So I’m sure you’ve heard the three letter acronym “NFT” (Non Fungible Tokens) circling around the internet. But if you’re like me a week ago, you had little to no idea of what the thing really means or why it matters.
Why it matters
These collectables have sold for almost $70 million — which makes it important. A collage of images by digital artist Beeple sold for $69.3 million in March 2021– and this was the first time an NFT was sold at a major auction house.
But why would you want to buy a digital piece of art if it could be screenshotted and replicated by anyone? Why purchase a digital piece of art if it will never be unique or personally yours?
Essentially, it is because NFTs transform a digital piece of art into one-of-a-kind verifiable asset using the blockchain.
All you need to know is that the blockchain technology allows NFTs to be authenticated and securely stored, just like a jeweler may authenticate a diamond as a real diamond gem. On the blockchain, the NFT purchased cannot be stolen or linked to someone else. Someone can of course duplicate an unauthentic version — but it is not the same as the same piece of art because it isn’t stored on the blockchain and verified as such.
In this way, the blockchain works as a digital database that allows for the trading of cryptocurrency, which is fungible, and exchanges ownership, unlike NFTs. Unlike Bitcoin, which can be exchanged for the exact same Bitcoin, NFTs are not allowed to look the same. Once you purchase one, it is a unique asset to you.
Why do they have value, specifically $69.3 million dollars of value?
So who would really pay tens of millions of dollars for no real benefit, other than people knowing you own an original piece of digital art? After all, digital art is not and will never be the same as an original, said Mona Lisa.
But where the value comes from, allegedly, is the idea that NFTs cannot be replicated.
They are scarce, and with scarcity comes value. People often purchase them to claim the digital artwork as their own, because any one can have a fake, but once one person owns it, it can never be traded or replicated again. Like any other artist, you might just appreciate their work and want to own it personally.
If you do, you can purchase NFTs at online marketplaces such as OpenSea, Mintable, Nifty Gateway and Rarible. But beware: some of these marketplaces charge “gas fees” to make a royalty, otherwise known as the energy it takes to trade the NFT on the blockchain.
Why are NFT’s so valuable for artists?
Unlike physical pieces of art, NFTs can act as a contract when it is stored on the blockchain to execute actions when the artwork is traded. Often, the NFT is programmed to give the artist a percentage of the sales, using our previous example, the artist of the $69.3 million NFT receives 10% every time it is resold. We all know the all too real stereotype of the starving artist, and let's just say that this reliable future income is no joke and a huge game changer for artists.
When did this whole NFT craze begin?
Technically it's not all as new as it may seem. The first NFT was created in 2012 called “Coloured Coins” originating as bitcoin, but with the ability to represent other assets. The next big thing for NFTs came in 2017, known as “Cryptokitties”, the first version of what we traditionally know today as NFTs.
By now this is the reason you are reading this, NFTs have reached mainstream media. One example of this is when former CEO of Twitter, Jack Dorsey, opted in on the NFT craze to sell the first tweet in Twitter for a whopping $2.9 million dollars.
Another popular NFT known as “Hashmasks”, was collaged with over 16,000 digital art pieces. The project, made in collaboration with 70 artists, sold the entirety of the NFTS for $16 million in February.
Perhaps the most valuable NFT was originally a Doge meme, an art piece that sold for $4 million originally, but is now worth an estimated $220 million, according to Business Insider in September 2021.
Is this craze almost over (yet)?!
For all you crypto haters, unfortunately it appears the answer is no. The CEO of Coinbase believes that the NFT market will “surpass the size of Coinbase’s cryptocurrency business”, which is valued at a humble $1.3 billion.
Many cryptocurrency and blockchain platforms are attempting to form marketplaces for NFTs to join in on the trend before it's too late. Not surprisingly, Coinbase is one of them along with Blockchain.com, Binance and FTX.US. As of now, it seems that more firms are wanting to join the NFT marketplace business rather than pull out.
In our opinion, only time will tell if the NFTs are merely a trend, or here to stay.
But just how insane has the growth of NFT’s really been?
From the looks of this graph, I would say very sarcastically it's been decent.
As you can see, the digital token marketplace went from being valued at basically nothing in December 2020, to a $100 million in January and in just another month later nearing $600 million. The popularity of NFTs are no joke.
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