An innovative funding model is starting to build momentum in South Korea for industries like art, collectibles, media, gaming, and even music. This funding model is called NFT which stands for non-fungible token. Think of NFTs as a digital certificate of authenticity for anything from an object, video game, or even songs. It is a unique digital file that is stored on a blockchain network. Therefore any changes in the ownership need to be verified by a global public network. This means that every chain of ownership is fully documented permanently making it impossible to fake. NFTs have the potential to be a massive part of the Metaverse space.
The coronavirus pandemic has played a significant role in the NFT boom of late. As more people stayed home and spent more time on the internet, they started to spend their extra spare cash on digital assets as cryptocurrencies like Bitcoin and Ethereum started to explode. Currently, the total value of NFTs in the world stands at $14.3 billion. This number is expected to increase even more in 2023. Therefore, expect to see even more NFTs in Korea as industries look to cash in on the newest cryptocurrency craze.
NFTs in Korea
Korea’s Financial Regulator, the FSC, came out in early November of 2021 that they will not regulate NFTs in Korea. This is because NFTs do not fall under the definition of “Virtual Assets” provided by the FATF. The FATF’s stance on NFTs is that they are digital assets that are unique, rather than interchangeable. Therefore, it is more like a collectible than an investment instrument. However, NFTs became taxable in Korea in 2022. There is now a 20% tax on income from virtual assets exceeding 2.5 million won ($2,100).
However, suppose a game uses blockchain or NFT technology that allows the exchange of cash for a digital asset. In that case, it will not be rated by the Game Rating and Administration Committee (GRAC). Therefore games in Korea can use Blockchain technology and NFTs as long as it does not offer a trading function. This does not make sense for gaming companies as the reason for NFTs is to make money.
NFTs for Korean Gaming Companies
The first industry in Korea that will look to incorporate NFTs will be the gaming industry. South Korean mobile and online game producers are looking to attract players using NFTs. NFTs are perfect for the gaming space as the various characters, skins, weapons, and other items that players make use of to do missions and tasks can be converted into NFTs. Then these NFTs can be traded for digital currency. However, in South Korea regulators have banned games that incorporate NFTs at this time. Therefore, many Korean gaming companies have launched these games outside of South Korea.
Wemade – First Gaming Company to incorporate NFTs
Wemade was one of the first Korean gaming companies to release an NFT-applied game globally. The game is called MIR4, with over 1.5 million players overseas. This game alone has sent the market value of Wemade 10x. In MIR4, players can mine “Dark Steel” which can help increase the level of characters and their weapons. However, it can also be converted into a cryptocurrency called WEMIX. WEMIX currently trades at $0.67 but was at $0.20 at the start of 2021. However, the conversion of virtual coins into real money is not allowed in Korea as well as China. Therefore, for Korea and China, MIR4 is only available without the NFT features.
Wemade has also released another NFT-applied game called “Rise of Stars” in 2022.
NFTBank
South Korea’s NFTBank was a startup launched in the middle of 2020 and now manages over $2 billion of clients’ assets. Their future plan is to establish a service that combines blue-ship NFTs and sell them in the form of funds in 2023. This will be done through NFTBank 2.0 which is an upgraded version of the current platform. Services offered by NFTBank include showing NFT transaction records, investment profits, and portfolios. Furthermore, NFTBank can analyze the values of NFTs in real time. The platform uses AI technology to suggest the best time to sell a particular NFT. A vast majority of clients on NFTBank are foreigners with over 80% coming from the United States.
K-Pop Entertainment Companies Looking into NFTs
K-Pop Entertainment companies have always been ahead of digital trends. They were able to use social media in a very effective way to take their K-group stars global. Now, these K-Pop entertainment companies are looking into NFTs to create virtual leads. The biggest K-pop entertainment company HYBE has talked about looking into NFTs. They recently partnered with the largest cryptocurrency operator in South Korea called Dunamu, which runs Upbit. They will launch a joint venture focused on creating and marketing NFTs related to HYBE artists such as BTS and TXT.
YG Entertainment, JYP Entertainment, and SM Entertainment are also looking into NFTs collaborating with Blockchain-related businesses. In addition, smaller K-pop Entertainment companies have also announced ventures related to digital assets such as NFTs.
NFTs Starting to Explode Globally
Collectors have always been interested in buying unique items such as paintings, baseball cards, vintage cars, etc. However, recently, a graphic artist named Mike Winkelmann (Beeple) sold a digital collage at Christie’s auction for $69 million. This is, to date, the most famous case of someone using NFTs to sell art. The NFT file itself does not contain the digital piece of art, it is just a kind of certificate saying that the owner of this NFT is the owner of this particular asset. Therefore all they are are one-of-a-kind bits of code that have the authentication code in the NFT file itself.
A Blockchain startup called NBA Top Shot has used NFTs to sell collectible clips of NBA highlights. They sold $230 million worth of basketball highlight NFTs in 3 months. This is very interesting as anyone can see the highlights themselves. Therefore technically, these NFTs should have no value at all, but they do.
The value comes from the demand. Many NFTs are bought because they feel they will hold a higher value at some point in the future. They are betting there will be new buyers who will see the NFT as a valuable financial asset. Therefore, the value of NFTs derives mainly from the people or communities involved in their creation. NFTs, prove that anything that is a) unique and b) verifiable can become a store of value and even reap vast amounts of profit. However, there is a risk that NFTs will hold no value in the long term.
Top 10 NFTs to date
- Digital Collage named “The First 5,000 Days” by graphic artist Beeple sold for $69.3 million
- Electronic music producer 3lau sold 33 NTS for a combined $11 million.
- CryptoPunk #3100 and #7804, are each worth $7.85 million (4,200 ETH). These are digital characters on the CryptoPunks Art Platform.
- 9 Genesis Land plot on Axie Infinity is worth $1.66 million (888.25 ETH)
- The third CryptoPunk on this list is #6965. It is worth $1.5 million (800 ETH).
- CryptoPunk #4156 is worth $1.2 million (650 ETH)
- CryptoPunk on #6487 is worth $1.13 million (605ETH).
- A digital cat on the CryptoKitties game Dragon is worth $1.12 million (600ETH).
- CryptoPunk #6487 is worth $1.02 million (550 ETH)
- Decentraland, a decentralized virtual reality platform on the Ethereum Platform, a 12600 ㎡ piece of digital land is worth $961,000 (514 ETH)
Jack Dorsey, the CEO of Twitter, auctioned off an NFT linked to his very first tweet for $2.9 million to Sina Estavi, a Malaysia-based crypto entrepreneur.
What is the appeal of NFTs?
On a fundamental level, without taking about the theoretical aspect of owning digital assets, NFTs offer a way for anyone to identify actual ownership quickly. Therefore, naturally, it has been applied to collectibles. Fraud is still the top problem when it comes to the collectibles industry. However, since actual ownership is stored on a public blockchain, it is impossible to corrupt.
Startup Funding Through NFTs in Korea
Kakao’s main blockchain arm Ground X is storing and verifying unlisted investments as NFTs on its public blockchain. These investments are for shares of startups that have not yet gone public. These NFTs can be bought, sold, and traded by local and foreign investors in Korea. The information about the unlisted shares, such as the number of shares and the shareholder’s name, will be permanently stored in the blockchain platform of the chat application Klaytn. Once an NFT-based digital card is issued, members can trade it on the forum. Therefore the transfer of ownership will only take place through Klaytn.
Ground X has also partnered with Korean equity management platform QuotaBook and trading platform Angel League. Angel League allows investors to buy shares of promising unlisted startups. The record is then minted as an NFT and offered as a digital card through Kakao’s digital wallet Klip. KakaoTalk has 50 million users worldwide, and Klip is available to all Kakaotalk users. Anyone interested in investing in these unlisted startups can do so through Angel League.
NFTs on Ethereum
Of the top NFT lines, the vast majority are done on Ethereum, which has the advantage of age and broad adoption. It offers total decentralization; however, it is expensive to use. There are hopes that incoming Ethereum patches will address the cost problem. The cost to mint an NFT is a minimum of $75. Therefore, the token would need to start at least $100. The reason is that online sales platforms will take, on average, 10% of the transaction for the initial sale.
How to create an NFT with Ethereum on OpenSea
- First, you will need an Ethereum wallet that supports ERC-721. Most use MetaMask.
- You will need $100 worth of ether (ETH).
- Find an NFT-centric platform that allows you to connect your wallet and upload your chosen “digital asset” or file you want to turn into an NFT. Some of the more popular NFT marketplaces are Open Sea (currently the largest Ethereum-based NFT marketplace), Mintable, and Rarible.
- There will be a “create” button on these marketplaces in the top right-hand corner. This will take you to a screen that will allow you to connect your Metamask (Ethereum-based wallet).
- Enter your wallet password when requested, and your wallet will automatically connect to your wallet with the marketplace.
- There will be a process that allows you to digitally sign a message to prove you are the valid owner of the wallet.
- Then hover over the “create” button on the top right corner, and you will see “my collections.”
- Click on the blue “create” button, and a window will allow you to upload your artwork image. Make sure to add a name and a description.
- Then add a banner image to the page by clicking on the red pencil icon in the top right-hand corner.
- Then click the “Add New Item” button and sign another message using your wallet.
- You will see a new window where you can upload your NFT image, audio, GIF, or 3D model. From here, you will have additional options for your NFT, such as adding an unlockable function that allows only the buyer to view the content.
- When you are ready, click “create” at the bottom and sign another message in your wallet to confirm the creation of your NFT!
- Your NFT will appear in your collection.
