The value of NFTs

So, what are NFTs? And why are they so popular?

A non-fungible token is an entry on a kind of digital ledger called a blockchain. The entry is linked to a digital file, such as a profile picture, piece of music, collection of photos, GIF, copyright, game character, or even a section of text. The NFT also contains a record of the people who created, bought, and linked the file to the blockchain. 

“NFTs are value-bearing instruments. Just as CDs have been used to store and play back music, and USB technology is used to store and retrieve data, present-day fungible tokens [FTs] and NFTs represent some kind of value,” says Nicole T.I. Chan, a former chairperson of the National Communications Commission and the honorary chairperson of the Taiwan Association for Blockchain Ecosystem Innovation. NFTs are non-fungible, meaning that their value is unique, at least in terms of their sentimental value to their buyers. In effect, each NFT is like a unique work of art, its value determined by how interested people are in buying it. 

ARK TPE is a blockchain innovation incubator that serves as base for many NFT innovation teams, showcasing the dynamism of Taiwan’s booming digital sector. 

An unstoppable trend

NFTs are hot right now, and many celebrities have been turning their social media profile pictures into “Bored Ape Yacht Club” NFTs. Their name notwithstanding, there’s nothing boring about these cartoony ape images on the Ethereum blockchain. By the time superstar Jay Chou announced on Instagram that his Bored Ape had been stolen, it had already been sold via an NFT trading platform for the astronomical price of 155 Ether (roughly NT$14 million at the time). Celebrity Bored Ape collectors even include the so-called Queen of Pop, Madonna, who reportedly shelled out 180 Ether (roughly US$570,000 at the time) to buy Bored Ape No. 4988 before announcing on Instagram that she had “finally entered the MetaVerse.”

The high prices for NFTs, which often trade for more than US$10,000, have roiled large tech companies. As Victor Tsan, cofounder and president of the Digital Transformation Institute and an adjunct professor at National Taiwan University’s Graduate Institute of Business Administration, explains: “The US’ Big Four tech giants [Google, Apple, Facebook and Amazon] have recently been having trouble finding staff, and have had to recruit from the cryptocurrency community.”

Wu Che-yu is a well known NFT generative artist who has established himself in the international digital art world. His work uses autonomous systems to give form to artistic concepts and is popular with collectors. 

Wu usually publishes his works on the blockchain. For his first real-world exhibition, he converted his NFT art from 2020–2022 into an immersive interactive experience. 

Next-gen economy for creators

“Viewed in the context of the digital transformation, NFTs represent an important turning point for innovative applications, and an inevitable trend.” Nicole Chan says that NFTs are based on developments in blockchain technology, crypto currencies and decentralized autonomous organizations (DAO), and argues that the joining of these technologies has given rise to a new economic model. 

After acquiring Bored Ape No. 1798 in May 2021, its anonymous buyer christened the toothy ape in a cap and waistcoat “Jenkins the Valet.” The buyer went on to give Jenkins a backstory that described his mother crying tears of joy and celebrating with the best bananas when her son was hired as a parking valet at the Bored Ape Yacht Club. The story goes on to say that Jenkins’ unique position brings him into contact with the world’s most powerful and influential apes, giving him first-hand knowledge of their lives and making him the guardian of their secrets. 

The story became popular, prompting a number of Bored Ape owners to form a virtual club that they called the Writer’s Room. Members join by purchasing Writer’s Room NFTs, which entitle them to vote on the creative direction of stories in a variety of mediums and to license their avatars to appear in different works. Jenkins has gone on to acquire representation from Creative Artists Agency, a top American talent agency, and publish a book written in cooperation with a New York Times best-selling author. He is even reported to be preparing for a Hollywood movie.  

Believers chased after these NFTs of martial god of wealth Zhao Gongming riding a black tiger, convinced that buying the NFTs would protect them against misfortune, just like physical images. (courtesy of Beigang Wude Temple)

NFTs and charity

NFTs are also being used for social welfare and to share compassion. For example, Wu Che-yu and five Taiwanese generative artists have initiated Project Percentage at the Formosa Art Bank DAO to jointly create and mint five series of NFTs. It will then work with non-profit organizations to issue 10,000 NFT shares. Donors will receive one generative-art NFT for each donation they make, with the processing fees going to non-profit groups to support their operations. 

Other NFT applications have emerged. When the Stan Shih-founded Cultural Tech Alliance, Taiwan, hosted a 2022 call for proposals, some of the corporate proposals involved NFTs. For example, the Far Eastern Group proposed building a virtual city’super market accessible only to holders of a specific NFT. And the Taishin Bank Foundation for Arts and Culture proposed issuing NFTs linked to Taiwan’s small farmers and farmers’ associations that would support the work of outstanding artists. 

The world’s first Taiwanese-style fried chicken NFT showcased Taiwanese street food, and helped keep taco NFTs from hogging all of the limelight. (courtesy of Shiyun Fried Chicken Shop) 

A cautiously optimistic view

NFTs are like financial instruments in that they have investors and risks. Given that, how should we think about NFT applications? Jaclyn Tsai, the current chairwoman of the Taiwan FinTech Association and a former minister without portfolio, says that nearly all of the NFTs that are popular in the Taiwan market were issued overseas. “The first challenge we have to face [in managing NFTs] is that there are no national borders in the virtual world.”

Tsai says that while managing NFTs involves dealing with issues related to intellectual property rights, ownership, fraud and money laundering, these are all covered by current law.

But she also warns that people need to know a bit about NFTs before investing in them. Those without a certain level of technical understanding could panic when prices fluctuate, and then take inappropriate action. NFT investors should also have a clear understanding of the rights and obligations set out in the smart contract, as well as of the terms of use of the trading platform, to guard against any harm to their interests. 

Victor Tsan believes that people should prioritize understanding NFTs and evaluating their risks before making a purchase. “Companies are likely to view NFTs as a means of opening up new markets and engaging with new customers, whereas individuals need to decide whether they are investors buying them for gains or fans buying simply for the sake of having them. Once they are clear on that question, they can then think about how they will use NFTs and what steps they should take.” 

While people with a positive view of NFTs see them as business opportunities and innovations, people with a negative view see them as risky bets that could cost you everything you have. Nicole Chan recommends cautious optimism: “Technology has so many different applications. You have to work out how to make the good ones stand out, and how to create the kind of legal environment that facilitates that.” The metaverse is coming to NFT enthusiasts and detractors alike, and it is today’s young people who will build and shape the online ecosystem of the future, whether they seek to create even better applications for it, or simply dive in without a second thought.

NFTs have sparked a revolution in digital product transactions. The fact that NFTs of works of art are valuable both as collectibles and as financial assets is changing the art world’s ecosystem.