Financial Background: The Economic Boom of Tokenization

The next era of fintech is definitely tokenization. Tokenization is basically the process of converting an interest, right, ownership, and so on into a digitalized version of the asset stored on the blockchain. Tokens can be fungible—such as security tokens or utility tokens—or non-fungible. Fungible tokens are used like currencies for transactions. An example is Bitcoin. One Bitcoin is equal to the next Bitcoin. Non-fungible tokens, or NFTs, on the other hand, are unique digital assets. NFTs can be “tokenized.” They serve as a digital certificate of ownership for both virtual and real-world assets that can then be bought and sold. These NFTs are taking the world by storm. Around May 2021, the NFT market capitalization stood at $17.9 billion. Just a few months later in October 2021, it grew to $27.18 billion. The NFT market generated huge attention when an NFT created by digital artist Beeple — a collage called “Everydays: The First 5000 Days” — sold for a striking $69 million. Now as the NBA’s Top Shot bring in more curiosity for memorable basketball moments, sports enthusiasts, and fans have all jumped on the NFT bandwagon.

The real question is what do purchasers gain from buying a digitalized asset? Imagine you want to purchase an NFT of LeBron James’ slam dunk. Users can simply view many of his slam dunk pictures on Google. Why purchase an NFT? The answer lies in knowing that you are the only one with the official and genuine version of the NFT. You are the only owner of something authentic and valuable. Imagine now you are a collector of old sports cards. You have been buying and trading valuable sports cards for years and aim to have as many cards in your collection as possible. Your collection’s value is defined by its authenticity, its worth to you and, most importantly, by its scarcity in the marketplace. This rarity element adds value. The NFT marketplace is no different. Whether acquired as a collectible or investment, NFTs are genuine. They can be resold, traded, or kept as a memory of a personal experience. Thus, you are paying for exclusivity, rarity, and authenticity, which gives the NFT as much value as the individual is willing to attach to it. The more value an NFT has, the more expensive it is.

No wonder the sports industry is capitalizing on NFTs and using them strategically for promotional and e-commerce purposes. Remember the thrill of watching your favorite athlete at a basketball game or the joy of recalling your favorite wrestler’s most impressive moments in their career? What if you could own a digital version of these moments? The sports industry is transforming such moments into NFTs to be sold to fans, collectors, investors, and other buyers. NFT purchases are stored on the blockchain. Don’t forget, the blockchain cannot be altered; it is immutable. Thus, fans can be assured that their NFT purchases are safe from tampering, theft, and so on. They can also be assured that they are purchasing a genuine digital item. In the past, collectors, for instance, had to be very careful about buying fake products. When buying NFTs from the comfort of your own home, you are guaranteed that the NFT is authentic and that the blockchain will store a permanent and inalterable record of your ownership of the NFT.

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