How investable are digital tokens?
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The rapid development of the Internet has led to some of the most exciting developments of the digital age, paving the way for the emergence of new forms of assets known as non-fungible tokens (NFTs). NFTs have become increasingly popular in recent times, showing unprecedented levels of profitability, reinventing assets and bringing together users from different parts of the world to form virtual communities. In a short space of time, NFTs have transformed from being a work of art that has great value as a collector’s item to a separate asset class in its own right. This is evident from their inclusion in the finance, healthcare, entertainment, sports, gaming, fashion, global supply chain and insurance sectors.
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Globally, the market for NFTs is valued at $40 billion this year. In India, the NFT industry is valued at an estimated $3.3 billion with a cumulative average growth rate of 61.6 percent, and is expected to reach an estimated $27 billion by 2028. Currently, 11 NFT companies are headquartered in India, accounting for 5 .02 percent of total NFT companies in the world. In 2021 alone, India added 71 NFT startups and has 86 active NFT startups today, reflecting a positive response from the entrepreneurial market. NFTs have witnessed widespread adoption by artists, creators, entertainment and sports celebrities, brands and more due to a diverse range of use cases. NFTs have been leveraged by creators and brands to increase awareness and engagement among consumers and enthusiasts, generate new revenue streams, provide access to exclusive events such as tickets, and even be used as digital contracts to own property in the metaverse, and shows a diverse range of applications.
Although in its infancy, the NFT industry has consistently shown great potential for investment. A research paper by Mieszko Mazur highlights that bluechip NFT projects can earn up to 130 percent on their first listing day and provide investment multiples of up to 40 times over the long term, significantly better than cryptos like bitcoin and similar to IPOs in returns. Thus, NFTs present a lucrative investment option for investors in India with the potential to provide favorable returns on investment.
A robust NFT ecosystem is slowly emerging on the horizon as a number of celebrities have launched exclusive NFT collectibles in India. These include the likes of Amitabh Bachchan, Salman Khan, Rajnikanth and famous cricket stars like Sunil Gavaskar, Rishabh Pant, Yuvraj Singh, among others.
The biggest application for NFTs so far has been in the gaming industry. With the rise of blockchain-based gaming and the rise of Web 3.0, users have been introduced to a variety of new and improved ways to play and build communities. NFTs allow users to own in-game assets such as avatars, weapons, and more. NFT games also allow players to earn through the play-to-earn model, which provides another opportunity for passive income. NFT games are predicted to take 10-20 percent of the total market revenue in India in the coming years, with an estimated 500 million users added to the base. However, blockchain gaming is in its early stages, but the potential for growth in the near future is an exciting prospect for NFT enthusiasts worldwide. With the rise of the metaverse and the ongoing craze for NFTs in the world of cricket, overall the future of NFTs looks bright.
