Non-fungible tokens (NFTs) are increasingly drawing the interest of South African companies, with exciting developments unfolding locally, as the blockchain-based cryptographic craze booms across the globe.
According to industry insiders, while the trend is still at an early stage locally, South African firms are identifying huge potential in NFTs, which they say hold infinite benefits for organisations across sectors and for investors.
An NFT is a secure digital file which validates ownership,and is stored on the blockchain system, where each NFT can represent a unique digital item, and thus is not interchangeable.
NFTs can represent digital files such as art, audio, videos, items in video games and other forms of assets in the physical world.While the item itself can be copied, the NFT that includes certification of ownership cannot be duplicated.
Non-fungible tokens have become hugely popular across the globe in recent months, with expensive items such as real estate, digital artwork and music being "tokenised" and sold online at exorbitant prices, leading to a huge jump in shares of companies linked to NFTs.
Jack Dorsey, co-founder and CEO of Twitter, made headlines last month when he sold his first ever tweet as an NFT for $2.9 million, via an online platform called Valuebles.
Tesla founder Elon Musk also jumped on the bandwagon, selling a new electronic music track, which he had produced as an NFT.
This week, SA’s first NFT of a media article, “Gadget1998”, was introduced by online publication Gadget and is up for auction, with the proceeds to go to charity. Gadget1998 is a digital image of Africa’s oldest surviving online game review, which appeared in May 1998.
The Jpeg-file art piece, which depicts a masked, superhero-styled woman titled Timekeeper 151, was created by Cape Town artist Norman O’Flynn.
While the NFT trend initially gained popularity in the local art industry, analysts believe it will trickle into other industries, as more organisations identify valuable use cases for digital creations.
Marius Reitz, GM of Luno Africa, says while NFTs have been around since 2015, the recent excitement locally has coincided with the popularity of crypto-currencies like Bitcoin.
“Google Trends shows SA is in the top 20 for searches for NFTs globally already, so we’re already seeing the firm signs of this interest.
“SA has always had a thriving art scene and we’ve seen first-hand the excitement and curiosity around crypto in the country, so it definitely makes sense that the two should meet. The potential is huge.”
As South African firms become more innovative and identify growth opportunities in the local NFT space, Reitz believes we will start seeing adoption of NFTs in a wider range of industries, including virtual real estate, fashion (allowing consumers to verify ownership and authenticate their items), licensing and certifications (for universities or employers verifying records or certificates), and in wildlife conservation where NFTs can be used to represent in-game assets typically represented by a type of wild animal.
“It’s important for government and organisations involved in the crypto space to collaborate with one another to identify ways NFTs could benefit local communities and the environment, and then to implement those solutions in a way South Africans can easily engage with.
“We know South Africans are incredibly receptive when it comes to crypto-currency and its associated technologies, so emphasis would need to be placed on educating policy-makers and incentivising collaboration in a way that benefits all South Africans,” notes Reitz.
Arthur Goldstuck, founder of World Wide Worx and editor-in-chief of the Gadget publication, believes SA’s first NFT of a media article provides the clearest indication that any content can be turned into an NFT.
“NFTs provide a fundamental advantage over other forms of ownership: while an NFT item can be copied, ownership of that item can't be copied, as it is certified and validated on the blockchain system.
“It’s very similar to a deed on a property, in that it’s a single source of truth about who owns what, and at which times it changed ownership. In fact, there are already examples of deeds offices around the world using blockchain, and it would be a small technical step from there to selling a house via NFT in an officially recognised transaction,” he notes.
Purchase of the NFT media article entitles the successful bidder to own the digital image, rights to ownership of the review itself, and a name credit on the page where it originally appeared.
Describing the growth rate of the local NFT space, Goldstuck points out the early stages suggest SA has more of a community, rather than an industry.
As the local industry grows, SA can expect digital artists and musicians to dominate the arena, as well as tech-savvy charities working the system, he points out.
“South Africans are fairly actively engaged in selling art and buying collectibles, much as is the case in most countries. It's not an arena in which national pride plays much of a role. For now, the attention tends to be on who is first in specific categories. Just this week, we saw the first global clothing range and perfume sold as NFTs.”
Although there haven’t been any formal assessments of NFT adoption among South Africans, Carel de Jager, a consultant at the Blockchain Academy, says the topic has, in recent weeks, been discussed extensively, and local corporates should familiarise themselves with the advantages and limitations of NFTs before piloting projects.
“A key factor that will contribute to sustainable growth of the industry in SA is education. This space can be overwhelming for someone that is new to blockchain and crypto-currency, and as with any new technology, it is riddled with scams.
“The best way to arm yourself is by building a solid educational foundation with a reputable provider before experimenting,” notes De Jager.
A favourable regulatory landscape will also encourage industry to make use of the technology, which could ultimately lead to less friction in existing asset ownership structures and transfers, he adds.