Lots of articles have been written about the ridiculousness of NFT’s (Non Fungible Tokens) and examples of outrageous amounts being paid to ‘own’ digital items. While I agree that the amount that some people are paying for NFTs are head-scratching, I think there is a place for NFT’s in the future.

Here is a good overview article on NFT’s. I think we are early in this trend, and while it is in the experimental phase I think alot of crazy things will be bought and sold. But conceptually, NFT’s do have advantages over physical collectables. People buy collectibles because they like having the items around them, and they hope that someone else will find them more valuable in the future. The same is true of NFTs. Except with NFT’s, you don’t need to worry about accidental destruction of your collectible, dedicate a room to house all that stuff, or insure it. Some might say they want to physically touch the collectible, but for the most expensive ones, you can’t since that could cause wear and tear and reduce the value. I addition, any NFT that has an official registry can guarantee you have the authentic ownership – where as a physical asset may be a forgery or a copy.

One knock on NFT’s is the lack of scarcity – and how people are just putting all sorts of things up for sale. That is not unique to NFT’s – the amount of physical collectibles out there are seemingly unlimited – from movie franchises, artwork, coins, furniture, just about anything. Anything that someone thinks might be worth more in the future.

So once the hype phase and headlines die down on these NFT’s that are being sold I think someone will find a model that makes for sensible NFT collecting. I think the NBA has an interesting model with it’s top-shot collection. One old school NFT is domain name collecting – people don’t think of that as NFT’s, but what are you really buying when you buy a domain name. Once scarcity in a digital item can be defined, it is a candidate for collecting.

One other interesting model is Earth2.io. This is quite interesting to me – because it has a defined scarcity of elements you can buy (grids on planet earth), and because people seem to be paying a lot of money for these grids. I could spend money on their site to buy the 3 or 4 grids of my house location for around $300 bucks. The reason I would do that is to stake my claim on earth2, and believe that my investment would be worth more in the future. If earth2 can build into something that catches popular culture’s imagination and becomes the most talked about investment since crypto – then that seems like a great investment. But this is just one of many NFT models out there, and so whether it amounts to anything or not will be interesting to watch. As interesting as I find Earth2.. I have no plans to buy land.

I will keep being amused by all the crazy things that people are selling and buying in the NFT world, as it makes for great stories. But long term I do believe there is something to NFT’s as a collectible and a store of value. Maybe even more so than crypto currency, which lacks the collectible aspect of an ‘asset’. I will be keeping my eye out for the NFT that I think has the right model, and maybe then I will join the world of digital collectables.