What is the relevance of NFTs?
We have entered into the third wave of the internet, also commonly referred to as “Web 3.0” or “Web3”. This is a further democratization or decentralization of the internet where no single government authority or corporate entity controls the content. Web3 is built on blockchain technology allowing any and everybody to be creators, own assets, and build ecosystems and communities with open-source software (OSS). OSS empowers creators and consumers with ownership of their content and data. With Web3, the digital economy is driven by these creators and consumers who can access streams of income and gain financial independence and influence. NFTs (non-fungible tokens) are tokens that reside on these blockchains that can be used to represent possession of unique objects. There are many use cases for NFTs including digital art, gaming items, avatars, domain names, documents, and investments as collateral. NFTs have the creative capability to transform industries including agriculture and banking, two of Africa’s largest sectors. NFTs can only have one official owner at a time and are protected by the blockchain where they are stored which means no one can alter the ownership record of that NFT. The NFT’s digital certificate of ownership is a matter of public record and is easily verifiable by everyone. NFTs are used to prove authenticity and ownership of an asset through cryptography. Their main properties are their uniqueness, traceability, rarity, indivisibility and programmability. They can also be auctioned and traded on different marketplaces. We are seeing fast adoption and experimentation with NFTs in many different industries. The Kings of Leon, a musical group, released an NFT album, the National Basketball Association released NFT basketball cards that featured highlight reels, and the first real estate property was tokenized and auctioned as an NFT recently as well. It can only be to our benefit to embrace an NFT internet which will soon be more mainstream.
Why should the average African be interested in buying or owning an NFT?
With NFTs, African creators, consumers and investors can claim ownership, access new markets, put out content, purchase and own assets from all over the world without having to follow conventional routes which are riddled with all sorts of obstacles. Building NFT projects, purchasing and selling NFTs are all ways to participate in Web3 as NFTs enable you to store and provide proof of ownership of various assets, both digital and physical. Rather than storing your wealth in a bank or any other financial institution alone, adding NFTs to your investment portfolio can prove to be beneficial. NFTs are scarce, authentic, traceable, often high-value self-custody assets that you have complete ownership over. You do not require anyone’s permission to access your assets and there are several marketplaces where they can be sold. Blockchains have security protocols that make it nearly impossible to have your assets “hacked” into. Moreover, NFTs are not just pictures of monkeys, hippos and kittens; they can also be collectibles, give membership to exclusive clubs, give access to virtual environments, even tell a story. They also have the potential to significantly appreciate in value over time. NFTs can give you access to participate in play-to-earn (P2E) games which is an enormous, multi-billion-dollar industry with massive wealth-generation potential for players. The possibilities are endless. In terms of numbers, there has been a surge in NFT marketplace volumes recently. Last month, Beeple, a digital artist, sold an NFT for $69 million. CryptoPunks, one of the earliest generations of NFTs, are currently selling for up to $1 million. The NFT market is determined by users and driven by demand and it is clear that there is a demand for them. A plot of land in the Sandbox, Somnium Space and Decentraland metaverses can cost up to $80,000. Many corporates all over the world are desperately looking for opportunities to build in the space, so why wouldn’t you be interested in buying or owning an NFT?
How rapid is the growth of NFTs in Africa?
Between 2020 and 2021, Africa had the fastest cryptocurrency adoption rate in the world at 1200 percent. This growth happened despite government restrictions in several African countries (source: Ventures Africa). Similarly, NFT adoption is gaining traction in Africa though not yet comparable to the North American, European and Asian markets. Early data nevertheless does hint at Nigeria and South Africa being the two leaders on the continent in terms of adoption. We have seen exciting and innovative projects with great potential emerging from the continent including NFTfi, AJE: The Afriverse, and Ubuntuland to name a few.
NFTfi was founded in 2020 and is a decentralized, peer-to-peer cryptocurrency platform where users can unlock value on their NFTs by listing them as collateral to access loans and liquidity from other users. Users can list their NFTs to receive a loan in cryptocurrency such as wETH (Wrapped Ether) or DAI (stable coin). NFTs are transferred into a double-audited escrow smart contract for the loan duration. The borrower must pay off the loan before receiving their NFT back. In the event of a default, the lender can foreclose and claim ownership of the NFT.
AJE: The Afriverse is a metaverse built on the Binance Smart Chain that allows users to create, explore and trade in their time-travel-enabled African virtual world. Their NFTs are owned by their users and holders of their native token ($AJE). According to the AJE white paper, the Afriverse will act as a bridge between the physical and virtual worlds and will deploy cryptographic protocols to manage digital value, for example, digital art, real estate and advertising space within the virtual environment.
Ubuntuland prides itself on being Africa’s first metaverse marketplace. It houses Africarare, a 3D virtual reality immersive hub that brings African creativity to the metaverse. Ubuntuland aims to showcase African art, fashion, entertainment, sports, tech and creativity from artists across the continent. The launch featured the works of South African contemporary artist Norman Catherine as NFTs in the Milla Gallery located in Ubuntuland. The NFTs sold out shortly after the launch, totaling $53,000. MTN recently purchased 144 plots of land in Ubuntuland, a virtual land modelled after the African landscape in Africarare.
Africa has also produced a number of successful NFT artists who sell their artwork online, many of them can be found on africancrypto.com’s NFT Directory.
How do NFTs shape the work of African artists?
NFTs can represent tangible items such as clothing, sneakers and even artifacts, or intangible items such as music. They each have a code that is digitally distinct, no two are alike, and stored on a blockchain whereas files such as .mp3 and .jpg can be duplicated or stolen. This is what makes NFTs so valuable and what differentiates them from a mere “screenshot”. No two NFTs have the same value, and your ownership of that NFT is proven by your digital certificate which grants you access to the item on the blockchain. NFTs are also important for artists who are looking to connect with, show appreciation for and sell directly to their fans. Releasing unique artwork with exclusive access to limited edition content is a great way for content creators and consumers to connect. Digital art is actually the most common use case for NFTs and in Africa, we have no shortage of talent for this. Africa has a long history of our art, artifacts and other creative works being stolen. NFTs can provide proof of ownership and protect against copyright infringement. It can also address hurdles artists face in receiving payments. NFTs are a new digital market for African content creators who are looking to sell programmable digital art. NFTs can contain smart contracts which are basically self-executing terms of agreement between buyer and seller coded into the NFT. This is really where creativity meets technology and African artists can only benefit from this competitive economy. They can sell their work everywhere and program royalties into the NFTs for all future proceeds. This means artists get to maintain control of their art and demand resale royalties. Moreover, public open-source blockchains already provide the infrastructure to build NFT projects on. This is revolutionary in the arts and entertainment industry where the bulk of revenue from purchases are retained by labels, music streaming sites, and other platforms and intermediaries. But NFTs don’t just benefit artists, music industry giants Sony Music and Universal Group have just joined the NFT space. Some big names in the music business have even purchased NFT LAND tokens in the Sandbox for hosting events. We have heard about Snoop Dogg, Travis Scott and The Weeknd holding events in the metaverse. Ariana Grande headlined a virtual concert in August 2021 with 78 million players, far more than you can fit into an arena. Snoop Dogg recreating his mansion, allowing his fans to view his NFT collection, hosting parties and virtual concerts are great examples of this new method of fan engagement in a virtual environment. African artists have an opportunity to participate in this new frontier. Virtual experiences are the next level in the evolution of the arts and entertainment industry.
How integral are NFTs to Africa’s quest to globalize?
The NFT market in 2020 was valued at $232 million. In 2021, it was valued at $22 billion which is a significant increase. The surge in the NFT market is indicative of an increasingly important digital economy. Powered by blockchain technology, the NFT internet is a leveler in many ways and can be applied to various domains. If you have access to the internet, which roughly 40% of Africans do, you can participate in this multi-billion-dollar economy. As internet technology spreads throughout the world, NFT adoption is inevitable. NFTs can open a world of possibilities for African entrepreneurs looking to expand their businesses, increase their network of customers, and showcase their products. It has already proven its capacity for globalization of industries such as the arts and entertainment industries. As more businesses are moving from traditional retail and e-commerce into the metaverse, proving ownership is becoming more and more important. Some of our major challenges in Africa include verification of authenticity, validation of ownership and document management. NFTs could prove to be an important solution in this respect. Timestamped NFTs with certificates of ownership, and smart contract functionalities can be used across sectors to provide proof of ownership, keep record of changes in value and much more.
How do we increase the adoption rate of NFTs in Africa?
As long as there is confusion and a lack of understanding about what NFTs actually are, whether they are just images of monkeys or pixelated icons and if they contain any real value, the adoption rate of NFTs in Africa will continue to be slow. Once again, we have no shortage of talent across the continent and we have a rapidly growing technology sector. An increase in NFT education is an important first step. With access to the internet, it is not difficult to learn about NFTs. With increased knowledge about NFTs, there will be new revenue streams unlocked as Africans discover that they can monetize their time and skills through unconventional means in a digital world. One example of this is through peer-to-peer (P2P) scholarship programs such as Axie Infinity scholarship programs. These programs utilize a profit-sharing model that requires no initial investment on the scholar’s part. Axie holders lease out their Axie NFTs to Axie scholars who then use those NFTs to play games and share the income. These programs are created and managed my Axie holders. Scholars earn tokens in game and can sell those tokens as cryptocurrency convertible to cash in their local currency. The Philippines is an important case study in this regard. In the Philippines, Axie has positively impacted many lives and given people new ways to earn a living since the economic devastation of the pandemic hit the country. The Philippines, considered a developing nation, has become the largest market for Axie infinity games. After news articles were published about NFT P2E games and Filipino entrepreneurs found success in earning from these games, Axie University was created which implements this scholarship model to educate and provide opportunities to those who are looking to play and earn an income through Axie games. Africa can adopt a similar model as NFTs, especially in P2E games, appeal to a generation of Africans who is looking to earn active and passive income online. This is especially important in a post-pandemic society where remote and online work is more commonplace.
How does the ordinary African make money from NFTs?
There are several ways to make money from NFTs. The most common are:
1. Creating and selling NFT collections
For creators, creating an NFT collection of artwork, music, collectibles, membership, or other high-value items and selling them on a website or marketplace such as OpenSea or Solsea is the most common way of making money. Developing an NFT project with various functions and utility as well as programming royalties in the NFTs such as avatars and in-game items for metaverse games are ways to increase the value of NFTs.
2. Flipping or Trading NFTs
For consumers or collectors, buying and selling NFTs for profit is most common. Getting on “whitelist” or pre-sale lists and purchasing NFTs early at a low price also referred to as the “whitelist mint price” and then selling it on a secondary market for a higher price for profit is commonly referred to as “flipping” or trading NFTs. However, it is important to note that not all NFTs in a collection have the same value and thus will not be worth the same price as each NFT has unique characteristics.
3. NFT Gaming (P2E)
People can make money by participating in P2E NFT games as mentioned earlier. Participating in games such as CryptoKitties, Axie Infitiy, My Crypto Heroes, Gods Unchained, Zed Run, DeRace and other games are ways to earn an income. Income in NFT games are in the form of tokens which can be exchanged for cryptocurrency and converted into cash.
4. Lending and Renting NFTs
Lending and renting NFTs via lending platforms give borrowers the opportunity to access loans with NFTs as collateral. Through NFT loans, lenders can access passive income from loan interest payments. Gaming NFT holders can also lend their NFTs to borrowers who then play games to earn tokens and share the income through P2P contracts. This is also a great way to earn passive income on NFTs that you are not using instead of them sitting on the blockchain. Popular lending platforms include NFTFi and Arcade.
5. NFT Staking
NFT staking is similar to lending in that you allocate your NFT to others usually via a staking platform willing to maintain them for an agreed amount of time. An annualized yield (APR) is established and you would be able to claim block and fee rewards. These rewards are dependent upon the asset’s ability to develop an income stream such as royalties. The aim is for it to boost liquidity and attract crypto investors. Some NFT staking websites include NFTX, Splinterlands, Rplanet and Kira.
By: Chinenye Monde-Anumihe
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