What’s up With NFT’s

Steve Evans

Senior Director of IT at Global Partners

Learning Objectives

The latest blockchain trend is NFT's, is it possible that NFT's are more than just a place for Bitcoin millionaires to park their money? Could the electronic Art World make blockchain hip?


This presentation will explain what Non-Fungible Tokens are, how they fit into the Blockchain ecosystem, why people are interested and most importantly, explore how NTF's could impact your business?


" A financial bubble doesn't necessarily mean the technology is not worth a second look."

Steve Evans

Senior Director of IT at Global Partners

Transcript

Good day, and welcome to What’s Up With NFTs. I’m Steve Evans, Vice President of Business Systems at Global Partners. I appreciate you taking some time today to learn.


First, a little bit about me and about my employer. I’ve spent 20 years in Fortune 500 IT, primarily oil and gas related services. I’ve touched on applications infrastructure service management PMO. Throughout that time, I spent a lot of time trying to imagine how tech trends are going to impact corporate IT. Global, my current employer, is a publicly traded distributor and marketer of energy. We have about 3800 employees, 13 billion in annual revenue, and we own operator supply about 1500 stations, 21 fuel terminals, and about a million cars a day are fueled primarily in the Northeast.


So, let’s take a look. NFTs. I’m not going to tell you today that NFTs are going to solve all of our problems. They’re not necessarily the latest fad either, but they certainly add some viability to blockchain technology. Let’s talk a little bit about some of those potential use cases. We’ll get down to the basics. Fungible versus non-fungible. NFT is a non-fungible token. If something is fungible, it can be interchanged with an item of the same type, same value.


The classic example is take two $5 bills swap it for one $10. The value is the same—still $10. One Snickers bar for another Snickers bar—exactly the same. NFTs, on the other hand, are unique, and they cannot be replaced with items of the same value or the same type. So, a baseball card. Lots of baseball cards have comparable or even the same value, but the cards are absolutely unique. Driver’s licenses, and classic Ferraris.


NFT technology is based on blockchain. We will touch on some blockchain concepts today, but I’m not necessarily going to speak in depth about the underlying technology. When it comes to NFTs, Etherium is the dominant platform. Flow and Tezos also support NFTs. There’s a standard that, like all technology, that NFTs are built on. Competing standards are always surfacing. It’s a constant improvement. The standards are the key to different platforms, understanding ownership transfers, access, allowing that interoperability. As an all blockchain technology, that’s the smart contracts that govern the token.


Getting the time machine and let’s go way back into 2017. Crypto Kitties. Crypto Kitties is the first NFT game that really launched the fad. The concept of C5ypto Kitties is you could buy, sell, and breed digital cats with all these unique features. Then, as a breeder, you would then put them back into the Crypto Kitty marketplace, and others could buy them and then breed additional cats with those features to buy, sell, trade. There was real money here and real interest. Then, you rewind a couple years and 2019, only a couple years after they launched, there was over a million players and they had over 40 million in transactions, which is tremendous. It’s the real deal. It was also one of the first scale use cases of NFTs. Let’s be honest, who doesn’t want to play with trade and breed cute cats?


You’ll see two examples here. One of our two cats is only worth $3. The other one’s asking prices a million dollars. Now, it’s important to understand that while most of the Crypto Kitty cats were down on the low end of the market. Nobody actually paid a million dollars for crypto kitties, I think, but they did pay close to $200,000 for one. It was real money.


More recently, our NFTs have gone through the roof. Here’s a list of the 10 most expensive NFTs sold. This is good through May 2021. As you look through this, you’ll notice some of the trends, right? We’re talking millions of dollars here. Across art and also all within a matter of weeks. Our dates, the type, and the money is all real here. This also represents kind of the high end to the top line of that fad, in real interest, in [inaudible] money. After that, things started to quiet down and slow down. You’ll hear a lot more recently about the bubble bursting on NFTs and there’s probably some truth to that.


Alright, let’s talk about the Internet of Assets. That’s essentially what NFTs are. We’ve had the Internet of Things, we’ve had transactions, we’ve just had websites, NFTs represent actual assets. The Internet of Assets is a great term I borrowed from Ethereum. As I dug a little bit deeper, I think we both borrowed it from Capgemini, who used it, who coined the term while they were talking about the Internet of Things. NFT internet, right.


Back to the idea that NFTs, managed by blockchain, allow digitally unique items to be tracked to a verifiable owner of public record. They’re bought, sold, traded on open marketplaces. The real power of the NFT apart from the verification of ownership is the concept of the enablement that you get as a creator. Creators can mint NFTs, create them, and sell them directly to consumers or customers. That allows them to control the scarcity. Instead of a digital art work being able to be copied and pasted across the web, you now have a artist or a creator that could limit the verifiable collection to 10, or 20, or 50, or 150 items that would well be copies of each other. Within that collection, each one would be a unique piece of art that could be bought, sold, and traded.


The other real benefit of the NFT concept is because you have verifiable ownership across the chain, creators can retain ownership rights or royalty rights for any subsequent sales. Now, as a creator, I can sell something once and then for the lifetime of that item, I could receive a royalty every time it’s resold, which is really interesting.


NBA Top Shot has been pushing into this market NFTs. They’re the ones that have really embraced the concept. Here’s a LeBron James Top Shot and the concept of the Top Shot is it’s a digital replay of clips and images put together and on essentially a video. This particular one is the most expensive or the highest retailing Top Shot for just over $200,000, but most Top Shots are below $15, so there’s a quite a range. As in everything, there’s a very high and a very low, and for the most part, the market is down on the lower side.


We’ve talked about NFTs. We’ve talked a lot about our music digital memorabilia, and that is because it allows you to sell verify originals. The creators can retain those future royalties, they maintain scarcity, which of course, drives the supply and demand. The other concept of fractional ownership in payments maintained by the blockchain. So, artwork can be bought as an investment vehicle, as it is in the real world, but here, the chain allows multiple anonymous people that maybe do not normally get together to be able to fund, and then take part in future sales of art or any sort of digital memorabilia.


Other big use cases are around licensing, event access, or tracking of some sort of digital twin. If you think about that NFT, if I can verify ownership, and I can track ownership, if I’m selling season tickets—one of the hardest things about season ticket sales is after you turn it over to the consumer, where does that go? Well, NFT would allow you to be able to track that. Even if re-sales occur, recoup some royalties on that sale, licensing bodies could digitize licenses, registrations, ownership. Rather than locked up paper records or locked up records in siloed systems, we could open up some of those and have a lot clearer understanding of what my license history is, or have I maintained a registration, or who actually owns that house or that car.


In these sort of acts, these sort of use cases, lend themselves a lot more to the private or industry consortium chains instead of the public chain. Not everything has to be on the public blockchain. This is where it gets really interesting for industry, the idea that I could or a consortium of my industry peers can build our own platform using one of the blockchain standards out there. Then, we could regulate within our own industry, how we deal with ownership, tracking, sales, royalties, and it can be separate from that public blockchain out there.


There are downsides, as with everything. When you specifically talk about NFT as an investment vehicle, or as a purchase and sale, many say the bubble has burst, you bought a lot of NFTs, you spent a lot of money, you’ll never recoup that value, and that absolutely could be true. The initial interest and money driving some of this may never be recouped, but that simply means that the market has corrected itself. In some of these things like music, art, and digital memorabilia, it’s simply more accessible for industry or or kind of corporate use cases. A financial bubble doesn’t necessarily mean the technology is not worth a second look. I will say it’s complex. I know a lot about technology played with a lot of technology. It has NFTs like anything else has their own unique vocabulary, its own ecosystem, you really have to learn things from the ground up. It is complex because there’s lots of parts and there’s lots of partners with their own version of the truth, all in theory operating together on standards, but still each platform has its unique approach.


Fees. When you start talking about cryptocurrency, there’s a fee for everything. NFTs that sit on that cryptocurrency on the blockchain are no different. There’s fees around minting, there’s fees about on listing in the open markets, purchase and sale fees, currency conversion, every step of the way there there is a fee, and these fees can become sizable.


Sustainability is another potential downside or challenge. I think all of us recognize that our industries are all faced with some sort of sustainability challenge. Blockchain consumes a significant amount of resources. This has driven some early adopters to question whether they should be pursuing NFT as a means of distributing their work.


Platform longevity. We’re so early that not all platforms will last. Microsoft has just announced the shut down of their blockchain as a service. On the flip side, eBay has begun begun listing NFTs and Flow, which is an Etherium competitor, says its transactions will far out see the Ethereum performance. That first move advantage and disadvantage is still very much in play. There are winners clearly today, there are platforms of choice today, six months a year to two years from now, it’s really hard to say whether those platforms will be be viable.


Great resources out there in the web. Forbes CNBC has some great articles on blockchain and NFTs specifically. Ethereum 101, Blockchains are two great sights on this. Go to NBA Top Shots, go to Crypto Kitties, poke around. Go to Open CIO, a great marketplace, and just see what it’s all about.


As always, if you have any questions, don’t hesitate to reach out to me. I’d love to have a conversation. I thank our friends at the Quartz Network for giving me an opportunity to have this conversation. I hope you enjoyed it. Thank you.


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