NFTs have shaken up the digital trading space this year, however one cryptocurrency expert is warning that 90 percent of their worth will plummet ‘to little or no value over the next three to five years.’
For those unfamiliar with the concept, non-fungible tokens, described as ‘digital trading cards,’ are a unique digital asset encrypted with an artist’s signature and which verifies its ownership and authenticity and is permanently attached to the piece.
It allows ‘original’ versions of popular online content – like viral memes, sports highlights and tweets – to be sold as if they were physical pieces of art.
Crypto expert and Coinbase co-founder Fred Ehrsam said the NFT bubble is bound to pop ‘in three to five years’ while comparing it to the late 90s internet bubble
Ehrsam started Coinbase with Brian Armstrong in 2012, which went public in April at a whooping $100 billion valuation, according to Observer
NFTs allows ‘original’ versions of popular online content – like viral memes, sports highlights and tweets – to be sold as if they were physical pieces of art
NFTs take digital trading by storm
NFTs have quickly become the next big thing in the crypto world, with buyers being able to purchase a unique digital asset such as a sports highlight or even a tweet. The Non-Fungible Token is then encrypted with an artist’s signature which verifies its ownership and authenticity and is permanently attached to the piece.
Most NFTs include some kind digital artwork, such as photos, videos, GIFs, and music. Theoretically, anything digital could be turned into a NFT.
At the moment, NFTs are most commonly sold in so-called ‘drops’, timed online sales by blockchain-backed marketplaces like Nifty Gateway, Opensea and Rarible.
There’s an array of reasons why someone may want to buy a NFT. For some, the reason may be emotional value, because NFTs are seen as collectors items. For others, they are seen as an investment opportunity similar to cryptocurrencies, because the value could increase.
Writer and podcaster Andrew Steinwold traced the origins of NFTs back to 2012, with the creation of the Colored Coins cryptocurrency. But NFTs didn’t move into the mainstream until five years later, when the blockchain game CryptoKitties began selling virtual cats in 2017.
And with big time players such as Elon Musk and the NBA getting behind the idea, there is money to be made in NFTs, with more than $10 million in NFT transactions now taking place daily, according to the website DappRadar.
Even meme makers have gotten in on the idea, offering NFTs of their most viral offerings and making a lot of cash in the process.
Bad Luck Brian, the meme of Kyle Craven’s hilariously bad yearbook photo, sold for more than $45,000.
Overly Attached Girlfriend, spawned from a YouTube video of Laina Morris satirically showing her love for Justin Bieber, has sold for $459,260.
And in March, Twitter CEO Jack Dorsey’s first tweet – ‘just setting up my twttr’ – sold as an NFT for just over $2.9million.
But the bubble is bound to burst, according to early cryptocurrency pioneer Fred Ehrsam, with the Coinbase co-founder giving NFTs three to five years before losing most if not all of their value.
‘I go so far as to say that 90% of NFTs produced, they probably will have little to no value in three to five years,’ Ehrsam said in an interview with Bloomberg TV this week.
‘You could say the same thing about early internet companies in the late ’90s,’ he said.
Ehrsam has seen such crypto concepts crash and burn seemingly overnight, with many such projects relying more on hype than substance.
‘People are going to try all sorts of things. There’ll be millions and millions of cryptocurrencies and crypto assets, just like there were millions and millions of websites. Most of them won’t work,’ Ehrsam revealed.
Ehrsam got his start trading Bitcoin back in 2010 as a foreign exchange trader at Goldman Sachs before leaving the firm in 2012 to start Coinbase with Brian Armstrong, which went public in April at a whooping $100 billion valuation, according to Observer.
In the months since offering an IPO, the crypto company’s market cap has dropped by half amidst ongoing pressure for regulation.
Meme makers have gotten in on the craze as well, offering NFTs of their most viral offerings and making a lot of cash in the process
However, Ehrsam still believes that cryptocurrency is truly ‘the next internet-sized opportunity for the United States.’
‘The world doesn’t change overnight, but you can see the seeds of exponential growth occurring already,’ he said in the Bloomberg interview.
‘I do think we will live in a future where for us to coordinate, we won’t need these centralized platforms today. That’s already true of financial services, in that you can be your own bank. You don’t need a central institution to hold your money anymore.’