Cryptocurrencies are now being recognised by governments and accepted by major companies globally. Crypto coins like Bitcoin and Ethereum have helped the rise of new digital assets. One such digital asset is NFTs. In the first half of 2020, there was €12.1 million in NFT sales. This new industry combining new technology with art has skyrocketed 'to the moon' with €9.4 billion at the end of the third quarter of 2021.
What is an NFT?
The acronym NFT which has become popular both in the financial and art world stands for non-fungible tokens. An NFT is a unique identifier that can prove ownership of digital goods. They make digital works of art and other collectables into one-of-a-kind, verifiable assets that are easy to trade on the blockchain.
Until the arrival of NFTs, digital art did not hold value in the same way that a masterpiece from Monet or Picasso does. This is simply because digital could easily be duplicated with the click of a button, making it almost impossible to distinguish the original.
Sacha Jafri explains how software makes this possible. He said, "There's software that scans an art piece. It can't be faked. It's absolutely impossible. If you scan a blank piece of paper and another blank piece of paper, they are different because this software will recognise the difference between the two blank pieces of paper."
The most expensive NFT
A phenomenon in the NFT marketplace is limited art collections such as Cryptopunks, Bored Ape Yacht Club and Cool Cats.
Each of these collections are limited to 10,000 pieces of digital art. Each day 1000s of NFT artworks are sold. Like traditional art pieces found in an auction by Christie's or Sotheby's, the rarer the artwork, the higher the price it can fetch.
The remaining third of a 10,000 Cryptopunks collection was recently sold for over €472 million. This pixelated art piece shows the potential of NFT sales in the future.
Why should I invest in NFTs?
You may wonder why someone would invest in something that you can easily duplicate on a mobile or laptop. Expensive NFTs are being used as profile pictures on social media accounts to show wealth, much like business people wear expensive watches.
Many people are buying into the world of NFTs to be part of an online community. Owning certain NFTs can give you access to exclusive content and live events.
Digital investors are utilising NFT marketplaces to make large amounts of money in what they hope will be a short amount of time. Also, business models from many industries are getting reshaped to incorporate NFT trading. A single NFT can be bought and sold multiple times, but the buyer must pay a royalties fee to the original owner or creator with each sale. The royalties fee is typically around 10 percent.
Charles Morin, Co-founder of Jumy, told Euronews: "Since we can trace the full story of the token at every single ownership transfer, the artists get some money out of the royalties."
Whether involvement in NFTs comes from financial interest, joining a community, or simply for the love of an art piece, the future of NFTs looks prosperous.