The “cryptopunk” that Visa (ticker: V) bought is part of a line of NFTs, or nonfungible tokens, that allow people to transfer images and other items over the internet and track their ownership. The technology is based on similar principles to Bitcoin and other cryptocurrencies, and it has become a huge hit this year, with more than $1 billion worth of NFTs traded on just one platform this month. Cryptopunks have sold for millions of dollars through auction houses.
For now, NFTs largely represent digital bragging rights, a way for crypto-millionaires to flaunt their newfound wealth. They are largely inaccessible to the average user, even those who may have bought some Bitcoin through their PayPal Holdings (PYPL) or Robinhood Markets (HOOD) account. The platforms where they trade are difficult for most consumers to access, and often charge high fees.
See more: Visa bought nft
Visa isn’t planning to become an NFT investor. It’s not even holding the asset on its balance sheet. Angelos considers it “a piece of commerce memorabilia that we wanted as part of our collection.”
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Visa has other memorabilia in its collection, including early paper credit cards and a set of cuff links that former Visa CEO Dee Hock wore when lobbying banks to sign on with the association that became Visa. Angelos thinks NFTs could join that pantheon of commerce, because they have the promise to become the software powering a new set of payment mechanisms that help companies reach customers and consumers earn rewards.
He gave an example of a band that wants to interact with fans. “I discover a band, I want to support that band,” Angelos says. “In the past, I could buy the album, I could go to the concert. Now what many artists are doing is they’re creating NFTs or digital tokens that their fans can purchase. And by owning that NFT, it actually serves as a form of membership.”
People who own the NFT might get access to a closed social media group “that instantly connects me with other superfans” or the musician might be able to airdrop special items to their fans through their digital wallets, instead of trying to reach them through email lists or Facebook groups that they don’t control. “It’s almost like a digital mailing address, whereby I can reward my fans and I can identify them now,” he says.
An NFT company called Candy Digital that is working with Major League Baseball has been working on a similar concept, where people would be able to get an NFT that more closely connects them to their favorite team.
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In theory, Bitcoin was meant to take middlemen like Visa out of commerce entirely by allowing people to transact directly over the Internet using software tracked on computers all over the world. But that has not happened yet, in part because the software is too slow and complicated for many people to access. That leaves an opening for incumbent players to maintain their importance. Visa sees an opportunity to be the rails for the new digital economy just as it has been the rails for the current one. It’s already connected to consumers and businesses, so people don’t need to use a completely new system. Visa’s interface with the public can be similar whether they pay through cryptocurrencies or dollars. The company already has helped crypto exchanges issue credit cards and other products.
“As this goes mainstream, there’s a demand for consumers to be able to just use their credit card or their debit card to purchase an NFT,” Angelos says. “Most consumers don’t need or want to host a digital wallet and own Ethereum. They just want to access a provably unique item that they can put on their avatar.”
“This has to expand beyond the few million people who manage a self hosted self custody wallet,” he says. “There is an opportunity there.”
Write to Avi Salzman at firstname.lastname@example.org