By Constantin Kogan
The most expensive NFT in the world, The Merge, created by the artist Pak, sold for $91.8 million. In ten years, this record-breaking purchase won't be a footnote on the list of the top 10 most expensive NFTs.
NFTs are primarily viewed as digital art that can be purchased and enjoyed by collectors. But recent developments in the industry have led analysts to understand that NFTs have greater utility beyond "digital art." Creators innovating in the NFT space are on track to unlock trillions of dollars in economic value as more use cases of NFTs emerge and the technology becomes mainstream.
Venture capitalists (VCs), anticipating a gold-rush several magnitudes greater than the dot-com boom of the late 1990s, have started channeling millions of dollars in capital commitments to startups in the NFT, Metaverse, Web 3, and DAO space.
The research report also noted that 41% of all the VC deals in Q1 2022 were with companies that specialized in the Web3, DAO, Metaverse, and NFT sectors.
The most compelling reason VCs are pouring so much money into the Web3, DAO, Metaverse, and NFT sub-niches is the potential to extract untapped economic value in intangible assets, specifically intellectual property.
Intellectual property is a broad term used to describe a set of intangible creations of human intellect that are owned and legally protected by a company or individual from outside use or implementation without consent.
Some examples of intellectual property include copyrights, patents, trademarks, and trade secrets.
The U.S Chamber of Commerce Global Policy Innovation Center notes that the value of the intellectual property created in the United States is estimated to be approximately $6.6 trillion.
The U.S. Chamber of Commerce also notes that innovation in the United States, directly and indirectly, accounts for more than 40% of U.S. economic growth and employment.
Since the industrial revolution, intellectual property, primarily patents, have helped companies and nations generate trillions of dollars in economic value.
According to Investopedia, patents are property rights with legal protection that allow the inventor exclusive access to the invention, such as a design, process, an improvement, or physical fabrication like a piece of equipment or machinery.
Entrepreneurs, inventors, and corporations invest significant time and resources in research and development to create innovative products that will benefit society. Patents protect these new products from malicious duplication, so inventors have a guaranteed means of profiting from their investment in research and development.
Countries with strong patent protection laws tend to have more productive societies than their counterparts with weak intellectual property laws and protections.
A research study conducted by the World Intellectual Property Organization in 2021 shows over three million patent applications filed in 2020. The majority of the patents filed were made by inventors and corporations in developed countries.
As the world transitions to the Web 3 economy, copyrights and trademarks will become the new engines for economic growth. The Web 3 economy will provide endless opportunities for anyone to monetize their creativity and receive economic value for their intellectual property.
Creators will be able to receive fair compensation for their work plus ongoing payment in the form of royalties and residuals as long as their work exists.
Small companies will be able to attract new customers by creating bespoke products, services, and experiences that serve desirable niche markets.
Large companies, particularly those with extensive catalogs of copyright-protected assets, will find new ways to monetize their assets and grow their existing revenue streams.
For example, The Walt Disney Company (NYSE:DIS) has made several pioneering steps to secure its place as an innovator in Web 3 digital entertainment.
Disney recently partnered with Veve, a digital collectibles company, to sell NFTs based on the characters ranging from Obi-Wan Kenobi of Star Wars to Captain America of the Marvel Universe and many characters in the Disney library.
In addition to Disney's foray into the NFT space, the company received a patent for a metaverse technology that allows users to create personalized 3D overlays on walls, rooms, and objects.
By unshackling its intellectual property from conventional monetization methods, Disney has exponentially increased its ability to profit from its immense library of intangible assets.
In the future, it is theoretically possible that we will be able to watch movies and play video games that feature a collection of characters from several intellectual property owners.
Imagine watching Disney-owned Marvel superheroes like Ironman, The Hulk, and Captain America fighting on screen against Warner Bros. Discovery-owned DC superheroes like Superman, Batman, and Wonder Woman. Children have imagined these crossover movies for years, but legal and contractual challenges have prevented them from happening.
The emergence of technologies like NFTs, Metaverses, and the smart contracts that power them can breathe life into every child's imagination.
Andreesen Horowitz (A16Z), the renowned Silicon Valley venture capital firm, noted in their 2022 State of Crypto Report that Web3, NFTs, and The Metaverse give people the ability to own a piece of the internet.
Andreesen Horowitz believes that we're now entering the golden era of web3, where transformative technologies will change the fabric of modern society.
As a result of their conviction, A16Z recently raised a $4.5 billion crypto fund, the largest crypto-focused fund to date, to invest in startups working in web3 games, NFT communities, creator monetization, decentralized content & story creation, and many other areas.
In conclusion, the growth in funding of crypto projects working at the frontier of the metaverse economy will help millions of creators and corporations create an unprecedented level of opportunities to monetize their knowledge. As these new opportunities arise it’s important that startups avoid making the mistakes of Web 2 companies and ensure that a decentralized and prosperous future is accessible to all.
