A lot less people are buying NFTs today compared to last year. But that's okay, everything will be fine. So let's talk about some of the characteristics of NFT marketplaces and how they differ from real estate marketplaces today:
When you create or "mint" an NFT, you are doing so on a particular blockchain, such as on the Ethereum blockchain. You might do that minting through a marketplace like OpenSea, but at the end of the day, your NFT now lives on a public blockchain and not on private OpenSea.
What that means is that if OpenSea suddenly decides to do something bad that you don't like (I am in no way picking on OpenSea), you can simply stop using them and just access and trade your NFTs from some other marketplace. As I understand it, there are also lots of smart people working on blockchain interoperability.
Once you have your NFT on a blockchain, you can choose, through various applications, to list it for sale, run auctions with a reserve price, or just hold it and do nothing, among other things. You can also set it up so that any proceeds from a future sale are automatically split with someone else -- maybe they are a co-creator of the NFT that you minted.
Whether you've decided to list your NFT for sale or not, there is also the option for the market to make unsolicited offers on it. It is up to you whether or not you'd like to accept any of the offers, but in all cases the offers you receive are made fully public to the market. As a bidder, it's easy to hide behind "burner" wallets, but you generally can't hide real intent.
If/when you do sell, that sale becomes public record for all to see. The blockchain never forgets and it doesn't matter which marketplace you decide to use.
In some real estate markets, it's fairly easy to see the sales history of a property. But in other markets, such as here in Toronto, it's still fairly gated. Generally speaking, you are accessing a controlled database and so you need to abide by whatever rules might be in place. If you want to build a new application on top of your local real estate board's database, that is going to be tricky and it will likely involve more than a few lawyers.
It is, however, fun to imagine how this might all change with public blockchains. And I think that NFT marketplaces do offer some clues in terms of what could happen to our real estate markets.
Consider this potentially unexpected scenario:
In the world of NFTs, there is something known as creator royalties. And they function just as you might expect. As the creator of an NFT, you can set a royalty % that gets paid to you each and every time the NFT is sold. And because the blockchain never forgets, you never have to worry about enforcing and collecting your royalty fee. It just gets automatically distributed.
Now imagine a world where people like the architect and the developer of a new property are able to attach their own creator royalties. This would be massively cumbersome to administer today, but it's entirely straightforward once you've got everything on a blockchain. And it would be a huge boon for business models that today do not benefit from reoccurring revenues.
In theory, it might also better align interests, because if you're a "creator" who wants a good solid royalty fee stream, maybe you're a little more motivated to do good long-term work. Who knows? This model might never actually happen, but I do think it is indicative of the kind of changes and innovations that we might see as crypto continues to filter through the economy.
One of the things about crypto and blockchains is that they are mostly public. Every transaction gets logged in a public ledger, which means that if you know the address of a particular wallet, you can see its balance, all the in and out $/crypto flows, any NFTs that it may own, as well as probably many other things that I am still working to get my head around. In all likelihood you won't know who the wallet belongs to, but you'll be able see what's going on at that particular address.
This is a pretty radical feature if you compare it to the way things generally work today. And what it signals to me is that we are headed towards a world with a lot more transparency and real-time data. Today I learned of a company called Dune Analytics. It is an analytics company built around open blockchain data (there's no proprietary data). At the same time, it's also a community. And it is this community (think of them almost as analysts) that helps to make sense of the open data.
To give you an example, here is a chart from Dune showing monthly volume by NFT marketplace. OpenSea looks to be running away with things right now. And there's no guessing. Here is all of the data.
But, of course, this is just one example. Blockchain data could also be used to generate something like a real-time profit and loss statement for a company, which again, is pretty radical when you compare it to the way (and how slowly) that things are done today. It's hard to not to see all of this and think about the far reaching implications of what's unfolding right now. Everything from healthcare to real estate will almost certainly be transformed by this next iteration of the internet.