Panini effect
Market Review #17 | Non-Fungible Token
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Hi, this is Clément from HUB612👋
Welcome to all the new followers and hello to everyone!
I remember me buying a tons of Panini packs for the 2002 FIFA world cup hoping to fulfil my album. I ended up tradding cards with friends and step by step, I saw my collection thicken quite a bit! Even though this was a short hype, the experience was quite fun!
Be prepared, the fun is coming back with the arrival of Non-Fungible Token (NFT)!
We like to collect everything
It’s in our nature to accumulate things. It can be clothes, domestic appliances, coins, comics, stamps, literally everything.. We are the victim of a panini effect and there probably a reason for that:
To prove loyalty (every year you buy your favorite soccer team‘s jersey)
To gain status (investing in art or wine is about symbol/status)
Irrational: we are sentimental or passionate about something (a value that we can only understand personally)
..
Let’s be clear, collecting is a bit more complicated if you decide to take it seriously. Items are not publicly traded on a market. We are talking about private markets which have restricted or no access. Let’s say you want to buy an old car, how would you do that? It requires you to be under certain private networks, and luck may serve you to find these groups and get the item you dream about.
Hopefully, a wide range of startups I mentioned in a previous issue allow you to invest in almost everything (Wine, art, cars, sneakers, and a lot more collectibles).
But what about the price? What makes a collectible a valuable item? Why would you pay $4000 for sneakers? .. ?
For this particular example, you may not get it but in 2020, the total global sneakers market was valued at approximately 79 billion. Another example, the British Guiana 1c magenta is one of the rarest, and most valuable, stamps in the world. Sold in June 2014 at Sotheby's for $9.48 million.
People around the world are trading collectibles, either for money or collection purposes. The price is mainly driven by the supply/demand on the market. There is not a simple explanation of the pricing because most of it is irrational.
NFT 101
To keep on learning easily, let’s briefly explain what is a non-fungible token. It’s a virtual object whose identity, authenticity, and traceability are theoretically unquestionable and inviolable, thanks to blockchain technology.
Fungibility is the property of a good/commodity whose individual units are essentially interchangeable. Typically, 1€ coins are fungible because they can be interchanged. Thus non-fungibility is related to non-interchangeable goods/commodities (they have their own identity and are unique). Blockchain technology can provide that.
A simple way to think about NFTs are as files that live on the blockchain. Their specificity is that they have a new specific file format that you can’t copy.
From kitties to Christie’s
Back in 2017, the first NFT appeared on the Ethereum blockchain. The use case was Cryptokitties. Allowing players to purchase, collect, breed, and sell virtual cats. Each kitty was certified unique, and to be honest, the game worked pretty well back in the days. To give you a glimpse of the trades, the most expensive cryptokitty was paid 600ETH at the time ($390,000)!
The cryptokitties was a punctual hype. NFT kept a low profile until recently.
An interesting low signal I picked was the recent Christie’s auction (oct 2020). It was the sale of a work by Robert Alice called Block21 (a portrait of satoshi Nakamoto on one side and an NFT on the other side). The work sold for $131k! And now they’ve launched a new 100% NFT auction with the Beeple's first 5,000 works. The current bid is at $3m, for those interested you have the URL :)
The interest in NFT is not a surprise for me. We just transposed to a more transparent, accessible, and diverse market for collectibles. Of course, you don’t physically own your purchase, but this is already the case for so many services/products. Just look at the Fortnite skin purchases: in 2018, when the game was not even a global hit, they sold up to $2.4bn in skins and emotes. This is mad right? But this is happening.
Use cases & Type of NFT (to date)
Last week, Sorare raised $40m for their Serie A. The news picked the curiosity of collectors, fans of football fantasy, and crypto early adopters. The startup is halfway between a panini collection and a fantasy football game in which you can use the card you draw. Behind this news, are hidden two great use cases of NFT: collectibles and gaming. But there’s more!
NFT can also be the vehicle for digital art. For instance, NBA Top shot is a NFT where you own moments of NBA (3 points on a buzzer, a massive dunk, a foul, .. ). The volume of sales is impressive ($100m+ in sales in the past 30 days).
If you’re curious about NFT arts, you now have Pinterest copycats for NFT like Showtime, where you can buy some with a few ETH.
How do they put their art on a blockchain?
Creating a .gif or a .png is easy for creators. But very few know how to issue a token. To date, there are around 50 platforms that can help them mint ( = create) their token.
NFT is potentially a new revenue stream for creators as you can set royalties while creating your NFT.
All things Finance | Live with Marc Fiorentino
We were live Tuesday night with Marc Fiorentino (founder of monfinancier.com) and Kevin & Arthur (founder of Magma Newsletter) to chat about a lot of financial topics:
From the background of the Gamestop ongoing rollercoaster, to the creation of new communities around finance, the gamification of investment, the reasons for the explosion of crypto and its impact on personal investment, the business opportunities of Decentralized Finance and ...of course NFTs!
If you are interested in seeing the replay, I invite you to first discover the Magma Newsletter (FR) for which I occasionally write a few articles. This newsletter tracks industries, trends, and products ready to explode to give you insights and opportunities to capitalize on. Check it out!
To improve my work, please tell me how you felt about this issue!
Previous issues (wait, there’s more!)
💵 Cash Management for SMEs | Investment Memorandum #2 Agicap
✈️ Sorry, that’s excluded | Market Review #8 Travel Insurance
🖼️ Culture is the new asset | Investment Memorandum #6 MasterWorks
See you next week 👋
📧 I’m clement.parramon@hub612.com and @cparraam is my Twitter
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