waffledave
waffledave, from hf
Not an easy question to answer, because to be honest, NFTs in general are so widespread in terms of usage, utility and potential profitability.
Are they gambling? I would say, they are as much gambling as buying stock in any risky/upstart business. The risk is very, very high. There is zero oversight, zero accountability, and you are basically putting your trust in a team who's identity is usually not known. They could disappear the next day, making the value of your investment zero.
But I think the big misconception about NFTs is that they're just trading images. There is a lot of emphasis put on the "art" aspect, which to me has little to no value.
Yes, sometimes it is just bragging rights. If you look at the biggest value NFTs - CryptoPunks (one just sold for $20,000,000 a few days ago) or Bored Ape Yacht Club (BAYC) - these are essentially bragging rights based NFTs. It's not about owning the art, it's about being part of the club.
But there are only a handful of projects that can realistically create this kind of value. With BAYC, it's heavily centered around the brand. You are buying into, and investing in a brand. But the space is super saturated, especially across different blockchain networks. So there is not much space for this level of uber-elite exclusivity.
If you want to make money with NFTs, it ends up being more about utility. What value does the NFT provide for me? I have not made any significant money with art-based or low-utlity based projects. Everything I have made bank on has been passive income producing, or tied to some kind of asset. Almost always tied to DeFi in some way.
For example:
- NFT that grants me a "share" of a company like genesysgo. They sell the NFTs to raise capital for the venture, and owning one gives you a piece, much like owning a share of a business. What's cool is this is all programmed into the smart contracts that drive the NFT technology. My NFT receives automatic benefits that are hard-coded into the smart contract. GenesysGo raised $52,000,000 in their IDO for their $SHDW coin. Holders of their NFT get automatic disbursements of the coin throughout the year, which is programmed into the contract. Holders also get voting rights on the direction of the business, similar to a share.
- Gaming NFTs. Gamified finance is huge in crypto, and NFTs are fantastic for this. I own several projects where the NFT I own (which is unique) is my in-game character. In this sense, yes it is a skin, but the smart contracts behind it allow me to receive profit share from the game, and additional benefits like staking for their token.
- This is a wild example, but I own an NFT that gives me daily payouts (again, automatically built into the contract) from an online crypto casino. There is a percentage of the daily transaction fees collected from the casino operations that I get in my wallet every day.
- Virtual real estate. This might seem absolutely nuts, and admittedly we are far off from real life applications of this, but it's the kind of thing where being a first mover can be insanely profitable. Yes, virtual real estate is a thing. Owning a plot of land, or a building, in the metaverse. It has basically zero useful applications for the time being, but they are quickly being developed, and there is INSANE money behind it. Crazy levels of VC funding. Because, as VR becomes more and more of a thing, the infrastructure needed to build these immersive, connected worlds - in a decentralized way - needs to be built. There are already large corporations buying virtual real estate because they can sell their products through these worlds. It's very hard to grasp conceptually but ultimately it's because we are shifting from web2 to web3, which is a very different approach to how we do things on the internet. It will take some getting used to.
But honestly, the coolest thing for me when it comes to NFTs is that this scene is literally the frontier of the future of the web. As a dev this is such a cool space to be part of. The applications of a decentralized way to verify ownership of an asset are limitless. Imagine being able to sit in your house, go on your phone and buy/sell real estate. You can do this with NFTs. It's already being done - there is an NFT project coming out soon where the NFT itself gives you the leasing rights to a plot of land in the Bahamas. Escrow companies are being set up to drive this sort of technology (I have invested in these kinds of businesses as well through their capital-raising NFTs). The technology behind the smart contracts also allows for the asset to be fractionalized, so you can own 1/1000th of a real estate asset by owning an NFT, and be able to easily buy/sell at a moment's notice. You retain a voting right into the direction and decisions made regarding the asset via a decentralized autonomous organization - all automated through the smart contracts.
All the technology, innovation and infrastructure building needed to create this sort of thing is happening in the NFT space. There is huge value in the technology that runs NFTs, way more-so than the actual individual NFTs themselves. Being in the space and learning, or building, is invaluable. It's a fast-moving first-mover space where anyone can strike gold.
All this being said, there are scams every day. It's the riskiest thing I have ever been a part of. No recourse if you are scammed. You need to be vigilant. Justice is primarily vigilante based.
I have a great story about this... There is an individual, who's identity is unknown, who has been a notorious scammer in the NFT space. He/she is a master marketer and a wizard at building hype. The MO is basically to great huge hype for a project, get everyone to go nuts over it by making promises for future applications, brand building and utility... Then sell out (for a cool $2-$3 million), collect another million in royalties on after market sales. After a few days? They delete all social medias, take the money and run. Project is now worthless since there is no team behind it anymore.
They have been doing this repeatedly, and recently after their biggest heist yet, admitted they were behind several other high-profile rug-pulls, and laughed at everyone calling them suckers. Well... in crypto, everything is traceable. It's hard to hide from the transparency. This individual took the money from their latest scam, and bough several high profile NFTs, maybe $2 million USD worth. They slipped up in their attempt to hide where the money came from (contrary to what people think, it is hard to hide or launder money in the crypto space when faced with a forensic crypto specialist). The project owners of the high-profile NFTs he bought all got together and agreed to change the metadata on his purchases so that they all had 98% royalties built in. This means if he ever tried to re-sell them, he would get 0 (there is a 2% trading fee for most platforms). In other words, his $2 million he spent is now gone. Vigilante justice.
