In 2020, the NFT market value tripled, grossing more than $250 million. As of the first quarter this year, NFT Sales have exceeded more than $2 billion.
What Are NFTs?
NFTs (Non-Fungible Tokens) simply means a token used to represent a digital item. NFT can be used to represent any digital item at all. Common NFTs are;
- Video Game Collectibles
NFTs can also be used to sell any digital item that is represented by it in the crypto market.
Differences Between NFTs and Standard Cryptos
NFTs are much like other cryptocurrencies like Bitcoin and Ethereum. But a Non-Fungible Token has a unique signature, unlike BTC and ETH. This signature is so unique that there are no other forms of it.
A signature for a token. For instance, 1 bitcoin is equal to another 1 bitcoin but 1 NFT cannot be equal to another 1 NFT. Hence the term “non-fungible”.
NFTs have an edge over other cryptocurrencies by the measure of the type of value they hold. Take for instance, Bitcoin is a form of currency. You exchange your money for a calculated amount of Bitcoin and when you sell, you get your money back. NFTs represent more than currency as they also hold the value of whatever is attached to the token.
Ethereum is currently the leading blockchain platform operating the Non-Fungible Token (NFT). Others include Binance Smart Chain, Tron, Cosmos, and WAX.
The NFT Boom!
In 2013/2014, Kevin McCoy and Anil Dash created the first NFT. It was created so that varieties of assets could be accommodated and traded. This broke the limitations of coin-to-coin transactions like those used on Bitcoin and Litecoin. The new transaction functioned like a trade by barter system.
Later in 2017, Dapper Labs created CryptoKitties. A blockchain based virtual game where gamers trade virtual cats, raise and train them. This was advanced by gamers and also collectors and fans trying to own a piece of digital art. Dapper Labs also teamed up with the NBA to sell NBA (NBA Topshot) video highlights with non-fungible tokens!
In 2020, the COVID-19 pandemic broke out and led to a global lockdown. There was a notable interest towards cryptocurrency by the majority. This naturally sparked a large increase in NFTs.
The Basketball game has an estimation of over 825million fans globally. The aforementioned highest value NBA Topshot is a dunk by LeBron James. It sold for $250,000. An estimation of 100,000 users own at least one highlight and the NBA has recorded total sales of $250 million through NFTs!
The NFT circulation has also been influenced by personalities such as:
- CEO of Twitter, Jack Dorsey (who sold his first ever tweet back in 2006 for $2.9 million).
- Beeple, A digital Artist (who also sold a collage of his art for $69 million through an auction).
Many other celebrities including 3LAU, Shawn Mendes, Lindsay Lohan are also trading NFTs.
Is The Boom Over Now?
Obviously, some factors have contributed to the boom and heightened awareness of NFT. The question is ‘for how long will those last?’.
Statistics show the pandemic contributed greatly to the NFT rise. The price of NFTs are negatively affected by the ease of lockdown restrictions. The market was concentrated during lockdown and caused a price hike. Simple economics have played out with NFTs at the moment as there is currently low demand and high supply especially as more celebrities try to cash in on the trend.
Since February to about late March, the sale of NFTs have decreased by about 70%. It took off again in April and now it has tailed off once more.
History yet tells us not to discard NFTs though. I mean, who would have thought of NFTs scaling the news 8years ago when it was first created. Joseph Schumpeter, an Australian economist explains this is why capitalism works. He calls it “Creative Destruction”. He says it is the relentless effort of making old into new.
He couldn’t have said it better. I mean, look at Kanye West making ancient Roman leather sandals into YEEZY Air Tiberius!
NFTs have enabled all kinds of artists to market their products to a new digital focused audience.
The future for NFTs is tremendously bright. Transactions with NFTs are reliable, smooth and transparent. They have the potential to exchange more assets like property deeds and vehicle slips. So, watch this space!