What are NFTs?
Non-fungible tokens (NFTs) are unique, non-interchangeable units of data. They contain a piece of identifying information that makes them distinguishable from all other tokens. Because no two tokens are the same, they cannot be traded or exchanged at an equivalent rate or broken down into smaller units like currency.
How are NFTs used?
Because NFTs are one-of-a-kind, they can be used to value and authenticate the ownership of digital assets, including virtual land parcels, artwork, etc. One of the biggest markets for NFTs is the entertainment industry.
Take a look at how NFTs are being used to create merchandise in the following spaces:
- Art – There are two types of CryptoArt. The term mainly refers to crypto-themed pieces that tie blockchain into their cultural, political, economic, or philosophical subjects. However, CryptoArt can also be understood to mean digital artworks that are published directly to the blockchain as NFTs. Two of the most popular CryptoArtists right now are Beeple and FEWOCIOUS.
- Music – Musicians are using NFTs to add exclusive content to new and re-released albums. Kings of Leon created a tiered version of their 2021 album, When You See Yourself, which gave fans access to front-row tickets for life. Re-releasing his album, Ultraviolet, DJ 3LAU turned unreleased tracks, re-recorded songs, and album artwork into NFTs. Other artists who are getting involved in the NFT space include Portugal, This Man, Akon, Eminem, DJ Steve Aoki, and Shawn Mendes.
- Sports – Major league teams in American football, basketball, and hockey have created digital memorabilia in the form of one-off videos for their fans. Plus, the sports card company Topps has produced NFT packs that contain rare cards e-signed by famous players.
- Gaming – Video game companies are using NFTs to allow players to create and own unique game skins. In some games (such as Alien Worlds, Mist, and Minecraft), players can earn NFTs which can then be traded in for cryptocurrency.
- Collectibles – Pokémon, Magic: The Gathering, and Marvel are just some of the franchises that are offering fans NFT collectibles.
The Value of NFTs
In 2021, the volume of NFTs being traded in Q3 went up by 38,000% compared to the same period last year. According to DappRadar, the monetary value of these tokens exceeded $10.6bn.
In August alone, OpenSea, one of the biggest NFT marketplaces, reported a trading volume of more than $75m in a single day. This is more than its trading volume for the whole of 2020.
The top three highest grossing NFTs to date are works of CryptoArt created by Beeple. His piece Everydays: The First 5000 Days sold at auction for over $69m, making him the third most expensive living artist behind David Hockney and Jeff Koons.
The Future of NFTs
Currently, many applications of NFTs are focused on the entertainment industry and popular culture. We’ve already seen how they have been merchandized by sports teams, game and movie franchises, and musicians. However, they also have huge potential to transform the worlds of copyright, intellectual property, and software licensing.
Certificates for all kinds of things – including birth and death certificates – could be produced as NFTs. The information could be used to prove the identity of the owner. By storing these documents in a digital ledger, they are far less likely to be lost.