NFT stands for non-fungible token. Put simply, this is a digital asset that is distinctive from others out there—in other words, it is the only one of its kind and you can duplicate it. More specifically, an NFT is a code that’s associated with a particular file, and the person who buys an NFT gets a certificate of authenticity, making it easy to figure out which files are originals versus which ones are copies.1,2
When you own an NFT, the information will be stored in a blockchain so everyone knows that only you own the original, even if there are copies on the internet. But there are some limitations because you can’t change the NFT. Instead, you can trade it with someone who wants to get the asset from you, or you can list your NFT for sale on one of the many auction sites where these assets are found, such as OpenSea.1,6
Just as the crypto market has been growing rapidly, so has the NFT market, with people both buying and selling these non-fungible tokens. And, with the steady and rapid rise in popularity and purchases of cryptocurrencies, it should come as no surprise that NFTs, which can be purchased with crypto, have also grown substantially. More and more people are now opting to purchase these one-of-a-kind digital files.
Below are some helpful stats that can be used to understand NFTs and their impact a bit better.
- In 2021, an NFT called "Everydays: The First 5,000 Days" by an artist named Beeple was auctioned off for about $69 million.1,9
- NFTs are commonly utilized to show ownership of file formats that include JPEGs, GIFs, and MP3s.2
- The market cap for global transactions of NFTs was $40.96 million in 2018, $141.56 million in 2019, and $338.04 million in 2020.1
- Although they’re now mainstream, it’s believed that NFTs have been around since 2012.3
- One well-known NFT is Jack Dorsey’s (the founder of Twitter) first tweet, which sold for nearly $3 million.1,4
2021: A Year of Growth for NFTs
2021 isn’t over yet, but it has already seen a rapid rise in the popularity of RFTs. They have become more common than ever before, with more NFTs being created, bought, and sold. And people are willing to spend top dollar on a digital asset that they really want to claim as their own.
- In 2021, the value of NFTs for gaming declined, but those for arts increased.1
- Big name brands, such as Taco Bell, have started offering NFTs of their own by creating digital collectibles for sale.4
- In February 2021, monthly sales on OpenSea were over $95 million.7
- By March 2021, trading volumes for NFTs on Ethereum totaled more than $400 million.7
A Look at Some of the Most Expensive NFTs
When you look at the price of some NFTs, it can be hard to believe that they sold for as much as they did. Here are a few of the top-selling NFTs so far.
- NBA’s Top Shots, a trading card system, has already made more than $230 million.8
- Hairy, an NFT by Steve Aoki and Antoni Tudisco, sold for $888,888.88.8
- The Nyan Cat GIF sold for $590,000.8
- CryptoPunk #6965 sold for $1.54 million.9
The Popularity of NFTs in Gaming and Art
There are various categories of NFTs, but two of the most popular ones are gaming and art. In the same way that someone would collect fine art that can be hung on a wall, they can now buy artwork in the form of an NFT that might increase in value over time as well.
- In 2020 alone, NFTs in gaming and art were worth millions of dollars.2
- In 2021, an artist known as Beeple used the auction house Christie’s to sell his art for over $69 million.3
- When looking for NFTs, buyers can become owners of pieces of artwork, tweets, sound effects, and clips from sporting events, as a few examples.3
- Artists can take advantage of NFTs to sell their artwork to the highest bidder. And, if a piece of art is resold, the artists might even be able to get royalties.3
- Kings of Leon is a band that sold their album in the form of an NFT in 2021 and generated around $2 million.10
- Popular marketplaces for NFT artwork include SuperRare, Zora, Rarible, Nifty Gateway, and MakersPlace.5
The Negative Side of NFTs
Although a lot of positive things can be said about NFTs, and many people predict that their value will continue to grow over time, there are also critics who have made it a point to alert people to the potential drawbacks of these digital assets that come with such huge price tags.
- Some critics argue that NFTs are not going to be able to hold their value for the long run. And some even go so far as to say that NFTs aren’t worth anything at all.3
- NFTs are sold on online marketplaces, which means scammers might begin taking advantage of unsuspecting buyers.3
- Being able to verify that a seller is also the creator of an RFT can be difficult.3
- When you buy an NFT, you’ll get a key or password that should be kept private and secure because it will be used to prove your ownership of the digital asset. The risk of losing this password is real, so buyers need to take steps to protect it. Otherwise, someone else might be able to steal the asset and trade it without the rightful owner knowing or permitting it.3
Overall, even though NFTs are essentially just a code that identifies a digital asset and its owner, they have quickly become collectors’ items, with people willing to spend hundreds of thousands, if not millions, of dollars to stake their claim to a file. The fact that these digital assets are scarce helps them maintain their value, and that’s also one of the reasons why they cost so much money. Whether they will continue to grow in popularity and usage or eventually become a thing of the past is something that’s yet to be seen.