Joining in on the NFT craze, Visa Inc.’s purchase of a $150,000 CryptoPunk is a watershed moment in the history of virtual assets. With their purchase of CryptoPunk #7610, Visa’s foray into the world of NFTs adds a sense of legitimacy to the space, bringing crypto technology once again into mainstream headlines.
While Visa’s involvement in NFTs is bound to draw further consumer and institutional attention, the question remains, what’s in it for them? Why did Visa buy NFT art, to begin with? And why a CryptoPunk?
Visa’s main reason is that they want to stay relevant.
With the US Senate still struggling to grasp the technology and concepts involved in crypto, Visa is eager to establish itself as connected to a digital generation.
In a blog post, Visa claim:
“Cryptocurrency and non-fungible tokens (NFTs) are gaining traction and driving headlines, but still have many scratching their heads…we think NFTs will play an important role in the future.”
NFTs are unique digital assets that employ blockchain technology to verify ownership. CryptoPunks use the Ethereum blockchain and are an early example of the technology. Launched in 2017 by Larva Labs, over 10,000 pixel-art tokens were given away to early adopters, some now worth millions of dollars.
The CryptoPunk will be added to Visa’s “collection of historic commerce artifacts,” joining the ranks of early paper credit cards and zip-zap machines. In purchasing the NFT, Visa is effectively making a public declaration that crypto-technology is here to stay and should be memorialized.
A challenge for financial institutions is remaining relevant in a world moving increasingly towards decentralized blockchain solutions. Visa’s CryptoPunk purchase serves as a way to involve itself directly in the space. In order to adapt to the changing consumer habits that are likely to occur over the coming decades, Visa claims they have dipped their toe in the NFT world as a way to better understand the community and the technology.
“We think NFTs will play an important role in the future of retail, social media, entertainment, and commerce. To help our clients and partners participate, we need a firsthand understanding of the infrastructure requirements for a global brand to purchase, store, and leverage an NFT. Having worked with Anchorage Digital to complete this process, we’re better positioned to help our partners navigate the process.”
Still, for those who don’t read crypto blogs and check their wallet on the daily, the purchasing of a small, pixelated digital image is confusing but also intriguing. The world of NFTs is no longer just the domain of the crypto hardcore.
Drawing attention from the likes of Tom Brady, Jay-Z, and none other than Lindsay Lohan, the mainstream press is now starting to pay attention, drawn in by celebrity endorsements of the emerging tech. NFTs are fast becoming a status symbol and an expression of personality. NFL star Odell Beckham Jr., for example, purchased CryptoPunk #3365 for 888 ETH, around $2.1 million worth of ETH, and now sports it as his Twitter avatar.
While dropping $150,000 is no small change, it’s not exactly going to dent the company’s pocket, whose annual revenue for 2020 was $21.8 billion. Relatively speaking, Visa has not staked a lot of money on their crypto investment. Instead, they have bet big with their reputation, banking on the idea that NFTs represent the future will remain relevant.
Visa’s timing is perhaps perfect: letting the NFT market establish itself over the past couple of years but staying ahead of the curve in terms of institutional involvement. It’s essentially a signal of approval that many hesitant to get involved are looking for.
And it seems to have worked. Within one hour of the announcement, the CryptoPunk market went into a frenzy, with NFTs trading amounting to $20 million in sales. For many, institutional approval is important. While early adopters and enthusiasts are comfortable with the NFT space, it’s easy to forget it’s still in its infancy.
Visa purchased CryptoPunk #7610, a female punk with a mohawk, green clown eyes, and some hot lipstick. While all CryptoPunks are scarce assets, with only 10,000 of them in existence, #7610 isn’t one of the most desirable NFTs on the market. Its attributes are relatively commonplace, sharing them with hundreds of other punks.
And yet, looking at its activity history, its value has appreciated enormously since its first purchase of $67 in 2017. While this is still quite a way off the $11.8 million paid for the “Covid Alien” punk, it is becoming increasingly accepted that virtual assets can be extremely valuable.
The NFT space as a whole has seen massive growth over the past two years. OpenSea, for example, one of the leading NFT marketplaces, handled over $1.9 billion in sales over August, more than ten times that of March, which reached $148 million.
Visa clearly wants in on this, seeing the enormous amounts of money flooding the space.
“We also wanted to signal our support for the creators, collectors, and artists driving the future of NFT-commerce…we’re excited to work with this growing community to make NFTs usable and accessible in a variety of contexts.”
While payments for NFTs are handled on-chain, gas fees and confusion over the process are still roadblocks to widespread involvement. Already involved in bringing cryptocurrency to the world of fiat, Visa seems to now be interested in bringing fiat to the world of crypto.
“Enabling secure commerce is what we do — we’re the network working for everyone — and that extends to new forms of digital commerce that unlock access…we’re thinking deeply about this space and how we can apply our expertise in enabling seamless and secure digital payments to make NFT-commerce accessible and useable for buyers and sellers.”
For some, NFTs and cryptocurrencies mark an escape from the world of traditional finance and will not relish the idea of Visa entering into the scene. For others, their involvement will serve as a way to let those unsure of concepts such as crypto wallets, smart contracts, and gas fees invest in NFTs.