LONDON (Bywire News) - Non fungible tokens (NFTs) are one of the buzzwords of the blockchain revolution. However, as with many buzzwords, many people don’t fully understand them. So, what are they? And are they worth the hype.
If people struggle with the term it is, perhaps, understandable. NFT is a somewhat oxymoronic term mixing the tangible with the virtual. They bring a sense of uniqueness commonly associated with the physical realm into the digital world which – by definition – normally feels virtual.
In other words: an NFT is a unique digital asset distinct from anything else. For example, while bitcoins are replicated time and time again, there can only be one of any NFT.
The rise of NFTs
NFTs are everywhere. Just last week, Sotheby’s sold the first NFT ever created – a rough pixelated figure known as CryptoPunk – for $11.8 million. It was created by New York artist Kevin McCoy and became the first digital asset to be associated with an NFT-style certificate of ownership in May 2014, several years before people started coining the phrase NFT.
NFTs are commonly associated with artwork, but they can be anything – a drawing, animation, piece of music, video, written content, or anything else digital, with a certificate of authenticity created and verified by blockchain technology. This provides an immutable, public record which cannot be falsified.
It started with people such as 18-year-old artist Victor Langlois making digital artwork and then selling online, but it quickly grew. Today he’s selling artwork for up to $70,000. The market is booming. In 2020 it tripled in size with several landmark deals making headlines including the $69million deal for ‘Everydays – the first 5,000 Days’, a massive collection of work from the artist Beeple.
In May this year, Zoe Roth whose face became a meme known as Disaster Girl, turned it into an NFT and sold it for £500,000.
In part this trend is being driven by speculation and, like all speculative bubbles, it may have to pop some time. Data from Quartz shows that the market has dropped 80% from its peak of February last year. Many bearish analysts already see the NFT craze as a bubble whose end is near.
Boom or bust?
That poses an interesting question for companies which sought to capitalise on the surging NFT marketplace. Earlier in the year, with NFT activity near its peak, Voice.com the blockchain based social media platform suddenly announced it would be pivoting to become a social platform where people could turn their content in NFTs.
Voice have followed that up with their recently launched NFT Residency to help boost emerging digital artists. It is currently in private beta testing and plans to launch later this summer.
Critics have warned against platforms such as Voice getting too involved with NFTs, just as the market is cooling off. However, the more objective commentators seem to agree that NFTs – and NFT platforms such as Voice.com – are indeed here to stay.
Those bullish on EOS and NFTs will take heart from the apparent emergence of NFTs in other parts of life, particularly real estate. NFTs are increasingly being used to facilitate the purchase of virtual property. Digital real estate is actively being traded on virtual roleplaying games such as Super World. The digital ‘Mars House’, recently sold for around half a million dollars. This is an entirely virtual property which can be explored virtually, but which nobody can ever physically go inside.
If that sounds far-fetched, you may not be wrong. However, NFTs are showing potential to expand into the world of physical property. Here the process of purchasing property, managing due diligence, and transferring contracts is notoriously long winded and cumbersome. Imagine if, instead, a property could be transformed into a digital token which could then be bought and sold as an NFT.
It could then be possible to buy a house as an NFT and then borrow against the NFT to unlock more capital. It can do away with huge amounts of paperwork and replace multiple layers of middlemen which can make the process of buying property a nightmare.
NFT’s are also making their way into the physical art sector. Superchief in Soho, bills itself as the world’s first NFT gallery, taking digital works of art and placing them physically on display. It demonstrates the growing integration of the physical art works with the digital world and signals the ongoing penetration of NFTs into the mainstream.
So, while speculation and short-term crazes do indeed drive much of the activity in the NFT market, this is a sector which has enormous potential for real world application. In the long term it can find a place which allows it to truly transform activity across a range of sectors. Over hyped they may be in some place, but NFTs are unquestionable innovative, valuable, useful, and therefore here to stay.
(Writing by Tom Cropper and editing by Michael O’Sullivan)