Jack Dorsey, selling his first tweet for $2.9 million was impressive. But, I knew non-fungible tokens were gaining serious ground when UC Berkeley auctioned NFTs for their Nobel-Prize winning cancer immunotherapy patent.
Because NFTs skyrocketed in popularity just this year, many people are still trying to figure out why.
What Makes NFTs so Popular?
NFTs are one-of-a-kind digital assets with a unique value and sole owner. NFTs include digital artwork, gifs, memes, and even video game collectibles bought and sold using blockchain technology, which I will cover later.
These unique digital collectibles are highly profitable as they typically increase in value over time. Hence the reason they are so popular amongst consumers.
However, they also provide digital creatives with the recognition and capital they deserve. Let’s face it: digital artists are often taken advantage of as current technology permits free screenshots and downloads. In that case, what makes NFTs so unique?
1. They Are Unique
To understand why NFTs are flooding the digital market, you need to understand the term non-fungible. The word fungible means something is replaceable or interchangeable. Therefore, non-fungible means irreplaceable.
For instance, a five-dollar bill is fungible because it is replaceable with another five-dollar bill. The bills hold the same value. On the contrary, Van Gogh’s “Starry Night” cannot replace Da Vinci’s “Mona Lisa.” Both paintings are valuable but not even close to the same piece of art.
Now, think of the terms fungible and non-fungible in a digital realm. One Bitcoin equals one bitcoin. Meaning one bitcoin can replace another without losing value. Bitcoin is a fungible cryptocurrency.
While you can trade a non-fungible token, you cannot simply replace it because no two NFTs are the same. Since each NFT has a unique makeup, it can be impressively lucrative for artists, art-lovers, and investors. NFTs singularity is the reason they are booming on the blockchain.
Like other cryptocurrencies, blockchain technologies record NFT transactions. Blockchains are digital ledgers that publicly track transactions and ownership. The technology does not have a mediator that privately records purchases, so the money goes directly from the buyer to the seller.
NFTs use the Ethereum blockchain in specific. Ethereum is a form of cryptocurrency that uses ether coins or ETH. The platform’s blockchain employs smart contracts that mint non-fungible tokens. Meaning, the NFT you purchase has a unique ID and metadata that cannot be erased or copied, ensuring each transaction is permanently recorded and secure.
The smart contract also keeps track of the original creator and current owner, making it easier to establish authenticity.
2. They Offer Buyers a Positive Outlook
In the simplest terms possible, purchasing NFTs grant buyers:
- Ownership over a digital asset that is not replicable
- A digital collection of unique creations
- A return on your investment if you are patient enough to wait out value growth
3. And They Provide Sellers a Positive Outlook
NFTs are especially beneficial to creators because they do not have to split profits with publishing platforms for meager marketing. Blockchain transactions permit creators to communicate with and sell work directly to their followers.
Artists can reap the benefits of royalties as well. As previously mentioned, the Ethereum blockchain’s smart contract permanently embeds the original creator. This makes it possible for artists to receive a payment each time their work is resold.
The limitless market is perhaps most valuable to sellers. Creators are no longer limited to the location of their publishing platform and can access the global market.
Most recently, digital artist Mike Winkelmann, better known as Beeple, sold his NFT “Everydays: The First 5000 Days” at Christie’s Auction House for a whopping $69 million. Vignesh Sundaresan, a well-known member of the cryptocurrency community, purchased the piece. It is now one of the third most expensive artworks created by a living artist.
4. They Give You Access to Collectibles
Profitable and rare digital creations are accessible on multiple NFT marketplaces. The reason you are buying or selling NFTs will determine which platform you use. A few of the most popular NFT markets are listed below.
- OpenSea is a decentralized NFT marketplace that sells, trades, and buys the following NFTs: art, domain names, trading cards, collectibles, music, and more. OpenSea advertises itself as the largest digital marketplace.
- Nifty Gateway prides itself on listing rare collectibles from top artists for a limited amount of time. The NFT platform is unique because you do not have to understand cryptocurrency to purchase NFTs as they accept US dollars.
- CryptoPunks was one of the first non-fungible token marketplaces, initially started as a free-of-charge experiment giving away unique pixel avatars. The platform laid crucial groundwork for the cryptoart sold today.
- CryptoKitties is a game that allows users to breed, sell, collect, and purchase digital cats. Originally launched in 2017, Cryptokitties can now sell for six figures or more.
- NBA Top Shot allows fans to trade digital collectibles licensed by the NBA and WNBA. Meaning, you can own a clip of Lebron James dunking on the Clippers. Talk about bragging rights.
5. The Future of NFTs Seems Bright
Some skeptics dismiss NFTs as an art world fad. As previously mentioned, why not simply screenshot or download a digital file?
The undeniable truth is that the more digitized society becomes, the more fascinating digital creativity is. Whether you agree or not, the work put into Nyan cat is just as impressive as the painting on your wall.
NFTs are an expression of our evolving culture and then some. Even if the craze in the digital art world dies down, it will not change what NFTs are–a receipt in your digital wallet proving ownership. NFTs are similar to a bill of sale or deed. Do you see the potential?
Many cryptocurrency users predict real estate, vehicle, and other investment markets will eventually find non-fungible tokens beneficial.
So, Why Are NFTs Popular?
NFTs are popular amongst creators and consumers alike. Decentralized and unreplicable proof of ownership provides buyers and sellers with extensive leverage in the digital market.
Buyers can effortlessly turn a profit while sellers reap the royalties. Most importantly, digital artists can finally receive the recognition they deserve.