A brief history & where we are now
NFTs — non-fungible tokens — are unique digital assets stored on blockchains (decentralized public ledgers). A fungible token, like Bitcoin, Ethereum, or Dogecoin, are all the same — the tokens you hold ‘look’ identical to someone else’s. Non-fungible tokens are completely unique from one another, even in cases where the associated pieces of art look the same. Non-fungibility opens the door to a multitude of technical use cases tied to the uniqueness of assets and proof of ownership.
Recent years in NFTs
While NFTs have technically existed since 2015 (there is debate around the true ‘first’ NFT), most people are familiar with Cryptopunks and CryptoKitties launching in 2017 on Ethereum. In 2018, we saw the launch of the wildly popular play-to-earn game Axie Infinity. Fast forward to April of 2021, amidst the global COVID pandemic when people around the world had now been isolated from in-person communities and events for a full year, the current most recognizable NFT collection Bored Ape Yacht Club launches for a modest mint price of 0.08 ETH.
As of this post, the Bored Ape floor price sits at 103 ETH and has been the leading NFT collection across blockchains. Non-crypto-native spectators have poked fun at the high value placed on these ‘right-click saveable jpegs’ as NFT collections launch at an exponentially increasing rate across chains.
Since spring of 2021, NFT collections have popped up on the most popular blockchains. Known for having superior network speeds and near-zero transaction fees, Solana NFTs have closed in on Ethereum, with the Magic Eden marketplace logging nearly half a billion dollars in trading volume over a 30-day period. While Ethereum and Solana hold the top spots by NFT transaction volume, ecosystems like Avalanche, Terra, Tezos, and most recently NEAR have been experiencing their own NFT booms in recent months.
Early adoption of use cases
NFTs lend themselves to a plethora of use cases. In the current market, we’re seeing them used as access passes to websites and servers, as assets in play-to-earn blockchain games, virtual real estate, and even as tickets to in-person events. In the next few years, we may see disruption in industries like journalism, music, and physical real estate, as NFTs are adopted as ways to distribute royalties and verify proof of ownership.
NFTs in Music
Virtual Real Estate
NFTs as Assets in Blockchain Gaming
Why are people spending millions of dollars on jpegs?
In the past year, collections like Bored Ape Yacht Club, Cryptopunks, Solana Monkey Business, and others have popularized generative artwork collections; that is, every piece of art in the collection is unique.
An example to illustrate this concept is Cryptopunks: a collection of 10,000 NFTs on the Ethereum blockchain. Generative art collections use computer programs to layer assets together at random, and ensure that each piece has unique traits. This creates mechanisms of rarity, where less frequently appearing traits become more valuable due to their scarcity in the collection. Collectors often place higher values on rarer traits.
NFT collection supplies are finite, and in some cases, deflationary. As with any asset, supply and demand factors into its perceived value which reflects on the NFT collection’s “floor price” — meaning, the lowest amount someone is currently willing to take for a piece from a given collection.
In addition to the rarity and collectable aspects, NFTs are also tickets into exclusive communities, events, merchandise, and in many cases become a status symbol akin to owning a luxury car.
The next article in this series will dive deeper into the intricacies of the most popular blockchains and their current NFT trends, marketplaces, and collections.
About the Author
Lauren is the Founder of NFT Radar, one of the largest free communities dedicated to education & research for NFT projects on Solana, Ethereum & other ecosystems.
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DISCLAIMER: Content in this article does not constitute financial advice. Cryptocurrencies are volatile assets. Always do your own research and invest at your own risk.