT's are a unique and non interchangable unit of data stored on a digital ledger called a blockchain (Ethereum Blockchain) which can be sold and traded. NFT's can be associated with reporductible files such as photos, artwork, videos, music, even STOCKS (mark my words this is the future of all stocks.) So in other words they can be associated with something physical or digital assets (such as a file or physical object like the Mona Lisa) and a license to use the asset for a specified purpose. An NFT (and the associated license to use, copy, or display the underlying asset) can be traded and sold on the digital blockchain markets.
Most NFT's are part of the Ethereum Blockchain. Ethereum is a cryptocurrency (think silver 2.0 as Bitcoin is Gold 2.0), however its blockchain works differently than like Bitcoins blockchain. Ethereums blockchain hosts a few different things on it such as DEFI (Decenteralized Finance, see our blog about that one) and in this example NFT's. NFT's use a digital ledger to provide a public certificate of authenticy or proof of ownership, but it does not restrict the sharing or copying of the underlying digital file. The lack of interchanability (fungibility) distinguishes NFT's from blockchain cryptocurrencies such as Bitcoin and Ethereum as mentioned above.
NFT's function like cryptographic tokens, but, unlike cryptocurrencies such as Bitcoin or Ethereum, NFT's are not mutually interchangeable, hence not fungible. The unique identity and ownership of a NFT is verifiable via the blockchain ledger. Ownership of the NFT is often associated with a type of a license to use the underlying digital asset, but generally does not confer copyright to the buyer, some agreements only grant a license for personal, non commercial use, while other licenses also allow commercial use of the underlying digital asset.
While all Bitcoins are created equal, each NFT may represent a different underlying asset and thus may have a different value. Think a Chris Craft boat versus a Farrari, although both are super nice, they have completely different values and uses. Another example would be a Van Gough vs a Spray Paint Artists Art work. Both might be gorgious but have very different values.
Another way to think of this is Music Industry. A artist now has the ability to put out an album and license it while putting a limit the amount of albums with a dedicated Album cover (art) that ties to that one Album making that Album 1 of 100 ect. The artist can now sell that album and get ongoing royalties from that NFT being sold over the Ethereum blockchain. It empowers the artist to now be the music label. A person can buy a NFT for one of their songs and own the rights to that digital file by having the licensed rights of that song which could be 1 out of 1000.
Blockchain games are becoming quite popular as well as the art. You can own digital plots of land, which are controlled by the user instead of the game developer. NFT's allow you to own your own avatar as a NFT and trade or sell these avatars or plots of land and more on the third party market places without permission from the game developers.
The art piece on this page is the "Bored Ape" theme which has made MILLIONS in sales. Each one is unique and can be used as an avatar or more. Films are starting to use it, in may 2018 20th Century Fox partnered with Atom Tickets and released a limited edition "DEAD POOL 2" digital posters to promote the film. They were available from Opensea.com a 3rd party NFT market place and the GFT exchange. November 2021, the film director Quentin Tarantino relesed seven NFT's based on uncut scenes of the movie "Pulp Fiction". Miramax however subsequently filed a lawsuit claiming their film rights were violated.
Ok so there have been other crazy uses of NFT's such as "memes" which a image of the shit coin Shiba Inu dog's NFT sold for $4 million in June of 2021. Yes $4 million for a shitcoin meme picture. Crazy right? There have been videos sold and other pop culture collectibles with the highest today being sold for $69 MILLION...... Hence the NFT Craze. Kids online younger than 18 years of age are buying these crazy art pieces for cheap then selling them for 20-100x more.
Take the Bored Ape Yacht Club "BAYC for example (image at top of this page), which is a collection of 10,000 NFT's that acts as both an avatar and a ticket to an online social club with perks to private parties, yacht parties and fancy clubs throughout the world allowing you to hang with the elites such as DJ Khaled, Steph Curry and Post Malone. All who own their own BAYC's and are part of the Bored Ape Yacht Club NFT, they also use it as their profile photos on social media. BAYC's represent status and lifestyle and that comes with a very high cost these days.
These NFTs in prelauch were sold forunder $10k and then sold for MILLIONS. BAYC is part of what is called a "COLLECTION" or "PROJECT". Similar to Pokemon cards, these take a template and produce hundreds or thousands of variations, each ranked in terms of its rarity. In the case of the BAYC, there are 10,000 apes, each with different "properties" varying fur types, facial expressions, clothing, accessories and more.
One example of rarity is out of 10,000 apes, only 46 of them have "Solid Gold Fur" which makes these 46 particularly more valuable than the rest. Most BAYC will sell for 52 ether (at the time of writing this ETH is around $4k so that is $208,000), whereas some of these more rare ones sell for as high as $1.36M. One with gold fur and laser eyes went for $3million back in Oct 2021. Again the NFT Craze is here.
Heres a random one, Twitter (NYSE: TWTR) CEO Jack Dorsey's first tweet, was sold as a NFT worth millions of dollars. NFT's are blowing up and yes there is a massive craze going on right now. It's worth it for you to do some homework and a little reading about NFT's and where they are going because they are going to be the future of lots of things.
STOCKS: Ok so you heard it here first as I have been saying it since 2020, but as I mentioned earlier I do believe most if not all STOCKS will become NFTS at some point or a variation of it. So when you purchase stock of a company its typically 1 share of of 1 million shares or how many shares that are issued based on its price. Now you have common or preferred stock. Common stock gives you voting rights (typically one vote per share/stock owned) and preferred stock gives you no voting rights.
Most investors know more about common stock than they do prefered stock. The main difference is that preferred stock acts more like a bond with a set dividend and redemption price, while common stock dividends are less guaranteed and carry more risk of loss if a company fails, but there's far more potential for stock appreciation.
A NFT is simply a validated certificate of ownership of that stock now digitized on the blockchain for people to trade on 3rd party market places. Now my guess is it will become sort of like Ameritrade online still regulated but on the blockchain. This makes entering the stock market much more accessive.
So as an example a preferred stock can be a NFT because it has a set redemption price and are fixed at a specific rate based on the value of that stock which comes with the 3 top advantages. 1.) Preferred stock holders are paid before common stock holders receive dividends. 2.) Preferred shares have a higher dividend yield than common stockholders or bondholders who usually receive very low interest rates. 3.) Preferred shares have a greater claim on being repaid (NFT Certificate of ownership) than shares of common stock if a company goes bankrupt. You see with NFT's you can created different value based on the type of Certificate of ownership it has not to mention the value of it based on it being in the digital space along with the STOCK market giving it dual purpose in two different financial markets.
In fact some companies are already beginning to migrate over to the NFT space (not quite selling their stocks as NFTs but getting closer) one of them is called "Dolphin Entertainment" which is a entertainment marketing company but with a twist. They are listed on the NASDQ (NASDQ:DLPN) operating under its 3 entities "42 West, Shore Fire Media and The Door." They are setting themselves apart by starting Dolphin Digital Stuidios which helps corporate brands and individual brands launch and market their own NFTS. This is where it all starts folks.
Their first NFT was called "Playbooks" which is the NFT series for the Hall of Fame Resort and Entertainment company. DLPN has skyrocketed in April 2021 as a positive result of the NFT Hype and its shares have been performing very well since then, and its most recent financial reportings exceeded their projections.
Another one "Cloudflare Inc" (NYSE: NET) which is a tech company focused on website infastructure and online security tools. They primarily are a B2B model working with businesses as they develop their websites. Most people wouldnt look at Cloudflare and think "Hey they are an NFT company" as its primary focus is on reverse proxy services for tech companies.
However, their cloudstream platform has actually been helpful for those who want to sell NFTs online. Although this platform was originally designed for video publication, they realized how much the NFT trend has taken off and has since updated it to take advantage of this space. Once a creator has developed their NFT, they can list that NFT on Cloudflare Stream to upload it securely to the Blockchain. Pretty Brilliant!
REAL ESTATE PROPERTY TITLES/DEEDS: Now I could be way out in left field here but coming from the real estate and mortgage industry for many years and being an advid real estate investor myself, I do forsee Real Estate Deeds if not also Title, but Deeds for sure at least being mined as NFT's once recorded and put on the blockchain to record that unique certificate of ownership. Real estate is already on the blockchain and being recorded, NFT's just give it a little more stature on the digital asset space.
Now the NFT sold would need to be re-recorded at TITLE & Escrow and then they would load the documents up as a NFT and issue your NFT which is your valid proof of ownership on the blockchain. It could also list any liens you have against the property showing the existing value, legal description and the liens listed against it. This might be easier with Title when Title and Escrow certifies their Title giving you a NFT title stating its certified and clear of any encumbrances or liens. Think about it, there are many ways these can be used. Just look at all the above.
The future is bright when it comes to NFTs, however you may want to be very cautious about SCAMs because just with anything new, Scams will rise and take peoples money. Luckily there are forensic auditing companies such as Cyphertrace that are soley designed to go down the rabit hole of wallet IDs and track back to the scammers allowing you to press charges and potentially get your funds back. However I would still proceed with caution.
Obsidian Capital Management at this point doesnt offer NFT's of any sort and we may not, however that could change once we have a valid NFT that is a game changer that we know will drastically go up in value. However at this point its a gamble and we would rather launch our own Token to provide rebates to clients who do specific things with us creating a value in the market place with respect to our products and services. We will see, at this point we are very focused on what we are doing with the existing services we provide all while staying our course on our humanitarian mission to help as many people and reputable charities as we can.
Until the next episode, make it a prosperous day!
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