And with good reason. The NFT market amassed over $23 billion in transactions in 2021, according to crypto and decentralized application research firm Dapp-
Radar, making NFTs one of the most impressive expansions in recent investment history. Athletes, celebrities and influencers have been at the forefront, eager for the opportunity to monetize their brands.
“NFTs came onto the scene just under 10 years ago now,” said Daniel Taylor, intellectual property partner at downtown law firm Musick Peeler. “But they didn’t really hit the big time until 2019, increasing in 2020. Over the past year, however, they’ve really entered the mainstream lexicon. Now your grandmother is asking about them.
NFTs are essentially digital acts sold on the blockchain, but the underlying product itself can be just about anything digitizable – a song, a photo of a bridge, or a crude drawing of a monkey. That could help explain why investors have been slow to figure them out, Taylor said.
“Take a work of art – you might think, ‘Is it [an NFT] just copyright? You can find a lot of stories where people involved in these NFTs are basically asking, “Hey, what are we actually buying?” Taylor said. “In this whim lies interesting territory. … What you’re really buying is some code, mostly.
NFTs trade largely on their scarcity and perceived value, Taylor said, likening them to a physical ticket for admission to a ballgame concert that ended up being historic. This dynamic has made it difficult to project the value of an NFT at the time of purchase.
Many investment groups that missed the Bitcoin race believe NFTs represent a second chance to enter the ground floor of a new class of digital assets using blockchain technology, Taylor said.
“It’s a ripe area for the entertainment industry,” he said. “For example, in the United States, we are extremely reluctant to have perpetual asset royalties for creators. In other countries, you can reserve your copyrights and earn income each time the copyrights are resold. You can’t do that in the United States. Now, thanks to a smart contract for an NFT, you can.
UTA Ventures, the venture capital arm of Beverly Hills-based United Talent Agency, was one of several investment firms in December to fund the first $7 million seed round for Danvas, a startup from Los Angeles that promises to leverage NFTs” in the real world through museum-quality, specialized exposure. And Culver City-based Arca, an asset management firm focused on crypto and blockchain technology, has launched a
$30 million fund dedicated to NFTs in November.
In the first release of its new Digital Assets Research Report in October, Bank of America predicted digital assets to be worth over $2 trillion in market value with over 200 million users, with the “potential to transform every industry by improving efficiency and reducing friction.” through transactions. According to Alkesh Shah, head of the bank’s global cryptocurrency and digital asset strategy, hundreds of companies are “forming within the new ecosystem, creating a new asset class.”
“Bitcoin is important, but the digital asset ecosystem is so much more,” Shah said in the report. “Our research aims to explore the implications across sectors including finance, technology, supply chains, social media and gaming.”
Music-law attorney Dina LaPolt of LaPolt Law in West Hollywood says many of her songwriter clients have focused on NFTs for years, including electronic music producer Deadmau5, who switched to NFTs there. about two years ago after nearly a decade of physical creation. collectibles for concert fans. The performer has since raked in millions from the sale of NFT alone.
“I didn’t know then that this is what we would be doing for years to come,” LaPolt said. “All the customers do them.”‘
But national tour headliners aren’t the only ones making money, LaPolt said. As the industry has matured and the lines defining what gives NFT value have become clearer, NFTs are becoming an important revenue generator for creators across the music industry.
Taylor predicted that NFTs would continue to be a band-aid solution to the country’s slow-to-update rule changes. Litigation could cause temporary disruption, he said, but rulings clarifying some of the uncertainty in the industry could be a source of opportunity for investors.
“These questions that NFTs naturally raise will continue to be at the forefront,” Taylor said. “But now that it’s here, it’s growing and it won’t stop anytime soon.”
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