Coinbase will launch an NFT marketplace

Crypto exchange Coinbase plans to debut an NFT marketplace in 2021, setting up a competition between it and the world’s largest NFT market, OpenSea.

Coinbase’s forthcoming marketplace has the potential to boost a (now) lucrative asset class that has increased by 2,100 percent from the fourth quarter of 2020.

The news: Once launched, Coinbase NFT will allow its more than 68 million users to mint, buy, and sell creative works on the Ethereum blockchain. It will also offer a social space for people to discover new NFTs and creators.

“Our ambition with Coinbase NFT is to allow everyone to benefit from their creative spark; to contribute to a future where the “creator economy” isn’t a small subset of the “real” economy, but a central driver.” —Coinbase

NFT 101: NFTs are unique, non-interchangeable units of data in the form of art, images, videos, GIFs, and other collectibles. They are stored on blockchains like Ethereum, Flow, or Tezos are a means to prove ownership of assets without any intermediaries.

Future of NFTS: In an interview with Bloomberg TV, Coinbase co-founder Fred Ehrsam mentioned the parallels between the growth of cryptocurrencies and the dotcom boom of the 1990s.

“I go so far as to say that 90% of NFTs produced, they probably will have little to no value in three to five years,” Ehrsam said. “You could say the same thing about early internet companies in the late ’90s." —Fred Ehrsam

Crowded NFT market: Coinbase NFT sets up a battle between it and OpenSea the a16z-backed marketplace that enabled $3B in NFT sales in September alone.
Coinbase’s NFT strategy also mirrors that of FTX.US, a competitor crypto exchange that recently opened its own NFT marketplace on the Solana blockchain.

Behind the hype: Mashable writer Amanda Yeo wrote an op-ed on why she's against NFTs, arguing that they are “merely the very costly, environmentally disastrous, tech bro equivalent of peeing on a hydrant.”

"NFTs don't even guarantee any money goes to the person who created the work. As it currently stands, there is nothing stopping people from simply tokenizing other people's work, claiming it, and profiting off it," she wrote. "In fact, it's already happening."

VCs love NFTs: In 2021 alone, NFT startups have raised more than $662 million, per The Information. Venture capital firm Andreessen Horowitz is largely responsible for the influx of cash and led a $100 million funding round in OpenSea, which is now valued at more than $1.5 billion. NFTs, however, seem likely to follow the same trajectory of most websites in the dot com boom: a few will succeed, and the vast majority will fail.

Why it matters: Coinbase is the largest crypto exchange in the U.S. by trading volume. Its entrance into the NFT space will likely accelerate the already hot asset class, whose total sales catapulted to $10.7B in Q3 of 2021 — up more than 8x from the previous quarter.

Creator implications: Love or hate 'em, NFTs are one of the fastest-growing segments of the creator economy. Since Q4 of 2020, NFT sales have generated about $13.25B. And while there’s no guarantee that sales won’t drop precipitously, NFTs are offering fruitful new opportunities for creators in art, gaming fashion, music, and more.

Shopify, eBay NFT sales: In July, Shopify began allowing merchants to sell NFTs via their storefronts. eBay also allows sellers to hawk NFTs. The two e-commerce marketplaces say they offer a better buying experience for customers not interested in popular NFT marketplaces.

What’s next? There’s a frenzy around NFTs right now. It’ll be interesting to see what companies — crypto and not — will latch onto the craze and which ones will ultimately fail and succeed. TikTok, the NFL, NBA, and others are already on board — might Robinhood, Gumroad, or other brands follow suit?

Chat NFTs: If you want to join a community focused on all things non-fungible, check out Indie Hackers’ NFT group here.