Institutions of higher education are not typically associated with recreational auctions, yet the University of California, Berkeley entered the domain of non-fungible token (NFT) sales with a peculiarly niche piece. On June 8, the university sold a token comprised of Nobel prize-winning scientific data to a small group of alumni for $54,360 worth of Ether cryptocurrency. The data originated from Berkeley professor James Allison, whose immunotherapy research in the 1990s eventually led to a Nobel Prize in Physiology or Medicine in 2018.
As with many other NFTs that have made headlines for their exorbitantly high prices, the inherent value of the token is unclear. While the token is the only officially minted version, the data is not exclusively held by the alumnae, for it was sold soon after Allison’s research. In the wake of the transaction, questions about the longevity of NFTs as a viable financial asset have resurfaced because the Berkeley sale represents a unique departure from previous examples of prominent tokens.
The group of alumnae that gathered their Ether to purchase the NFT did so using a technique that has developed because of the blockchain marketplace. The individuals placed their funds in a decentralized autonomous organization, an entity that brings together individuals in the blockchain without any overhead management.
The constituent funders were able to set their own regulations in the blockchain and execute transactions as equal partners. The decentralization inherent in the purchasing method demonstrates a promising principle for all market activity because it increases efficiency while creating a transparent environment in which sales are made. Blockchain technology and decentralized autonomous organizations are still shrouded by a fog of complexity for many people, yet there are many manifestations of NFTs that are targeted at the mainstream and are more readily comprehensible.
The Appearance and Purpose of NFTs
Previous NFTs that have been widely discussed were designed to be entertainment pieces. The NBA began producing collectible player tokens in 2019, well before the phrase “non-fungible token” entered most people’s vocabulary. The partnership venture, officially named NBA Top Shot, produced digital cards of game highlights that have been purchased by roughly half a million fans. Despite their success, many have expressed confusion as to why it is worth spending upward of $100 on an item that can be replicated for free elsewhere.
The differentiating principle with the cards, as with the Berkeley data, is the exclusivity of owning an officially sanctioned version of a product. The art market works on a similar premise and is a well-respected facet of contemporary culture. To cement itself alongside established asset categories, the NFT market needs to proliferate to a greater degree than it currently has.
Berkeley’s NFT Plan
Berkeley is committed to ensuring that the Allison NFT is not an example of a one-off novelty item, for there are existing plans to sell a similarly data-centric token in the near future based on CRISPR gene manipulation. It is a stretch to imagine that similar tokens might become prominent in the public due to their high prices and low perceived value outside of a small population, but their relevance may not depend upon mass popularity.
The buyers of the Berkeley token were clearly partial to it; they were previously associated with the university and were enthusiastic proponents of the technology. The sale serves as proof of the concept’s validity rather than a standard for future iterations and demonstrated that there is a small but dedicated base that will pay for future releases.
Several figures view the Berkeley token in more literal terms, interpreting the data sale as an example of how institutions can share information. Ian McClure of AUTM, an association that seeks to increase the fluidity of peer university information exchanges, believes the NFT auction can be analyzed to learn more about the streamlining of data transfer processes.
The information contained in scientific tokens can be equally relevant to the public, opening a larger market that could contribute to their entry into personal financing. Information movement is not the only benefit of NFT sales; revenue can be used to fund initiatives within institutions. Berkeley has determined that 85% of the sum will be used to fund forthcoming research opportunities, creating a self-fulfilling cycle for gathering information that can be woven into future tokens.
Skeptics & Surges
Evidence of the imminent normalization of NFT can be found in the stock market, with one company’s recent price uptick providing financial support for new ways of exchanging tokens. E-commerce company OLB Group, Inc. saw its share price rise from $5 to $6 in the course of a day following the announcement that its SecurePay platform would allow NFT sales. While OLB is not a blue-chip stock, SecurePay is compatible with many major digital wallets, meaning its platform may be used by a large client base.
Stock surges are notoriously volatile, so it is impossible to make a sweeping claim about OLB’s trajectory with certainty. If it is successful, the greater flexibility with major platforms would result in increased accessibility, a concern for many would-be NFT owners who find current blockchain platforms impenetrable. The ease with which tokens could be traded on OLB’s or a competitor’s system would make the public more likely to rationalize their existence and come to terms with acquiring them.
In their current iterations, NFTs are being traded as a distinct asset category. Setting aside their entertaining or informative qualities, they derive value from their previous sale prices and the overall health of the market. They have the potential to penetrate into standard investment portfolios and mutual funds if they are standardized and moderately priced from the perspective of a casual investor.
It is likely that tokens like Berkeley’s will never fit this role, for they are not designed to be spread in large quantities within a financial space. The incorporation of less sophisticated tokens into portfolios bundled with equities would offer a new stream of liquidity for companies that are seeking growth in the aftermath of the pandemic, potentially transforming blockchain technology into an added lifeline for economic stability.
NFTs undoubtedly constitute more than a fad. Despite how many skeptics wrote off their market as nothing more than a bubble, the tokens continuously spark discussion months after any such bubble should have burst. The price ceiling for tokens continues to skyrocket, in large part due to purchase cycles that resemble the world of visual art pieces. Their entrance into the mainstream is now plausible but will only occur if doubters are willing to set aside their reservations and buy into the market.