Interest in traceable digital collectibles called non-fungible tokens (NFTs) has exploded in recent weeks, with various artists and celebrities generating huge sums of money in sales.
Stored primarily on the Ethereum blockchain, NFTs are representations of digital properties – such as art, music, videos, and collectibles – that have a unique signature that allows ownership to be traced and verified.
NFTs are discussed as an innovative new way for artists to monetize their digital works and earn long-term royalties. By generating a limited supply of tokens, creators can fake scarcity that drives up prices.
According to DappRadar data, the volume of transactions in the three major NFT markets amounted to $ 342 million in February alone. In December, only $ 12 million worth of NFT was sold, while NonFungible figures suggest that the NFT market generated only $ 200 million in 2020 as a whole.
NBA TopShot, a marketplace for basketball-related collectibles, was the biggest contributor to NFT trading volume last month at $ 225 million, followed by OpenSea and CryptoPunks.
What is an NFT?
NFTs differ from other cryptocurrency assets, such as Bitcoin, in that they are not interchangeable or divisible.
If an asset is fungible, it can be freely exchanged for another identical version without any loss in value and can also be generally divided into smaller constituent parts. For example, if two people were to exchange a unit of Bitcoin with each other, no significant change has occurred and each Bitcoin can also be broken down into smaller units called Satoshis.
Non-fungible tokens, on the other hand, demonstrate ownership of a unique property and therefore have unique value. And NFTs also cannot be broken down into smaller units.
While NFTs have been around since 2017, it is only in the last few weeks that they have started to gain popularity with artists and celebrities, as well as gaining public attention.
In the past month, synth-pop artist Grimes made $ 6 million from sales of NFT, while musician 3LAU sold an NFT album for $ 11 million. A work of art by graphic designer Beeple also sold for $ 6.6 in an aftermarket (NFT’s biggest sale to date), days before a collage by the same artist was sold at the home of Christie’s auction.
While it’s hard to see why someone could spend so much on a digital asset that can be easily reproduced and found online for free, NFTs seem to have tapped into a primary desire for ownership that could see them become a permanent fixture in their lives. the digital world. art. Or maybe it’s all just a hype.