NFT: Understanding the New Crypto Hype
Everyone is talking about digital arts and NFTs. Let’s start with some fundamentals
A non-fungible token (NFT) is a type of token representing a unique asset kept on the Ethereum blockchain. NFTs are the latest trend in the crypto world after reaching a market value growth of 299 percent in 2020.
Some have said NFTs are a mix of art and crypto, given that these assets are unique and non-replicable, very much like an art piece in digital form. Unlike crypto coins, which represent money, NFTs represent a type of collectible asset.
This new type of marketplace has indeed only been made possible thanks to the blockchain technology that allows for legitimacy, provenance and immutability of digital assets. Through blockchain authentication, an NFT cannot be replicated or altered — a rare benefit in the digital world, where forgery can be quite common.
According to CNBC, NFT marketplace OpenSea saw sales grow tenfold in February. In the same month, Bloomberg reported that more than $60 million was spent on collections of gifs, jpegs, memes and other types of art pieces that are only available digitally.
The popularity of NFTs has grown in the last week as Twitter CEO Jack Dorsey auctioned his first tweet as an NFT with bids of more than $2 billion. The post is hosted by the platform Cent, an Ethereum blockchain network which allows users to mint, sell and bid on NFTs of tweets.
“Owning any digital content can be a financial investment,” says a post from Doresey. “[It can] hold sentimental value. Like an autograph on a baseball card, the NFT itself is the creator’s autograph on the content, making it scarce, unique, and valuable.”
Indeed, Dorsey has not been the only one to jump on the NFT bandwagon: his NFT auction was just the latest item in a series of bids that have become increasingly popular.
In February, a video by digital artist Beeple was sold for $6.6 million. Last year, Paris Hilton auctioned a digital artwork of her cat for 40 ETH, worth around $17,000 at the time, on the Ethereum-based auction platform Cryptograph.
“NFTs, I think, really could be an alternate asset class, one that speaks to a younger generation, who maybe does not want to invest in stocks,” said artists Beeple to Forbes. “Maybe they would rather invest in digital collectibles and things like that — things that speak more to their culture and how they sort of interact with the world.”
During this week, Beeple sold another digital artwork pierce for $69.3 million a collaged JPG image made in February named ““Everydays — The First 5000 Days”. The sale has broken the record as the most expensive NFT sold so far.
In our latest #FinancialFox interview, we talked about the NFT hype with Dr. Julian Hosp, CEO of Cake DeFi. Julian believes that NFTs and cryptocurrencies represent ultimately two separate concepts: while the real value of cryptocurrencies is freedom and financial independence, NFTs are about uniqueness and status to the user, proving an emotional connection to the asset.
“The real value of NFTs is that of status. There is only value in digital art if there’s a story and uniqueness behind it. That’s why I think NFTs are totally overhyped but in the long term it will cause disruption because people will understand how to create this emotional connection and how to allow Millennials and Gen Z to show status” he says.
Our interview with Julian Hosp will be live soon on our Youtube Channel. Make sure you subscribe to get updates.
Crypto and Investment guru Clem Chambers on NFTs
About the future of NFTs, Clem Chambers, CEO of Online Blockchain plc, believes that they will follow the same pattern as all crypto trends: “Like most of the blockchain developments breaking ground now right now, the NFT space will start as a little sprout then grow into a Sequoia. It is almost certain that new technologies will spawn from these developments.”
As a renowned investment guru, Chambers has been advising traditional market investors on how to approach investment strategies in the crypto era. Is it worth investing in NFTs? “Intangible things are the most valuable and have been for centuries. But it’s a skill game: first comes study and experimentation, then investment can be considered.”
Currently, one limitation is the high fees for NFT transactions, because minting is expensive. This will correct itself in due course, says Chambers: “Money will find a way, it always does. Competition will drive the price of transactions down.”
Rarible is the first community-owned NFT marketplace. It has attracted some celebrities like Lindsay Lohan and is Clem Chambers’ favourite platform.
Crypto Punks was one of the very first NFT platforms, launched back in June 2017. It is composed of 10,000 unique collectible characters of 24x24 pixel art images, which are generated algorithmically and have proof of ownership stored on the Ethereum blockchain.
Valuables by Cent is a NFT marketplace dedicated to buying and selling tweets that are autographed by their creators.
OpenSea is one of the largest NFT marketplaces available — “an eBay for crypto assets,” according to its page. It offers a variety of digital assets including collectibles, gaming items and other virtual goods backed by a blockchain. OpenSea is funded by YCombinator, Founders Fund, Coinbase Ventures, 1Confirmation, and Blockchain Capital.
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