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This Is Not A Toy

The disruptive technologies that ultimately change the world are often dismissed as toys in their early days. 

They start out as novelties used by a small but enthusiastic army of geeks in an underserved market. They gradually propagate among slightly larger, savvy groups of tastemakers. Then one day they’re suddenly ubiquitous. A new era dawns. 

It happened with the internet, and the telephone before that. And many in-the-know believe we’re on the cusp of a similar dawning for NFTs.

NFTs are non-fungible tokens; digital certificates of ownership that are recorded on a blockchain. This recording renders them immutable and public. They’re basically the internet’s version of a property deed. 

Ignore, for a moment, what you likely know of NFTs from the popular media — eye-popping valuations for digital artwork of questionable merit.

We’ll come back to that later. 

For now, let’s consider the more practical applications of NFTs and the very real implications they have for the near future of banking.

Some real estate transactions are currently being conducted 100% online by tokenizing the real-world property assets as NFTs. A modern prophet of fintech, Rex Salisbury, has noted that San Francisco-based fintech Fabrica uses NFTs to make the process of buying and selling physical parcels of land significantly faster and cheaper. NFTs enable the company to eliminate the paper-shuffling in these deals that’s usually done by third parties.

The market for these transactions is small today. It’s easy to dismiss, much like the early models of telephones which could only transmit calls across a couple of miles.

But conduct a quick thought experiment and it’s easy to see this model being successful with other classes of real estate. If commercial buildings and mortgages could be bought and sold completely online with no intermediaries then all the sudden that’s a much more significant disruption. Like the global telephone calls that opened up the possibility of doing business overseas, it’s a much more difficult opportunity to dismiss.

Cut back to those digital “artworks” consisting of crypto- punks and kitties. 

The mania around these images may look like a fad; the latest iteration of Dutch tulip bulbs or dotcom websites. But these toys are helping a savvy group of tastemakers refine the tools they need to build new markets. These markets can run without intermediaries. And that’s why banks need to take note.

Read more about how the Alloy Alchemist Fund is helping members gain an inside track on what’s next for NFTs below.

*Amber Buker, Director of Insights