A non-fungible token (NFT) is a digital object: a unique and non-interchangeable value of data which is essentially stored on a blockchain, in a form of digital ledger. Simply put, its a piece of computer code and data which represents ownership of something. This could be anything in the digital world such as equipment in a video game, a digital painting or even a tweet. An example is the first ever tweet sent by Twitter founder Jack Dorsey which was sold for $3 million. It’s important to note that an NFT is not just limited to digital items, in-fact an NFT can also be a hybrid. A seat at a music concert, a piece of land in London or even licences and certifications can all be transferred to NFT.
The NFT trading volume is huge and surpassed $10 billion back in October 2021. In 2022, we are very likely to see an even bigger increase and a huge growth in NFT tech. This could mean seeing NFTs everywhere from video games, movies, TV shows, books and many more. So why are NFTs booming?
Firstly NFT investors see a long-term value in them and fundamentally believe that over time the value will appreciate. As explained NFTs are digital assets and can be anything online from art collectibles to memes. This creates huge scope for rare projects. For example back in 2017, Canadian duo Matt Hall and John Watkinson were inspired by London punk scenes and decided to create an experimental project called CryptoPunks. These are collectible characters and there are 10,000 unique CryptoPunks (of which 6,039 male and 3,840 female). All which are made digitally scarce through the use of blockchain technology. In June 2021, “Covid Alien”, a character in the CryptoPunk collection sold for over $11.7 million to a billionaire buyer in an auction. You might be wondering why? Well that’s mainly because of CryptoPunk’s popularity in the NFT scene and more importantly because of their rarity and exclusivity. Think a very rare Pokémon card from the 1990’s being sold in modern day.
Another reason for the growth within the NFT platform is the confidence in the tech that surrounds NFT. Blockchain which is at the heart of NFTs has a number of use cases. It is possible to buy and sell an NFT exactly like a physical asset however blockchain allows for each transaction and the validity of the ownership to be tracked in a digital ledger. Blockchain is excellent at creating trust between different entities, forming a decentralized structure and more importantly having visibility and traceability. All of this excites NFT investors and establishes confidence.
Finally, social status is another big reason which has been behind the growth of NFT tech. Have you ever dreamed about owning a Lamborghini? Or maybe you’re lucky enough to actually own one. When someone spends hundreds of thousands of dollars to buy a Lamborghini they don’t do it because they want to get from point A to point B. That can be achieved with a far cheaper vehicle. They do it because they want to flex their wealth, they want to show the world “look at me, I’m successful, I can afford a luxury car”. Well NFT can be treated in the same way, its possible to buy a very expensive NFT and post it on Twitter or Instagram to flex. This could be a way to give investors access and acceptance in the crypto community.
I believe 2022 will be a fantastic year for NFTs. This is a technology that is fast becoming mainstream, gaining rapid traction and growth. A technology that has built a strong community. It is a technology that is allowing people to own things that were previously thought impossible to own. Collectibles will change, we will go from rare physical trading cards to digital art collections and NFTs will start to appear in multiple entertainment mediums. Eventually getting to a point where it will become difficult to ignore them.