NFTs (non-fungible tokens) are having a moment.
These tokens typically represent some sort of collectible — often a digital collectible. But NFTs can also be used to represent wine, sneakers and other physical goods.
Like bitcoin, NFTs are based on blockchain technology. Each NFT is unique (that’s the non-fungible part). And each NFT is verifiable.
Take an NFT of a baseball card, for example. Say only three NFTs/baseball cards for a particular player have been issued. NFTs allow people to instantly verify the authenticity of the card, the fact that it’s only one of three in existence and the correct ownership. NFTs can also be sold or transferred quickly and easily.
As a result, NFTs are catching on. There was more than $17.6 billion in volume traded last year, according to a Nonfungible.com report. And investors made more than $5 billion in profits when reselling NFTs. Those are significant jumps from 2019 when the trading volume was $24.5 million and investors posted profits of just $2.9 million.
Yet as incredible as those gains are, NFTs haven’t come anywhere close to going mainstream.
OpenSea – the largest NFT marketplace – has more than 600,000 members. Instagram has more than 2 billion monthly active users. TikTiok has more than 1 billion monthly active users. Facebook has 2.9 billion monthly active users. OpenSea is tiny in comparison.
Normally, it would take years for the entire NFT ecosystem to reach the billions of monthly active users today’s social media giants have. It took Facebook 18 years to reach almost 3 billion monthly active users. It took Instagram a dozen years to crack 2 billion monthly active users. And it took TikTok six years to reach 1 billion monthly active users.
But NFTs might have a cheat code. Last month, Meta CEO Mark Zuckerberg (Meta owns both Facebook and Instagram) told the audience at South by Southwest that NFTs will be coming to Instagram “in the near term.” Zuckerberg suggested Instagram users would be able to both display and “mint” NFTs on Instagram.
Zuckerberg’s NFT plans prompted Deutsche Bank to sit up and take notice. In a research report, Deutsche Bank suggested that Instagram could make it easier for people to buy and sell NFTs. And that will help legitimize NFTs and drive growth in the sector. Deutsche Bank even estimated that NFTs could drive $8 billion in profit for Instagram.
I understand where Deutsche Bank is coming from. Venmo, PayPal, Robinhood, Square and others have made it easy to buy crypto. And that’s helped drive usage and adoption. The assumption is that Instagram will be able to do the same for NFTs.
But I’m not necessarily buying it. Venmo, Square, Robinhood and other similar companies are active platforms. People already used them to send money, buy things or invest. So giving people the option to buy or invest in crypto fit those platforms nicely. Instagram is more of a passive platform. People scroll through photos, reels and stories. Sure, they respond to influencers and advertisers. But that’s a far cry from buying or investing in NFTs.
The more likely evolution is that Instagram becomes a viable platform for photographers to sell pictures that people really like. They can “mint” NFTs of popular photos and sell them. That will drive some new sales. But to reach $8 billion in profits, Instagram users will need to buy, sell and trade with some velocity and volume. I have a hard time seeing that. That’s not what people turn to Instagram for. Asking people to use Instagram as an NFT trading platform or a giant NFT store requires a significant behavioral shift. And nothing Zuckerberg and Meta has done recently suggests they’re up to the task.
But even if Meta fails to turn NFTs into a big money-making enterprise, that’s okay. Instagram embracing NFTs is still a big deal. It will normalize NFTs for the millions of people who have never seen them before. That normalization will spur growth. New NFT customers will enter the market. And it will likely speed up the adoption process.
Those are all good things for the NFT space. And they make NFTs an intriguing proposition moving forward.