In October 2021, cryptocurrency exchange Coinbase announced that it would launch an NFT marketplace. Moreover, Sotheby’s, an auction house active since 1744, also launched its NFT-exclusive marketplace, Metaverse.
This year has seen a surge in the sale of NFTs. According to DappRadar, a startup that collects statistics on crypto-based applications, the NFT industry surpassed $10 billion in transaction volume in the third quarter of 2021.
Most recently, we’ve heard a lot about NFTs in the context of digital artwork. Mike Winkelmann, the digital artist known as Beeple, had never sold a print for more than $100 until October 2020, when Christie’s sold an NFT of his art for $69 million. According to the auction house, the deal places him “among the top three most valuable living artists.”
NFTs have dominated news feeds in recent months, particularly within artists’ communities.
According to Forbes, an NFT, or a non-fungible token, is a “digital asset that represents real-world objects like art, music, in-game items, and videos.”
So, are NFTs worth the hype? Some experts believe they are about to burst. Others feel that NFTs are here to stay and will permanently revolutionize investment. What we know for sure is that they’ve become really, really popular. Let’s see why.
What are NFTs?
A non-fungible token (NFT) is a one-of-a-kind identifier that may be used to transfer and verify ownership of digital commodities cryptographically. In the same way that a blockchain may be used to make payments or trace parts in a supply chain, an NFT can be used to verify ownership of anything, including artwork, collectible cards, or property investment. The term “non-fungible” indicates that the token is one-of-a-kind and cannot be exchanged for anything else.
If you buy a digital asset that has been validated by an NFT, you are truly acquiring a digitally verified note declaring that there is only one owner. Anyone can obtain a copy of the information or link pertaining to the asset that the NFT is tokenizing, but only the NFT owner has the contract that states their rights to the property.
NFTs were created to tackle the challenge of generating exclusivity for an asset that can be quickly duplicated. In the same manner that the blockchain prohibits one bitcoin from being “held” by more than one individual, using NFTs gives evidence of legitimacy. Basically, when you acquire an NFT, other individuals may be able to create copies of the picture, video, or digital object you possess. The original, like a one-of-a-kind work of art or a limited-edition print, is more expensive.
NFTs, unlike real works of art, cannot be damaged, misplaced, or lost since they are stored on a blockchain, similar to how cryptocurrency transactions are. The copyright or license rights may or may not come with the transaction, depending on the NFT. However, this is not always the case.
The Ethereum blockchain is used by the majority of NFTs, although there are other options. Moreover, NFTs might have a wide range of uses outside of the art world as the underlying technology and idea improves.
A brief history of NFTs
NFTs aren’t a brand-new technology. In 2012, “Coloured Coins,” which are bitcoin tokens with additional features that enable them to signify other properties on the blockchain, were the first sort of NFTs to join the market.
NFTs and visual art merged in 2017 to produce “Cryptokitties” — digitally made cats that can be purchased and traded with NFTs proving ownership. Crypokitties was established to investigate the notion of digital rarity and to include a non-fungible token into smart contracts.
However, a resurgence in the excitement about cryptocurrencies and the growth of digital art have propelled NFTs into the public eye. Here are some examples of NFTs used for business purposes:
- William Shatner issued a collection of his personal artifacts in the form of NFTs in 2020, which includes a wide range of images taken throughout the course of his illustrious career. In just 9 minutes, he sold 125,000 copies.
- Twitter’s CEO, Jack Dorsey, sold the first tweet on the network as an NFT for roughly $3 million.
- Top Shot is an NFT marketplace for memorable NBA moments. The most valuable collectible exchange is LeBron James dunking against the Houston Rockets that went for more than $387,000.
How can I buy an NFT?
You may use online exchanges or marketplaces to purchase, transfer, exchange, and generate NFTs. The originator or owner can set an actual price. Alternatively, you could also bid on the NFT through an auction.
Here are some of the most popular NFT marketplaces:
NFTs are often purchased with a cryptocurrency like ether. Alternatively, the price could be indicated in dollars. Different transactions could be subject to a distinct set of costs.
Please note that NFTs can be high-risk investments. NFTs have brought in hundreds, if not millions, of money for some people. Others may end up paying a high price for a digital item that is ultimately useless.
What does the future hold?
Technology always goes along with humans. However, it has never been progressing faster. Technologies like NFT and crypto have the purpose of bringing finance closer to people.
However, we must exercise caution when large corporations begin to participate in this technology. Regulators must ensure that they adhere to the original intention of the blockchain, crypto, and NFT developers. This also implies that the founders must remain faithful to their principles, even when large corporations’ money, influence, and acquisition proposals begin to pour in.
The most significant danger for NFTs is that the market will collapse. NFTs may be the hottest thing in town right now, but they still have a long way to go before being generally accepted and widely popular, just like all technological advances.
On the other hand, if we think of NFTs in terms of the expanded use of the blockchain, it appears that they can stay in some form due to their use as commercial proof of property.