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Alex Atallah is tired.
The 28-year-old New Yorker is the cofounder and CTO at OpenSea, a marketplace for non-fungible tokens (NFTs). In recent weeks, he said he’d been working from 9 a.m. until two in the morning as interest in buying and selling digital items surges.
“Last year at this time we were doing about $1 million a month [in trading volume],” Atallah told Insider. “In January, we did $8 million in volume. And in February, we did $95 million in volume.”
OpenSea facilitates the creation and trading of NFTs, which are digital assets that are bought and sold through blockchains like Ethereum. An NFT can come in many forms. It can be a one-of-a-kind digital art piece, a meme, an outfit designed to wear in a virtual world, or a digital key used to access a file like an music album. Even a tweet can be packaged as an NFT. Ownership of an NFT is authenticated by checking its status on the digital ledger. Like all blockchain-based technologies, they require a significant amount of energy to trade.
And as with many internet trends that have brought big paydays for some, influencers are embracing the format.
“I do think there’s going to be quite a bit of NFTs made by loads of celebrities,” Atallah said. “We’re getting quite a lot of inbounds about it.”
YouTube stars like Logan Paul, Zach “ZHC” Hsieh, and the virtual influencer Miquela have all experimented with NFTs in recent months (the sale of Miquela’s NFT raised around $82,000 for the charity Black Girls Code). The Hollywood talent agency A3 Artists Agency, which has a division dedicated to digital stars, is creating an NFT task force this week to explore opportunities for its clients. And YouTube creator Jake Paul (Logan’s brother) is launching his own virtual avatar on Tuesday with plans to sell digital items like boxing gloves to fans in the coming weeks. He’s working with the digital avatar company Genies, which recently launched a line of NFT collectibles for music artist Shawn Mendes, to create a 3D version of himself.
‘Of course influencers are showing up, there’s a lot of money to be made’
While many internet stars are newcomers to the crypto world (and represent a small minority of all NFT transactions), the potential windfall that can come from selling digital collectibles is drawing more attention to the category.
“Of course influencers are showing up, there’s a lot of money to be made,” said Kayvon Tehranian, the founder and CEO of the NFT auction platform Foundation, which recently facilitated the sale of an internet meme called Nyan Cat for around $580,000. “NFTs will allow for internet culture and anything that has value on the internet to hold value in and of itself. If influencers are creating artifacts of value, whether you want to call that person an artist, a meme, a creator, an influencer, it doesn’t totally matter to us.”
Paul’s strategy of launching a set of virtual clothing items for avatars isn’t new in the world of NFTs. Digital fashion accessories like sneakers and hoodies meant to be worn in virtual worlds such as Decentraland are heavily traded on platforms like OpenSea. Paul and Genies hope to bring the concept to social-media platforms where influencers’ fans spend their time. It’s still early days for the venture, as Genies has yet to introduce the ability for fans to make their own avatars to wear the virtual items they buy. The company said it’s releasing that functionality in the next few weeks.
“We’re kind of moving into this cross intersection of social and gaming in this metaverse conversation and it’s bringing avatars and digital goods to social platforms and social circles for the very first time,” said Genies CEO Akash Nigam.
Whether NFTs will remain a viable tool for influencers is yet to be seen. The market for digital items is hot right now, but some crypto investors and platforms say it’s likely to cool off.
“I think there’s a lot of heat right now in NFTs because crypto buyers in particular are very flush with money,” said Mahesh Vellanki, a former investment banker who cofounded the creator crypto startup Rally. “NFTs is a great place for them to diversify and also speculate. We’ve kind of seen this before in crypto when it came to the DeFi boom and the ICO boom. There tends to be a lot of frenzy around certain things, and right now NFTs are the hot thing.”
Creators are hoping that NFTs will offer another way to interact directly with fans
The barriers to entry for creators looking to test out NFTs are relatively low, though most artists have to pay a “gas fee” to set up an NFT on the blockchain, which can add up. Platforms like OpenSea have set up ways for users to mint NFTs for free, making it easier to get started (the company makes money by charging a 2.5% seller fee for sales transactions).
If a creator is unable to sell their NFT, they won’t be able to make back those upfront costs. But for internet stars with millions of fans, the payouts from NFTs can be huge.
Logan Paul recently made millions selling a series of digital playing cards and video clips of himself unboxing physical Pokémon cards. But for less famous creators, the popularization of digital collectibles and the ability to gather royalties on their future sales presents a new (albeit less lucrative) opportunity.
Franky Aguilar has been experimenting with NFTs for years. The Las Vegas-based artist and content creator (Aguilar has around 150,000 followers on TikTok) worked on one of the first NFT projects called CryptoKitties. He recently sold an NFT called “Deez Nuts” to YouTuber Cody Ko for 1 Ether ($1,792.92 at the time). He hopes that NFTs will eventually be used as a tool for artists and creators to drive engagement with fans, as was the case with the rock band Kings of Leon, which sold an NFT art piece as a mechanism to unlock a digital download of its most recent album.
“My attention is turned less on ‘I need to make as many NFTs and get rich as fast as possible,'” Aguilar said. “The art is the door frame that has now opened the door to letting all these possibilities go.”
Tiffany Zhong, the founder of the creator community upstart Islands, thinks the opportunity to turn NFTs into an engagement tool for influencer is still a ways off.
“Right now it’s obviously a lot of art collectors, whether it’s physical art collectors or digital art collectors who are spending these millions and millions to win these auctions,” Zhong said. “If you make the experience really easy for these fans to get involved, then NFTs will become normalized more.”
“My one message to creators is they need to think about this as a long-term community experience,” she continued. “Don’t think about it just in dollar signs. This is a new way for you to bond with your community.”