Every year, since their launching back in 2009, cryptocurrencies (a breed of digital money) and blockchain (a peer-to-peer technology on which crypto currencies are built) are capturing more and more ground in the public mind and media.
The focus was until now mostly made on Bitcoin’s volatile trading history, as well as the numerous applications that blockchain can enable, offering a certain level of decentralization, transparency and security, despite some unresolved structural setbacks, notwithstanding the energy consumption issue.
But 2021 seems to be the year of a new breed of crypto asset breakthrough: non-fungible tokens (NFTs) whose market has been surging exponentially worldwide ($2.5 billion in sales in the second quarter of 2021, up from just $13.7 million a year earlier) according to Reuters. Some experts even think that NFTs could also become the jewelers’ best friends in the near future, even in the MENA region.
A digital commodity
What in the world are NFTs? Non-fungible describes something that can’t be replaced with something else – similar goods or assets. “To explain it in a simple way, it is a unique digital good with similarities to cryptocurrencies. It takes the form of a computer file that you can buy or sell with cryptocurrencies or real money, depending on the payment methods accepted by the provider or the NFT owner. The file is usually stored in a dedicated digital wallet programmed in a blockchain infrastructure,” explains Joe Abi Raad, managing partner at Maze, a digital marketing agency mostly active in Lebanon and the Gulf Corporation Council (GCC). “NFTs cannot be exchanged for another, except if their owners agree to a bartering arrangement,” adds finance expert Rudy Fares, who actually works as a consultant with CryptoTicker, a German crypto company. “It is therefore a concept that could prove useful to all creative industries, from digital artists to fashion designers and jewelry makers, just to enumerate a few,” he adds. “So far, most NFTs are part of the Etherium blockchain. However, other blockchains started implementing their own version, like Tron,” adds Abi Raad.
For many, NFTs can be considered as the future of art collection as well as a reliable way to authenticate, protect and even remunerate digital art. In theory, if a jewelry designer records the digital blueprint of an original crafted necklace as an NFT, the information stored in the blockchain will allow him to protect his intellectual property rights and even attach a commission to the file that will be up for sale and resale.
Even if the file is duplicated, the data linking the original to its owner will remain recorded on the blockchain. According to Vogue Business in June, jewelry executive Asprey “believes NFTs, jewelry and heirloom collectibles are a perfect match because NFTs bolster the authenticity of the products, documenting their provenance and guaranteeing their authenticity.” Asprey considered that NFTs were “perfect” for its business as they “capture everything about the product, permanently, when the information is part of a blockchain.”
The “NFT mania,” as it is often referred to in the media in recent months, has even made its way to the MENA region where most countries are usually “lagging behind” when it comes to tech related trends, as underlined by Fares.
“It is something new, still at proof-of-concept stage. The infrastructure is still limited and the code is constantly changing, which slows down the speed at which it could spread,” adds Fares. As it is often the case, things seem a bit more promising in the GCC, where each country is developing its crypto regulations at its own pace. The United Arab Emirates look eager to move up another gear in terms of legal infrastructure and market trend incentives, giving room to NFTs in the process.
In April, Kristel Bechara became the first Arab female from the UAE and the Middle East to launch an NFT tokenized art series, and successfully sold two pieces in less than a day.
These kinds of promotional events might however not be enough to convince professionals who view NFTs as being too intangible, especially for the jewelry industry.
A great deal of them are still unfamiliar with the concept or don’t yet see the potential behind it. Also, according to Fares, developing the necessary tech environment to widen access and trading to NFTs in the region is a slow but sure process that could take several years.