Visitors look at an immersive art installation titled "Machine Hallucinations Space: Metaverse" by Refik Anadol at the Digital Art Fair Asia in Hong Kong, October 3, 2021.
Lam Yik | Bloomberg | Getty Images
MIAMI BEACH, Florida – Even if NFTs are a flash in the pan, cryptocurrency investors are betting that the underlying blockchain technology will persist.
Crypto enthusiasts and venture capitalists flocked to Miami Beach, Florida this week for one of the world's premier arts events. For the first time, Art Basel Miami presented several NFT exhibitions. But the city also hosted more than 200 other events that focused more on the technology behind these digital collectibles.
Musicians, artists and celebrities are calling for the introduction of NFTs, or non-fungible tokens, which are unique digital assets with verified ownership rights stored on a blockchain. It's a way of gaining ownership of content that historically could easily be replicated online.
The new asset class is making around $ 2 billion a month, up from $ 400 million in January, according to JPMorgan's latest estimates. Analysis by DappRadar shows that NFT volume rose 38,000% year over year to $ 10.7 billion in the third quarter.
"The hype is definitely big," says Mike Shinoda, musician and co-founder of Linkin Park, who released a new NFT mixtape this week. “Most people believe that there is some kind of bubble. But most of us who are in space think that, whether it's going up or down, this is something new, this is about in some version of it stay yourself. "
Gateway to crypto
Tristan Yver, Head of Strategy at FTX U.S. based in Miami, said the hype is benefiting every corner of the crypto industry, even if parts are overrated. According to Yver, digital art can be a less intimidating way to introduce people to blockchain technology.
"We all have some basic understanding of art. We don't all have a basic understanding of cryptocurrencies and blockchain – this is the next step towards mass adoption," Yver told CNBC. "NFTs are the first time a lot of people have connected to cryptocurrency and blockchain."
Blockchain technology used to be synonymous with Bitcoin. But a host of other blockchains have popped up in the past few years that now support things like financial applications and video games.
Also known as distributed ledgers, the main reason they are built on top of a blockchain is because they are "decentralized". There is no central authority that controls these networks and there is no single point of failure. Proponents say it is more transparent. Some tech investors see it as the next wave of the internet and call it "Web 3.0".
Adam Judd, head of crypto at LionTree, said some specific NFT projects feel "a little bubbly". However, he still sees room for growth in the category and new use cases around identity, community incentives, start-up funding, entertainment, and fashion. He cited the cultural phenomena of the Bored Ape Yacht Club and Beeple's record $ 69 million NFT sale that sparked "immense interest" in Web 3.0.
"One of the biggest opportunities right now is easy human interfaces and experiences that make NFTs accessible, valuable, and economical," said Judd. "Once the normal person is just as comfortable buying an NFT as they are buying a coffee, the rest of Web3 will benefit."
Packy McCormick, founder of Not Boring Capital, was also in Miami this week and said NFT events are the key catalyst for bringing like-minded people into a room. But the conversations were moving more towards decentralized autonomous organizations or DAOs, a new type of governance system, and other new use cases for blockchains.
"Once people get into NFTs, they want to know everything else that's going on on the blockchain – it's impossible not to go down the rabbit hole," McCormick said. "There will be a lot of people who speculate. But the important projects will last and over time the quality will prevail."
– CNBC's Ritika Shah contributed to this report.
Watch: Art Basel 2021 starts as NFT, crypto enthusiasts come to Miami