Many people have heard about NFTs and most may still be unsure as to what an NFT actually is.

NFT stands for non-fungible token. Internet forums love to marginalize NFTs into just images that unsavvy cryptocurrency holders pay hundreds, thousands, or millions of dollars for.

In the same vein, they mock the industry stating they will save their money by simply screenshotting any NFT they want for free. What these people get wrong is that the value of the NFT is not in the image itself, but rather the proof of ownership and the benefits that come with it.

Crypto Punks, Bored Ape Yacht Club (BAYC), or Crypto Kitties are some of the earliest NFT collections that gained popularity and have grown significantly over the years with a cult following. Owning a Crypto Punk has become a status symbol, similar to wearing a Rolex or driving a nice car.

They are so influential that in August, VISA bought a Crypto Punk for $150,000. BAYC community is equally as influential, with members accessing real-world events such as “Ape Fest” during NFT.NYC. Most significant for the billion-dollar BAYC brand is a partnership with Rolling Stone as well as the announcement that Universal Music Group would be creating a virtual band with 4 Bored Ape characters.

This is what so many people overlook. NFTs are more than JPEG images. They are digital assets that represent art, experiences, community access, collectibles, or in-game items - all residing on the blockchain. Think of the last concert you went to. You might have paid $100 for a ticket, but you didn’t pay $100 to own that piece of paper. You paid for the access that piece of paper represents. A similar analogy would be a Country Club membership. Typically you need an invite from an existing club member, and you’re required to buy a bond as collateral to gain access to the golf course, pool, and community of people at that club. An NFT is just a digital version of that bond.

NFTs can also represent physical items like sports memorabilia, paintings, rare musical instruments, luxury watches, sneakers, and more. Anything that has a community of collectors who see value in it can be “tokenized” to represent ownership of that physical item. For example, an art collector may want to invest in physical art for future value appreciation, but they don’t want to take on the risk of hanging it in their home. The art remains securely in an art gallery, but the owner can be tokenized. If the owner ever wants to sell their art, they can simply transfer ownership of the token. The token can also be redeemed at the gallery for the physical art if the new buyer wants to move it.

An NFT can also represent a revenue-generating opportunity for the owner. The art gallery might pay a small dividend to the “token” holder as a percentage of ticket sales for people that go and view their piece of art. The token holder gets value appreciation of the art plus potential cash flow from the gallery’s guests.

Musical artists are also using this as an opportunity to create their songs or albums as NFTs. Instead of partnering with a streamlining service where they make thin margins, the artist can sell the song in NFT format directly to the consumers. The consumer can then upload it to a streaming service and collect royalties on the plays of the song. Instead of the majority of the profits going to the streaming service, they are now democratized between the artist, platform, and customers. A rare Wu-Tang Clan album was just acquired by an NFT group.

Gaming is going to be the next frontier that gets eaten by NFTs. Until now it’s been common for people to spend real-world dollars on games like Roblox to open new levels or character features. The problem is the game developer reaps all of the benefits and the customer can’t do anything with those in-game assets outside of the platform. Imagine a world where you could own your game character and the character’s weapons or accessories. You could buy, trade, or sell those accessories for other items and even take your character from one game to another. In the future, Super Mario might be easily transferable into Grand Theft Auto.

With all of this opportunity, does it mean all NFTs are valuable? Absolutely not. In fact, a lot of NFTs won’t be valuable at all. This is because, for every collection of Crypto Punks, there are hundreds of copy-cats trying to recreate the allure of the Crypto Punk community. Copy cats or replicas are never as valuable as the original. I can own a Mona Lisa replica, but I don’t have $3 billion to buy the original.

The future for NFTs is bright and we’re only scratching the surface of what NFTs will evolve into. There is no one-size-fits-all approach and that’s what makes this industry so exciting.

An NFT collection needs to have community, access, and utility to create collective value.

When Gary Vaynerchuck launched his NFT collection called Vee Friends, he didn’t just provide digital art but made the ownership of a Vee Friend redeemable for access to Vee Con, an annual conference for token holders. Similarly, the limited edition Unbanked.com Bankers NFT Collection was just launched and created by a famous digital artist. Customers also get free access to upcoming products which is where the rubber meets the road for successful NFT collections. They should combine community, access, and ownership.

NFT’s are gaining support and popularity, no matter what people think of them. By understanding their unique value, the global community is finding more and more benefits to owning them, especially with the unstoppable rise in the price of Bitcoin. People can empower themselves taking part in a growing digital economy while enjoying art, music, or games.

Ian Kane is Co-CEO of Unbanked.com

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