Unless you have been in a long coma or living underneath a large rock you have likely at least heard the term NFT over the past year. At the same time studies show nearly 70% of Americans do not know exactly what an NFT actually is. We will try to provide our best definition and explanation for NFTs and the value proposition they provide.
What is a Non-Fungible Token (NFT)?
According to Wikipedia’s definition “A non-fungible token (NFT) is a non-interchangeable unit of data stored on a blockchain, a form of digital ledger, that can be sold and traded. Types of NFT data units may be associated with digital files such as photos, videos, and audio. Because each token is uniquely identifiable, NFTs differ from blockchain cryptocurrencies, such as Bitcoin (BTC).
“Non-Fungible” basically means that it is a unique item and cannot be replaced with anything else. As an example Bitcoin is fungible, because you can trade one bitcoin for another bitcoin and each bitcoin will exactly equal each other in value. A one of a kind baseball card that is signed or a 1 of 1 edition is considered non-fungible. If you were to trade this 1 of 1 signed card for another different card, the value is not exactly the same as they are different items. NFTs are basically digital assets or items living on the blockchain, currently the most popular blockchain or cryptocurrency for trading NFTs has been Ethereum (ETH).
NFTs provide verified digital ownership rights of digital assets. Some of the most popular NFT use cases today are:
- Art
- Art Collections
- GIFs
- Video and sport highlights
- Virtual avatars
- Music
- Digital clothing and sneaker
Essentially NFTs are collected by enthusiasts similar to a person collecting art or trading cards. Several factors can determine the value of an NFT including interest in the artist, the project and the rarity of the NFT itself. Advocates argue that digital ownership of an asset is more valuable then physical ownership as it can be verified on the blockchain thereby it cannot be a counterfeit, also the owner can take it anywhere they may go via an application, and display it online at all times. Many NFT owners including celebrities and sports stars will use there owned NFT avatars as profile pictures in social media, displaying their ownership to the world. Popular social media sites have added NFT verification abilities into their platforms to confirm ownership of the NFT displayed.
Growth of NFTs
NFTs have been around since 2014, however they exploded in popularity in 2021 with the help of cryptocurrencies growth and easy to use NFT marketplaces like Opensea which has over $7 billion in trading volume. NFT trading rose by over 700% between 2021 Q2 and 2021 Q3 alone with over $41 billion dollars poured into the space in 2021 overall. The most valuable NFT to date was sold for $91.8 million dollars by the artist ‘Pak’ named “the merge”. The NFT use cases keep growing and have branched out powering several metaverse projects, NFT based games and DAO based projects, the continued growth and use cases is likely to drive mainstream adoption in the future.