If there is any huge trend, growth, and wide acceptance ever recorded in any digital asset within the shortest time, that would be NFT!
NFTs seem to be everywhere!
Though the first NFT was created back in 2014, which was a short video clip of artwork. The video was created by Jennifer McCoy, and the video was turned into NFT by her husband, Kevin McCoy and Anil Dash. It was later sold for $1.47m in June 2021.
The buying frenzy of digital assets has since increased and has been on the rage!
WHAT IS NFT
NFT means non-fungible tokens. NFTs are simply digital artwork and assets; they are cryptographic tokens that exist on the blockchain. Each unit of NFTs has its unique data and represents a unique asset that cannot be interchanged or duplicated. An NFT can be a complete digital asset such as an audio or game file, an image, a gif, and digital art or can be token versions of real-world assets like real estate, house, land, and jewelry.
The primary use cases of the new digital assets are proof of authenticity and ownership.
VALUE OF NFTs
Whatever thing has value is only valuable because people believe it is valuable. The value of non-fungible tokens stemmed from their uniqueness, scarcity, and the general value ascribed to them. The value of NFTs, like other valuable items, is assigned by people, which is not inherent to the thing. The price of an NFT art is set by the owner selling it. However, the price changes in response to the demand and supply of the market.
Owning a digital collection of art is cool as the idea of owning an original work is attractive and a sign of social status. This practically defines Veblen goods. In addition, NFTs are also purchased to resell when the value increases and can be sold for more money, just like physical art. Non-fungible tokens allow collectors to take advantage of all the perks of owning a physical work of art. But with an added benefit: their collection can be shared freely over the Internet without limitations. They can therefore accumulate more value as they grow.
At first, it may seem that if the free circulation of the work is allowed online, which can be seen by anyone, screenshotted, or even downloaded, no one will want to have the original. However, if you think about it, much of our society is driven by status. If having a particular original work gives you status, many people will be willing to pay for it. There must be thousands and thousands of copies of mythical paintings by Picasso or Van Gogh. However, millionaires are still willing to spend millions of euros for the original. The value of an NFT increases based on its popularity which may equal its demand, limited unit, and value ascribed to it.
The previous CEO of Twitter, Jack Dorsey, sold his first tweet on Twitter as an NFT for $2.9 million in March last year. The tweet is only 5 words and was tweeted back in 2006! Mike Winklemann, a famous digital artist, sold one of his works as an NFT for $69.3m in 2021. An NFT named “the merge” was bought by 28,983 collectors for $91.8m.
NFTs can be viewed online by anyone, screenshotted, or maybe downloaded. Still, the owner only has the original item with built-in authentication.
The original use cases of NFTs are to help the artist and digital creators monetize their work by selling it and gaining royalties whenever the digital asset is resold. However, the use cases of the new digital assets have since grown and do not seem to be at their peak yet. The primary main use case of NFTs now is to authenticate. Digital creators and companies in different industries have adopted NFTs to ensure the authenticity of products that customers or consumers buy. For example, Nike uploads a digital version of the product a customer buys on the customer’s virtual locker named “Cryptokick,” solving its authentication problems. The new technology can also be adopted in the food and medical sector to track the producer, the ingredients used in making the product, and its journey from the manufacturer through the shipment process.
The unique tokens are also used in the entertainment industry as a receipt of payment, to purchase collectibles on an online store, and to show support by fans to their favorite artists and celebrities. For example, fans of a football team, music artists, public figures, etc., can support their favorite without being physically present at an event. Music concerts can also sell tickets and give fans a digital gift.
For example, the National Basketball Association (BNA) introduced the “NBA Top Shot.” It’s an online marketplace where fans can purchase different moments from their favorite player, match, or team.
The real estate industry has also adopted NFT. It is used to provide rental services, proof of real estate asset ownership, transfer land deeds, and keep track of changes in the property’s value.
Buyers of real estate properties can now know everything about the properties they want to buy, starting from when they were first built. Virtual real estate properties can also now be sold as non-fungible tokens.
NFT has also helped store medical records and verify the identity of people without compromise. An example of this use case is a non-fungible token birth certificate issued to newborns by healthcare providers.
Intellectual property and patent rights have never been safer. Artists, inventors, and digital creators can use NFT tokens to prove or protect the ownership of any innovation, invention, creation, or content.
The unique tokens are also a suitable way of representing academic credentials by academic institutions. For example, educational institutions can use NFT to prove the class of degree earned by students, their attendance, tuition payment records, and other important information. This is thanks to the unalterability of the base record on the blockchain.
The NFT technology has been adopted in the gaming, transportation, and finance industries and used to exercise voting rights, ticketing, and tracking artwork.
The estimate market capitalization of NFT is $12,152,088,770, the sales volume (24 hours) is $23,021,382 and the total sales (24 hours) is $26, 910 as at 05:35pm 04/06/2022 (source: https://coinmarketcap.com/nft/).
Celebrities, international companies, famous artists, footballers, social media companies, and sports associations have adopted the new technology. However, they are still embracing digital assets and the latest crypto technology. Some of them are Adidas, Samsung, Nike, Coca-cola, Dolce & Gabanna, MAC, Facebook, Instagram, Snoop Dog, Charles Hoskinson, and David Beckham.
NFT tokens are bought and sold online through different markets. The most famous places to buy and sell digital arts are Opensea.io, Rarible, Foundation, and Binance.
Despite the current many uses and applications of NFT, the potential of the new crypto technology may not even be at the optimum.
The popularity of NFTs is growing, and the use cases also keep increasing. However, some NFT applications may not be so practical or popular in the future. Nevertheless, given the issues of authenticity, ownership, and scarcity of art and collectibles that they are solving, the technology is here to stay.
Since the NFT industry is still new and just like every other investment, precaution needs to be overserved. However, investing small amounts in good digital asset collections to try out the potential may not be a bad idea.