The big idea and why it matters: NFT (non-fungible token) technology must be separated from the NFT craze of the past several years that resulted in bad trades for many who fell for the hype. It’s not an understatement to say NFTs and blockchain technology stand to revolutionize the way we will transact and own many investments in the future.
“NFTs – the next level of when wealth and ignorance collide.” -Anonymous (the internet)
What a difference a few years make. Today’s quote comes from this broader list of NFT comments, which was published back in September of 2022 and has not aged well. As best I can tell, that was after NFT prices started to drop (spoiler alert, in case you don’t dabble in investment crazes), but there are some gems in that list which capture the hype of those times, along with my color commentary:
- “If you want something to be truly and wholeheartedly yours, turn it into an NFT.”
- “I think I have found my calling. NFTs.” Your calling to financial ruin?
- “The new way to become a millionaire – NFT.”
- “NFT is a brand-new phenomenon that is creating billionaires in the online world.” If you know any NFT billionaires, please put them in touch with me.
To their credit, at least some other comments lacked conviction or even conveyed some caution about NFTs:
- “Still trying to figure out NFTs.” Me too!
- “Thinking whether NFTs are a waste of time or not.”
Back up the truck
No, not to buy NFTs, but rather to first define what NFTs are, as we’ve never taken the time to cover them as a standalone Alt Blend topic. NFT stands for “Non-Fungible Token,” but that likely isn’t very helpful, and context is required for additional understanding. Today, we will aim to increase our NFT aptitude while learning about some past pitfalls and future applications of this powerful technology. Here we go!
We have covered distributed ledger technology, more commonly known as blockchain, quite a bit in the past. Blockchain is the foundation of cryptocurrency, which we explored during the nine-part “Crypto Dip-Toe” series. As this Investopedia article points out, cryptocurrency tokens are fungible; i.e., each Bitcoin is effectively the same.
Each NFT, however, is unique (hence the “non-fungible” descriptor). That uniqueness is what is supposed to give NFTs their value, as they “can represent digital collectibles or real-world items like artwork and real estate.”
Sittin’, waitin’, wishin’
As this Fast Company article from earlier in 2025 notes, NFTs have been in an extended downturn, and many lawsuits from the NFT collapse are ongoing. It never fails that people want to blame others for the poor investments they make, and the evaporation of NFT value is no different. However, I do have empathy for those who invested in Nike’s “virtual shoes” referenced in the above article; not because I think NFT Nikes are/were a good idea, but rather because Nike sold those imaginary sneakers to people for nearly $200 million and then basically shut down the exchange on which they were traded!
In normal market downturns (i.e., markets that consist of fundamentally valuable companies, real estate, etc.), there comes a point where it would be wise to “back up the truck,” given you have a proverbial truckload of cash waiting on the sidelines. But with this NFT situation, in most cases, there isn’t a way to assign any value or expectation of recovery because they were essentially created out of thin air. David Bahnsen would refer to this as a “shiny object” situation, and it’s worth a throwback to his Dividend Cafe from Jan 21, 2022, for the following insights:
The unsustainability of an investment working because everyone likes it is the thesis behind shunning shiny objects…After enough time of irrational exuberance, the dismissal of fundamentals as obsolete, and the notion that economic laws of logic have been displaced, there eventually comes a time of recalibration, resettling, repricing, and rethinking.
Don’t shoot the messenger.
Just because NFTs are built on blockchain technology doesn’t mean we should throw out the blockchain baby with the NFT bathwater. Plenty of shiny object investing has been done via stocks and stock exchanges, and it doesn’t mean stocks or the exchanges they trade on are inherently evil. NFTs and the blockchain are no different, but they have much broader applications that should continue to make our lives easier in the years to come. A lot of that can be summed up as “tokenization.”
O-wim-o-weh, O-wim-o-weh
No, tokenization doesn’t mean everyone will be enjoying life more because they’re walking around singing Tokens hits, like “The Lion Sleeps Tonight” (but hopefully it’s now stuck in your head for a few hours…and I may owe readers an apology for what a ridiculous stretch that reference is). Instead, it means we can take otherwise clunky things, like ownership interests in large buildings, and easily break them up into fractional, easily tradeable, and traceable interests.
Speaking of real estate tokenization, we covered that to some degree last summer, here. It should reduce a lot of transactional friction involved in standard real estate transactions, but I’m not sure I believe the hype regarding how quickly this will become standard practice. This ScienceSoft article purports that “67% of investors have already invested or are planning to invest in tokenized assets.” I have to wonder where they found that pool of “investors.” If two-thirds of people you know have even heard of real estate tokenization (let alone have plans to invest in it), please send me a note ()! Maybe “Sciencehard” would have a different opinion… (sorry, again 😊).
Operational lubrication
From a regulatory standpoint, it would be unrealistic to think that existing real estate fund structures and investor qualification requirements (accredited investors and qualified purchasers) would evaporate such that anyone could suddenly purchase real estate tokens in any property. What is more likely is that existing managers (e.g., the Blackstones of the world) could build pools of assets that become tokenized, but still fall under our current regulations and investor qualification restrictions. The upside could be a more straightforward investment process, ongoing valuation/performance reporting, and secondary transactions (i.e., resale).
That could have a massive impact on Alts and investment back-office life, but I’d expect a far more limited impact from the end-investor perspective – at least initially. What could make this technology more interesting is if it allows customization of what each investor owns. Currently, I can invest in a fund run by a real estate manager, which means I have exactly the same exposure as every other investor. But, instead, what if I could receive a customized portfolio with different pieces (tokens) of various properties? We will see how realistic that idea is as the NFT/tokenization situation unfolds.
Tokenholders?
Another ongoing development is the tokenization of already fractional interests. As you know, owning shares of stock in a company represents a partial equity interest, and this method of investing in public companies has worked pretty well for quite a long time. At the same time, it’s easy to forget that it has evolved from people literally screaming at one another on the floors of stock exchanges (ah, the good ol’ days) to what we now take for granted as near-instantaneous transactions in a flicker of a computer screen.
Or at least those transactions seem to be instantaneous. In reality, there are still various intermediaries, multi-day settlement periods, limited exchange hours, and other points of friction involved. Tokenization, however, could all but eliminate the intermediaries and allow for global, 24/7, truly instantaneous settlement – and THAT would surely be NiFTy.
Until next time, this is the end of alt.Blend.
Thanks for reading,
Steve
