NFTs have become a huge hit over the past year, as artists, collectors, celebrities, venture investors, and dealers alike have pushed their prices to record levels.
CryptoPunks pixelated selfies, digital pieces of artwork by artist Beeple and the first tweet of Twitter (NYSE:TWTR) founder Jack Dorsey have been sold as NFT worth millions of dollars.
Our guide will walk you through what NFTs are, how to use them, and then cover some of the companies in this sector with the most promising upside.
What are NFTs?
NFT is an abbreviation for Non-replaceable code. In economics, the term “disposable” refers to an asset that can be exchanged for another asset or a commodity of the same value.
For example, a ten dollar bill is exchangeable, because you can easily exchange it for another ten dollar bill of exactly the same value.
On the other hand, if an asset or good is ‘non-exchangeable’, it cannot be exchanged for an asset of exactly the same value. The autographed baseball card will be non-fungible, because it is unique, and it will be difficult to find another baseball car of exactly the same value.
Other examples of non-fungible assets include plots of land, homes, and website domain names.
Art is also a non-fungible asset because its value is very subjective – and this leads us to the definition of irreplaceable symbols.
Non-fungible tokens are digital assets, including videos and jpegs, that can be sold or bought, just like physical assets.
In simpler terms, a non-fungible token is a unique certificate that states who owns a video, video game skins, images of physical objects, virtual real estate, GIFs, tweets, virtual trading cards, or other forms of digital media. Each NFT is unique and cannot be recreated, making it rare by design.
These assets take digital ownership to a higher level with the help of blockchain technology. Each token has its own address on the blockchain which cannot be forged or altered.
Although NFTs have been around since 2014, they have become very popular because they are a great way to buy and sell digital art. They are only bought and sold, usually with cryptocurrencies such as bitcoin and litecoin.
How do NFTs work
Traditional artwork such as paintings are often highly prized precisely because they are rare.
But digital art can easily be copied endlessly.
With non-fungible tokens, artwork can be converted into a “token” to create a digital certificate of ownership that can be bought or sold.
NFTs can be thought of as modern day collectibles. They are traded online and represent digital proof of ownership of a particular good or asset. These tokens are securely registered on the blockchain, the same technology that powers cryptocurrencies.
Blockchain technology ensures that an asset is unique and can also make it difficult to counterfeit or alter NFTs. Tokens registered on the blockchain cannot be duplicated because the ledger is maintained by millions of computers around the world.
Depending on the token, licensing or copyright rights may not come with the purchase, although this is not necessarily the case. Similar to how purchasing a limited edition edition does not necessarily grant the buyer exclusive rights to the image.
Some NFTs can also have smart contracts that may give artists a portion of future sales.
As blockchain technology advances, NFTs will likely have many potential applications outside of the art world.
For example, a place could use NFT to sell and track event tickets, which could curb resale fraud. Or, the college can issue NFTs to students who have graduated and allow employers to easily verify an applicant’s degree or certificate.
NFT trading activity
Selling NFTs has been a rewarding business in recent months. Here are some examples that made the headlines:
- “Every Day – The First 5,000 Days,” a collection of all the photos that the digital artist known as Beeple has posted online every day since 2007 has sold for $69.3 million through auction.
- Twitter founder Jack Dorsey put his first-ever tweet up for auction as a non-fungible token, which sold for $2.9 million.
- The NFT of a digital artwork called CryptoPunk was sold for $11.8 million in Sotheby’s first sponsored NFT sale.
- Popular NFT dealer Pranksy bought LeBron James “Cosmic” Dunk #29 for $208,000 in February 2021.
The NFT industry has been booming lately, and stocks related to this industry continue to be a subject of interest on Wall Street.
With several catalysts in place, you can expect a stronger showing for NFT stocks in 2022. With that in mind, here is a list of NFT stocks with high rise potential over the next 12 months.
Twitter Inc (NYSE: TWTR)
Twitter has positioned itself as a major player in the NFT space. The social media company has revealed plans to launch a new feature that will allow its site to better serve NFT creators.
According to this TechCrunch article, Twitter will soon explore support for authentication, allowing NFT creators to link their crypto wallets to the platform. This feature will also allow content creators to track and display their codes on Twitter.
However, the plan is still in its early stages and Twitter has not explained how the feature will work.
All the company has said is that it is experimenting with different ideas to help creators who use NFT-based technologies stand out from the crowd in some way. This could possibly be done with something like a differently shaped avatar or a profile badge.
Mada Aflac, chief software engineer at Twitter, teased the first glimpse at the feature with a Video In September 2021.
The video showed how Twitter will enable NFT creators to link their wallets to the platform. It also revealed an option for creators to choose one of their NFTs to use as their profile picture.
Dolphin Entertainment (NASDAQ: DPLN)
It looks like Dolphin Entertainment will become one of the most successful NFT stocks on Wall Street over the next couple of years.
Headquartered in Florida, Dolphin is an independent content development and entertainment marketing company. Provides strategic advertising and marketing services to independent digital content providers and major film studios.
In August 2021, the company revealed a partnership with operator FXT.US, which will help it create the NFT marketplace for major entertainment and sports brands.
Under the agreement, Dolphin will be responsible for the development and implementation of the production, marketing and creative branding of these programmes. On the other hand, FXT will bring their technical knowledge about cryptocurrencies and use their own cryptocurrency exchange services.
Companies seek to program and develop the global NFT markets. They will target brands in sports, games, movies, cooking, music, television, charities and lifestyle.
In addition, Dolphin has established a division to design, produce, issue and market NFTs for its clients. It has already made an NFT deal with the Hall of Fame Resort & Entertainment Company (NASDAQ: HOFV).
Coinbase (NASDAQ: COIN)
Coinbase debuted on the stock market by direct listing in April 2021.
Founded in 2012 as a way to simply buy cryptocurrency, Coinbase has grown into one of the largest and most trusted cryptocurrency exchanges in the world. The company attracts more than 7.3 million users transacting monthly, which is a huge user base for exposure to non-fungible tokens.
Coinbase has already announced plans to open a marketplace for NFTs, with nearly 2.5 million users looking to join the list. To put that into perspective, OpenSea is the dominant market for NFTs with 1.8 million users.
Therefore, Coinbase’s huge user base can help its market to compete with existing competitors such as OpenSea and even grow larger than the cryptocurrency exchange companies.
The market, dubbed Coinbase NFT, will facilitate the minting, buying and selling of non-fungible tokens.
Coinbase says in a blog post that it aims to benefit artists by unlocking the full potential of the NFT economy.
“We make NFTs more accessible by building intuitive interfaces that put complexity behind the scenes,” the company says in the post. “We’re adding social features that open up new possibilities for conversation and discovery.”
eBay Inc (NASDAQ: EBAY)
Online auction and transaction platform eBay joined the NFT bandwagon in May 2021, facilitating the sale of tokens for digital collectibles on the site.
eBay appears to be in a good position to slowly increase sales of NFTs on the platform, as it starts with fewer certified sellers.
According to this report, the company plans to “add new capabilities that bring new blockchain-based collectibles” to its platform in the coming months.
eBay has invested millions of dollars in the infrastructure for traditional physical collectibles such as trading cards, luxury watches and sneakers that it helps verify for buyers.
Since it already plays a major role in the e-commerce industry, eBay is going out of business until you can take on some of the NFT players out there.
Although NFT activity has ballooned in the past year, the infrastructure for buying and selling collectibles is still not user friendly.
Jordan Sweetnam, senior vice president of eBay for the Americas, believes that non-fungible tokens offer different types of creators and collectors, similar to how “digital publishing brought more exposure to writers.”
eBay expects the initial phase of the NFT plan will help the company learn more about what its community wants. Later, the company will launch tools, software, and policies that facilitate the buying and selling of NFT across more categories.
Draft King (NASDAQ: DKNG)
In a recent investor presentation, it is clear that DraftKings has embraced the NFT and the metaverse industry.
DraftKings announced a partnership with the NFL Players Association in December. The deal continues to attract attention as it gives the company a portion of the NFT market with its beloved NFL player tokens.
By cooperating with the NFLPA, DraftKings will have the licensing rights to active NFL players, including the right to use their original name, image, and likeness.
DraftKings launched their own NFT market alongside seven-time Super Bowl champion Tom Brady and sold a deck of NFT trading cards to football start-up Rob Gronkowski.
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Orts has designed its own NFT marketplace to appeal to a mainstream audience. It supports secondary market transactions and has lower barriers to accessing NFTs. As a leader in fantasy sports betting, DraftKings will surely leverage its massive user base to advance further in the NFT arena.
Beth Beiriger, senior vice president of products at DraftKings, believes the company is equipped to take advantage of the growing intersection between sports and the NFTs that will be a cornerstone of engagement and entertainment within Web3.
NFTs are here to stay.
According to statistics, NFT’s turnover exceeded $10.7 billion during the third quarter of 2021, up more than 700% from $1.3 billion in the second quarter.
With billions of dollars pouring into the NFT market, many companies are trying to figure out how to get in on the action. Athletes and sports leagues create irreplaceable tokens and artists and performers are not left behind either.
But if you are looking to take advantage of the market without putting money directly on NFTs, the stocks we mentioned above are definitely worth paying attention to.