A year ago, non-fungible tokens (NFTs) were considered a “failed experiment.” Now, Twitter natively supports Ethereum NFTs as profile pictures, Facebook’s parent company META is launching an NFT marketplace, and several technology companies are investing in NFT platforms. Needless to say, they are no more a “failed experiment.”
The reason for this is the massive growth in NFTs over the past year. It started with the sale of the Everydays painting by digital artist Beeple for $69 million in February 2021. And since then, a slew of NFT projects began to emerge.
Many investors now deem NFTs as legitimate investments. But much of the NFT market lacks structure. In order to differentiate between NFT projects, we can place them into 4 categories.
NFTs can be collectibles, where each individual is part of a larger collection. These NFTs are limited in number, and no more than a specified amount can be created. Each NFT has a unique visual characteristic, which gives it additional value. These are used on social media platforms as unique profile pictures.
Example: Bored Ape Yacht Club, Crypto Punks, Meebits, etc.
These are a unique one-of-a-kind NFT. These are usually sold in a traditional auction process where one bidder holds the right and ownership to a piece of digital art. These are not part of a larger collection. However, unlike traditional pieces of art, these NFTs are dynamic i.e. they can change depending on real-world events. Additionally, photography NFTs are a growing market within the one-of-a-kind NFT artwork marketplace.
Example: Beeple’s Crossroads NFT sold for $6.6 million, etc.
NFTs were initially seen as visual, image-like pieces of art. But with the blockchain, other pieces of media can be encoded and sold on the blockchain. This is why music artists have gravitated towards NFTs and launched — audio and video NFTs. Many individual artists and bands like Snoop Dogg, Mike Shinoda, 3LAU, and more have launched their own NFTs. These are either in the form of complete songs, fractionalized parts of songs, or even claims to royalties of songs produced by the artist.
Example: Dogg on it, Async Music, The Next Album, etc.
Sports NFTs are an evolution of traditional trading card games. These can be either a sportsperson’s profile or a sportsperson’s highlight reel. Each person or piece of gameplay is encoded into a trading card like NFT that can be bought and sold on the respective marketplace. The leading example of this is NBA TopShot where pieces of gameplay are stored and tradeable on the FLOW blockchain. Other forms of sports NFTs include stadium ticketing, and revenue sharing with fans.
Example: NBA TopShot, UFC Strike, etc.
Here are some of the most interesting stats about NFTs:
- 4.2 million Ethereum wallets have ever owned an NFT
- Average monthly NFT sales on OpenSea: $2.5 billion (highest sales was in January 2022: $4.9 billion)
- 1.6 million NFT traders over time on Ethereum
- Marketshare by transaction volume on Ethereum: OpenSea (55%), LooksRare (44%), Others (1%; SuperRare, CoinbaseNFT, NiftyGateway, etc.)
- Marketshare by users on Ethereum: OpenSea (98.7%), LooksRare (1.2%), Others (0.1%)
With consistent sales of over $3 billion across the top blockchains, NFTs are on a massive growth path. In 2021, the market was valued at $40 billion, compared to the art market which is valued at $50 billion. Traditional art houses are turning to NFTs, sports stars and artists are incorporating NFTs as part of their production, and everyone seems to be jumping on NFT collections. The NFT mania is only beginning.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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