As the pandemic raged this year, people around the world continued to switch to everything online, including shopping for digital art, music, clothing and more.
While it is not possible to see or feel these things in real life, the non-fungible token (NFT) craze has now grown into a staggering $ 27 billion (£ 20.4 billion) market. ).
What is an NFT?
NFTs are unique and unique crypto assets that allow collectors to authenticate, own, and trade original authenticated versions of special digital goods using blockchain technology.
They can be anything digital, from drawings to videos or GIFs, but they can also be applied to a physical item such as coins or a stamp.
In economics, a fungible asset is something the units of which can be easily traded, just as money can. You can swap one £ 10 ($ 13) bill for two £ 5 bills and it will have the same value.
However, if something is not fungible, it has unique properties and therefore cannot be swapped for something else.
When an NFT is purchased, the buyer receives a certificate secured by blockchain technology, making them the owner of that specific digital asset.
Specifically, NFTs are typically held on the Ethereum blockchain (ETH-USD), but other blockchains support them as well.
Watch: Investing In Crypto And How NFT Collections Exploded In 2021
It cannot be duplicated or substituted, and it can only have one official owner at a time.
NFTs are transparent and no one is able to edit the ownership record or copy / paste a new NFT.
Due to this unique quality, the NFT market has become popular in recent years, attracting a number of high net worth consumers since their inception around 2014.
This year, NFTs have become increasingly popular as investors with bigger investment pots have joined the industry for some of the stock, while an exchange-traded fund (ETF) has been launched. to provide investors with additional market exposure.
NFT Investments, an investment vehicle specializing in NFTs, also announced a listing of £ 35million on the Aquis Stock Exchange Growth Market in London in April. It was one of the first NFT stocks to be listed in the City and the amount raised was a new record for AQSE.
The share placement was “substantially oversubscribed”, and more than three times the amount originally planned, with an order book of over £ 100million.
According to a new report from Chainalysis, the NFT industry now represents a $ 27 billion segment of the crypto market.
The data also showed that Open Sea, the largest NFT trading platform, has received over $ 16 billion so far this year.
Read more: The Economist takes a look at DeFi as it covers auctions as NFT
While the vast majority of NFT deals focus on retail investors, London in particular has been riding the wave, with galleries and auction houses across the city tapping into digital art and NFTs.
Christie’s auction house is currently offering five works by Nigerian artist Osinachi, and the city’s Saatchi Gallery held an immersive private exhibition last month, leading up to an auction.
The British Museum also sells NFTs of over 200 works by Japanese artist Katsushika Hokusai. It has partnered with French startup LaCollection to launch digital postcards with paintings reproduced from Hokusai’s work, including The great wave off Kanagawa.
The launch of a Hokusai exhibition at the British Museum, titled The big picture book of everything, will contribute half of the NFTs sold, while the rest will come from the museum’s own collection, as well as 103 unpublished drawings discovered in the book.
British contemporary artist Damien Hirst will also showcase his 10,000 NFT series at an exhibition taking place as part of London’s Frieze art fair this year.
Collectors can also make a comeback by “flipping” a used NFT in the aftermarket.
Chain analysis data revealed that the flip gives a much higher chance (65%) for a collector to profit while only 28.5% of NFTs bought when minted and then sold in a market end up. be profitable.
On average, the top-performing collectors on Open Sea – a peer-to-peer marketplace for NFTs – triple their initial investment every time they launch an NFT, while the bottom-performing group generates an average loss of 0. , 9 times its initial investment.
Read more: Non-fungible tokens: what are NFTs and why do they make so much noise?
During the year, several NFTs were sold for record amounts. In March, digital artist Mike Winkelmann, better known as Beeple, sold an NFT of his work for $ 69.3 million at Christie’s in New York City, placing him among the Three Most Valuable Living Artists. It became the most expensive NFT ever sold.
Meanwhile, Twitter CEO Jack Dorsey sold his first tweet as NFT for over $ 2.9 million. The tweet, which says “I just configured my twttr”, was first posted on March 21, 2006.
Dorsey said all proceeds from her NFT sale will be converted into bitcoin and donated to GiveDirectly, a charity that gives money to people living in poverty. Dorsey’s gift will go specifically to her response to COVID-19 in Africa.
The viral internet clip known as ‘Charlie Bit My Finger’ was also pulled from YouTube earlier this year, being sold as NFT for over £ 500,000.
Elsewhere, even horses created digitally with unique algorithms have been sold. Zed Run, a business that started in early 2019 with horses sold for as little as $ 30, recently sold a stable of digital racehorses for over $ 250,000.
On its platform, owners pay an entrance fee to race their horses against others for a jackpot.