Just two weeks ago, while most Malaysians were enraptured by the Game of Thrones-esque political drama that culminated in Muhyiddin Yassin’s resignation as prime minister, something else was capturing the hearts and minds of Malaysia’s crypto community.
A digital billboard right in front of Lot 10, Kuala Lumpur, showed the image of a cute cartoon penguin. While it might have seemed to be an innocuous, pointless advertisement to most, it certainly was not the case to those in the crypto, and specifically the NFT, community.
But this wasn’t just any cartoon penguin, this was a Pudgy Penguin, an avatar from a NFT project that has taken the NFT world by storm due to its incredible popularity.
What are NFTs you may ask? NFT stands for non-fungible token and is used to describe a digital asset that is stored on a blockchain. What makes a NFT unique is its verifiable scarcity. These digital assets can be many things, with the most popular now being images, animations, in-game items, virtual land and music.
To give a simple analogy, those who collect NFTs are the digital world’s equivalent of those who collect artworks or stamps in the physical world.
Let’s say you own a NFT of a Pudgy Penguin. Your ownership of this NFT can be verified and hence it has value if others think it does. So just how valuable is it, you ask? The average Pudgy Penguin NFT is currently worth around RM50,000. Yes, that’s right, a digital picture of a cute cartoon penguin is worth as much as a Perodua MyVi.
And the kicker is, this isn’t even the most popular NFT set around, far from it in fact. The most popular ones are Cryptopunks and the cheapest NFT from this set sells for slightly under a whopping RM2 million.
You might say, what’s stopping someone from taking a screenshot of this NFT and depriving the NFT of its value? Yes, someone can easily take a screenshot of it but since they don’t have ownership rights over this image, their screenshot is worthless.
A good conceptual framework for this is by thinking of it in terms of traditional art. The Mona Lisa by Da Vinci is incredibly valuable and if it were to be on sale, it would fetch an astronomical price. However, a picture taken of the Mona Lisa is pretty much worthless. Similarly, a NFT can be valuable (if people perceive it to be) but the picture or a screenshot of a NFT is worthless.
Some NFTs today carry mind-boggling price tags. Many are already worth hundreds of thousands to millions of ringgit and this gold rush has brought in a wave of new people into the wild, nascent space.
This is even more impressive considering the fact that there are somewhere between 100,000 to 200,000 people currently involved in the NFT space, which comes up to a tiny 0.03% of the roughly 300 million people who own cryptocurrencies and a minuscule 0.001% of the world’s population. In other words, NFTs are a niche within a niche.
However, there’s nothing minuscule about the gargantuan valuations some of these NFTs carry. What we’re seeing is the birth of a whole new asset class. Even with such small numbers of people being involved in the space, OpenSea – the premier NFT marketplace – surpassed a billion US dollars in volume (RM4.15 billion) in August, even besting e-commerce darling Etsy. They are doing so well that it wouldn’t be surprising to see OpenSea overtake online retail giant eBay’s volume in the near future.
For non-crypto natives, buying and trading in NFTs may seem like an expensive but ultimately frivolous pursuit. However, there is a lot more to it than that. Thanks to NFTs, many artists are now finding a global audience that they can engage and share their art with.
Many others are finding a community they can be a proud part of. For example, there are only 8,888 Pudgy Penguin NFTs, each with a unique difference. This makes them both scarce and provides its owners a sense of belonging and identity thanks to this NFT community. And those who want to join this digital club would now have to cough up large sums – something many people can’t afford.
This makes them exclusive and desirable, adding to their allure. Those who are part of this group often use their NFTs as their profile pictures on Twitter and other social media platforms, which only enhances the NFT’s exposure and popularity.
And perhaps more importantly, it is a signal of the coming age. Just as the internet democratised and bathed us in abundance – an abundance of information, an abundance of entertainment and an abundance of communication – blockchain technology, which is what NFTs utilise, has introduced digitally verifiable scarcity and as a result has given birth to value in the digital realm.
Together, the internet and blockchain technology offer enticing hints into the metaverse of the future. This coming metaverse still has some technological hurdles to overcome, chief among them being the creation of a truly immersive virtual reality experience. But it is nevertheless coming, maybe in five years, or maybe in 10, but the seeds are being planted right now.
And those who will reap its bountiful rewards will be those who correctly identify the coming digital tsunami and ride it successfully.
The image of a digital Pudgy Penguin on a billboard in front of Lot 10 in Kuala Lumpur recently.
The writer can be contacted at [email protected].
The views expressed are those of the writer and do not necessarily reflect those of FMT.