Before the pandemic, most people had not heard about non-fungible tokens (NFTs). Similar to cryptocurrency, NFTs are traded through innovative blockchain technology. These digital assets have gained popularity from influencers, gamers and artists alike who have maximized upon the technology to their advantage.
NFTs provide guaranteed ownership and authenticity. Although it is solely digital, NFTs are now valuable outside the digital world for content creators. Since they can produce a piece of work they own and get more recurring revenue every time it’s sold, digital creators now have more authority and control over their own digital art. Each sale of an NFT is also recorded on the blockchain, making it a digital provenance that can’t be altered by anyone else online. Digital creators have found a huge opportunity through the innovation. The artist Beeple’s NFTs have sold out instantly, and the most profile NFT sold for $70 million, while celebrities are jumping on board to create flagship NFTs, too.
According to the firm DappRadar, May 2021 saw many NFT users buying and selling more than 85,000 tokens, equaling a trade value of $5.8 million in one day. During the third quarter of 2021, NFT trading volume reached $10.7 billion.
But does NFTs’ popularity signal widespread adoption of the innovation? Sooner than later, NFTs will likely replace the industries that take ownership of other people’s hard work. Record labels are a good example. NFTs are becoming a status symbol for the future of decentralized social media, similar to a blue badge on Twitter. However, there’s more to NFTs than trading for millions of dollars. Many believe the digital asset can be more widely used and distributed, including for practical business deals. Since trading the digital certificates online happens through decentralized blockchain, business transactions can potentially occur more safely and quickly.
For example, new platforms like DESO are used for NFTs due to their no minting costs. Some brands can even promote themselves since it’s connected to a social media platform. Companies can look to make and sell NFTs solely on DESO with these benefits.
On top of it all, NFTs can also include functions and rewards that hold actual assets. Depending on the seller, an experience or a physical object can be sold with the NFT. For instance, creator coin NFTs offer exclusive rewards for the top coin holders. If an artist or athlete has a large following, viewership or fanbase who are passionate about supporting them, they will likely be inclined to buy whatever NFT that creator sells.
Many supporters of NFTs within the crypto sphere seek to decentralize the space. Creators can benefit from the decentralized social media aspect to discuss NFTs with a larger audience. Decentralization is a concept that is aligned with what NFTs are attempting to create, bringing the possibility to own art — a privilege that’s only been reserved for the wealthy for centuries — to everyday citizens. Art valuations, which have always been a discussion amongst a smaller group of art connoisseurs, has now become a more equitable or democratic process.
However, NFTs still remain unregulated and it creates skepticism amongst some creators, even though it still brings advantages for some people. The future of NFTs still largely remains to be seen, but it provides great opportunities to enter the market now and is a prospect many businesses may want to invest in. At least for independent artists and other content creators, the digital entertainment and art world remains prime for the taking.
While JP Morgan believes that legal issues facing the burgeoning sector may slow its growth, the demand for NFTs is accelerating. The current year-end market cap for major NFT projects has increased by 1,785% and it’s showing no signs of slowing any time soon.