Those who like to stay connected to current internet trends have probably heard a lot about NFTs in recent weeks. The blockchain collectibles are currently getting plenty of buzz thanks to high-profile sales of everything from original memes to albums from popular bands.
But what is an NFT and why are they becoming so popular right now?
Interestingly, NFTs aren’t a new thing. The first one was released back in 2017 by Larva Labs. That was quickly followed by a project called CryptoKitties, which ultimately raised millions of dollars for its team.
Recently, digital artworks have sold for millions and a variety of famous internet content has been sold for equally high amounts. This has sparked new interest in the blockchain-based tech from everyday people and high
NFT stands for non-fungible token. Essentially, an NFT is a sort of collectible, much like a baseball card or vinyl record. However, the key is that it only exists in the digital realm. The technology behind NFTs is similar to cryptocurrencies like Bitcoin and Ethereum since it relies on blockchain.
This allows NFT owners to prove the authenticity of their digital collectibles—something that is hard to do in today’s world of deepfakes and Photoshop.
By creating scarcity with blockchain, NFT owners are often able to re-sell their pieces for more than they paid. Think of it like collecting something in the real world, like expensive art, except there is nothing physical to hold onto.
When people think of blockchain, they may immediately jump to cryptocurrency. Where NFTs differ is the fact that they are unique. Unlike virtual coins, which can be exchanged for one another in varying amounts, NFTs aren’t interchangeable. Collectors can, of course, trade them for other forms of currency. However, in doing so they give up the rights to owning that unique piece of digital property.
Proof is King
In the real world, someone could own a rare Pokémon card and make millions by selling it to another collector. The same thing can be done with NFTs. However, there’s something interesting to consider because of the digital nature of NFTs.
When a collector buys something like an original artwork, they immediately gain ownership of it. While the artist typically retains copyright privileges and can reproduce copies, only the collector owns the original piece.
That being said, since an NFT is stored on the internet, that artwork can easily be copied by any user that wants it. All they need to do is save a copy of the image from their web browser.
The thing that makes NFTs so attractive for the wealthy individuals who collect them is the proof of authenticity. Just like an auction house can certify a piece of art before listing it to other buyers regardless of how many copies have been made, NFTs can be verified before they’re sold.
In the world of regular collectibles, sports cards and memorabilia tend to be popular. The same thing is happening digitally with NFTs.
Recently, NBA TopShot introduced a platform that lets users buy and sell data and short highlight clips from their favorite players. Like a trading card, each video is only reproduced a certain amount of times to create scarcity. This drives prices up and encourages users to buy their own.
To date, TopShot has seen more than $280 million in sales. That’s incredible considering the platform’s small size and the relatively short time that NFTs have been popular.
TopShot isn’t the only company using NFTs to create collectible digital items. A French firm called NonFungible launched a platform to do the same thing with soccer cards. So far, it has reportedly amassed around $50 million in sales.
Art and Artist
Part of what makes people want to buy NFTs is scarcity. That makes NFTs an interesting option for artists. Although anyone on the internet can still copy the work, collectors have more incentive to buy original pieces. This allows anyone to sell their work at a higher price.
Digital artist Beeple knows that firsthand. Beeple, whose real name is Mike Winkelmann, had a digital painting resold for $6.6 million late last month. This was a record within the NFT industry and could be a sign of times to come.
Another part of what is helping make NFTs so popular is the fact that it’s possible to collect just about anything. Yes, anything.
A collector recently spent $590,000 in an online auction to purchase the NFT rights to the popular Nyan Cat meme which rose to fame in 2011. Thanks to the massive number of people who love memes, it isn’t hard to see others following suit in the coming years.
Some people have also tried experimenting with the limits of what can be sold as an NFT. Twitter’s founder and CEO Jack Dorsey announced that he would sell his very first tweet, which reads “just setting up my twttr,” from 2006. At the time of this writing, the largest bid is $2.5 million. It goes to show that there is a market for just about everything.
NFT marketplaces give collectors a way to buy and sell those assets in a secure fashion that’s similar to doing so with real-world items.
Serious Hobby or Trendy Fad?
Something about the fact that NFTs are associated with cryptocurrency makes people suspicious. Although there are certainly digital coins that fizzled out shortly after their launch, there are also ones like Bitcoin and Ethereum that have proven themselves to be extremely stable.
Many people believe that the market for NFTs is finally starting to mature after a few years of supporting comical purchases and non-serious collectors. Indeed, as celebrities like Mark Cuban and major consumer brands get involved, it appears that the market is stabilizing.
That’s good news for collectors that want to take a chance on NFTs.