NFTs: What Are They And Why Are They So Popular?
From street art to unreleased songs and even artificial intelligence, NFTs are capturing the limelight. But what exactly are they and why are they so popular?
As the cryptocurrency market and decentralised technology space see a surge in demand, one particular area that is certainly booming in 2022 is non-fungible token (NFT) art.
Data from NFT market analyst, NonFungible, consistently shows growth. Since NonFungible began recording the data in 2018, the total spent on NFTs to date stands at $480 million (as of February 2022). Indeed, the data suggests the “NFT craze” is actually rather recent. In 2021, the first NFT artwork to be sold at a major auction house closed at $69,346,250 during an online auction by Christie’s.
But what exactly are NFTs, and why are they becoming so popular?
What are NFTs?
A Non-Fungible Token (NFT) is a unique cryptographic object that exists on a blockchain.
Uniqueness
NFT’s uniqueness comes from the unique data attached to each NFT, meaning they can be distinguished from one another and can’t be exchanged like-for-like. Their uniqueness is also precisely what gives them their value.
This data could be anything. From a string of binary (e.g. 1010101001001001…) to the complete works of Shakespeare. NFT data can also include images such as PNG or JPEG files.
Non-fungible
Crucially, NFTs are not fungible. Put simply, this means they are not mutually interchangeable and typically cannot be broken up into smaller pieces like cryptocurrencies, further solidifying their value. Indeed, it is both the latter and the trait of non-fungibility that make NFT-art attractive.
Artists can store images of their pieces on unique, indivisible NFTs and sell them globally in a matter of seconds. However, artists can also create digital art directly onto these NFTs. These create completely unique pieces that only exist in NFT-form.
NFTs vs Crypto: What’s the difference?
The main difference is that cryptocurrencies like Bitcoin (BTC) are cryptographic assets that have no unique attributes. This means each of the 19 million BTC in existence is the same as every other BTC and they can be divided into infinitesimal fractions. Accordingly, if one BTC was swapped for another, nobody would notice, but just like NFTs, a bitcoin can’t be copied.
Examples of NFTs
CryptoKitties
The most famous example of NFT-based digital art in the cryptocurrency space is CryptoKitties. CryptoKitties is a feline-themed game, with individual cat-themed NFTs (known as CryptoKitties) at the core. Each is unique in appearance, having certain unchangeable characteristics.
Whilst seemingly trivial, at the height of their popularity in 2017, individual CryptoKitties were selling for as much as 600 Ethereum (ETH), worth $170,000 at the time. Now, however, that large price tag is even higher, at $1.1 million at current market prices.
NFT Art in Pop Culture
Today, unique replicas of famous artists’ pieces are being turned into NFTs.
In early 2021, NFT art made history as a piece by pseudonymous British artist Banksy, was purchased and immortalised as an NFT, before being incinerated. Accordingly, the only copy of the piece now sits on a blockchain. The piece reportedly sold for $100,000, but will almost certainly attract more in its new form.
NFTs have also made their way into music. Rapper Torey Laez debuted three songs on his much-anticipated album “Playboy” as NFTs using a marketplace built on DeFi platform, Bondly Finance. The artist followed in the footsteps of DJ 3lau, who recently sold an NFT collection of his music for over $11 million. This month the Kings of Leon released a tokenised album generating at least $1.45M, or 820 Ether, in sales in its first five days
The artists themselves benefit by being able to sell directly to fans, therefore avoiding the fees paid to labels and receiving more of their music’s value.
In 2022, NFT enthusiasts need to keep a watch out for more NFT art and projects that can yield a great profit as well as contribute to this innovative art industry.
Are NFTs a good investment?
Just as art investors make it a point to invest in popular works by world-famous artists, so should you if you want to invest in NFT art. Art will never die and NFT art is certainly a popular and unique form. The value of investing in NFTs stems not only from the value conferred by their scarcity and uniqueness but by the application of those features to popular aspects of social culture.
Which football fanatic wouldn’t want to own the only official digital copy of their favourite player’s likeness? Which music fan wouldn’t want to own the only unique copy of an unreleased piece of music from their favourite artist?
Moreover, novel uses of NFTs are making headlines everywhere. From commemorating famous sportspeople or events to notable events in political history.
One of the most technically impressive immortalisations of digital art in this form comes from the 0xmons project. They use something called a generative adversarial network (GAN) to create pixelated figures, embedded in NFTs. A GAN is a tool that uses artificial intelligence to predict what real-life objects would look like. They are used in facial recognition technologies, as well as the more nefarious ‘deepfakes’.
These kinds of use-cases for NFTs turn heads and keep their value driving higher, which is perfect for NFT investors. And with weekly revenues of $50 million, the number of NFT investors is growing daily. Will you take the leap?
FAQs
What are NFTs?
NFT stands for Non-Fungible Token. It derives value from the unique data attached to each NFT and the fact it is non-fungible. Non-fungible means they are not mutually interchangeable and typically cannot be broken up into smaller pieces like cryptocurrencies. This further solidifies their value.
What is an example of NFT?
CryptoKitties is a feline-themed game, with individual cat-themed NFTs (known as CryptoKitties) at the core. Each is unique in appearance, having certain unchangeable characteristics.
Who are some famous artists that are publishing NFTs?
Banksy, Kings of Leon, DJ 3lau and rapper Torey Laez have all released projects as NFT art.
Are NFTs a good investment?
As of early 2022, the total value of NFTs sold stands at $480 million and is set to keep growing. However, the value of individual NFTs relies on them maintiaining their popularity and that is far from guaranteed. It’s NFTs uniquness that sets them apart from crypto, but that also increases the risk factor. While the gains some have seen from investing in NFTs are huge, the risk is harder to understand. If you are new to the crypto space then buying and holding crypto may be the safer bet.
As always, this article does not constitute financial advice and you should be sure to do your own research and consult a professional financial advisor before making any investment decision.
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