Although only exist on the Internet space, many collectors are still willing to spend millions of dollars to own them.
Currently, the type of digital items applying blockchain technology (NFT) is becoming a new business trend, bringing huge sources of revenue for startups.
What is NFT?
NFT stands for Non-Fungible Token, meaning a crypto utility stored on the blockchain to represent a unique asset.
Fungible is a feature of banknotes, bitcoin (or cryptocurrencies in general) Once it is said that money is indeterminate, that is, people make no distinction between currencies. Since then, it is impossible to determine the exact use of that money.
However, it is because of this feature that money becomes a means of exchanging goods easily. You sell a pair of shoes for 100 dollars. And you can use that $ 100 to buy a shirt. No one retorted or forced you to only use that 100 dollars to buy shoes only.
Non-Fungible, on the other hand, means distinct and irreplaceable.
Example: In everyday life, there are many things people do not want to be clearly defined. This causes the item to preserve its unique value. As for your driver’s license (you cannot use someone else’s). Or like inheritance wills (you cannot swap wills with others). Or as a work of art (each work has its unmistakable value).
And what is Token?
As the demand for product exchange increases, the product object is now not only encapsulated in physical things, but people also want to present it as a digital asset that can be stored on the internet. From there, the concept of tokenization was born.
Token is understood as a utility that encrypts any product, making it tradable on the blockchain platform. This will open up a more vibrant new market because it hits the uniquely scarce mentality of that product.
In simple terms, NFT (Non Fungible Token) is a kind of virtual item. Instead of owning a piece of art in real life, you can own them on the Internet.
When you hold NFTs and coins, you both own two types of assets on the chain. Besides, you can store NFT on a blockchain wallet, retrieve and sell similar coins.
However, the fundamental difference is that coins are not unique. The ETH in my wallet is the same as the ETH in your wallet, which can vary in quantity. In contrast, NFT has a unique and rare nature. A “virtual cat” in CryptoKitties is unique, each with a unique identifier, no duplication. The key is that the NFT is non-fungible, the trait that makes the NFT unique.
For example, you can exchange one bitcoin for another bitcoin, but cannot exchange 2 different Mona Lisa paintings, simply because there is only one Mona Lisa painting in the world.
The growth of the Internet meant that anyone could watch pictures, videos or listen to songs online for free. However, blockchain technology is allowing NFT buyers to own the virtual item.
What caused the NFT fever?
The COVID-19 pandemic played a big part in the explosion of the NFT virtual goods business trend. Blockade orders and travel restrictions in some countries around the world keep people at home and spend a lot of time on the Internet.
Also, the increase in the value of cryptocurrencies like bitcoin or ethererum makes users pay more attention to blockchain technology.
“We live at a time when the majority of the world’s population spends 50% of their time on the Internet,” Whale Shark, whose NFT collection is worth more than $ 2.7 million, told CNBC.
The advantage of NFT business model
According to advocates of the NFT business model, the trend will overcome the situation where many artists are not getting paid online content distribution. For some analysts, the NFT will create a whole new speculation craze.
NBA Top Shot, an NFT business platform that follows the professional basketball tournament in the US, allows users to buy or sell special videos about a basketball player. After being licensed by the NBA, the start-up that digitized the footage Dapper Labs created a series of focus videos at pro basketball matches and sold them in limited numbers.
According to CryptoSlam, NBA Top Shot sales have reached $ 280 million so far. For each transaction, Dapper Labs will receive a commission and the NBA collects royalties.
Basketball is not the only sport in the NFT business trend. French startup Sorare has allowed users to collect and use licensed football cards in several online games. According to NFT NonFungible’s statistics, Sorare’s sales have surpassed $ 22 million.
“NFT is becoming a new industry. The exchange of tokens or collectibles brings a great source of profits for trading platforms, ”said Lars Rensing, CEO of blockchain company Protokol.
NFT is not a new phenomenon. Previously, CryptoKitties, a game based on blockchain technology that allowed users to collect, breed, or buy and sell virtual cats, created a huge fever in the user community. According to NonFungible, up to now, the revenue of this game has reached 40 million USD.
NFT’s applicability is most popular in the game industry. Example: A game company creates an online game with various characters. The greater the community of players, the more valuable the characters get. And that value is even higher because each character is unique and developed. Players can trade characters as well as items together. This is also the success of the game CryptoKitties.
From this base, we can have a multitude of other ideas. As a building with multiple apartments, the access to the use of each apartment will be encoded into NFT. If the founder succeeds in attaching a token to a physical asset without legal barriers, then this could open up new potential and vibrant market.
Another explosive “bubble” in the future?
In addition to indulging their passion, many investors see NFTs as potential speculative portfolios and hold them for a long time as collectibles.
“NFTs have been popular since around 2017 among artists who create digital works and are looking for ways to monetize something that is otherwise freely available and easy to reproduce. Most people look to them for speculation. However this market is gradually maturing in 2020,” Nadya Ivanova, CEO of L’Atelier, told CNBC.
NFT has attracted many celebrities such as Mark Cuban, Lindsay Lohan, Gary Vaynerchuk, and many major brands. However, the NFT market is faced with skepticism from some artists and investors alike.
Many critics believe that the NFT will soon “die prematurely” similar to the issuance of electronic money from the enterprise (ICO). It is not surprising that some NFT trading platforms oppose this notion.
“I think 99% of projects today cannot last more than 2-3 years, similar to the explosion of ICOs,” commented Whale Shark.
Many NFT items are priced in ether, the crypto token of the ethereum blockchain. The cryptocurrency quickly hit a record value of more than $ 2,000 last month and then fell more than $ 600 in just a few days. This is a reminder to investors about the fierce volatility of crypto projects.
According to Coinmarketcap, there are currently 76 NFTs tied to the respective virtual currencies on the exchange. But experts expressed concern that current over-interest could create an NFT bubble, similar to the ICO bubble burst (the initial coin offering) of 2017-2018. electronic money judgment.
Is an NFT painting as valuable as a screenshot?
In February, an original piece of art crafted by British street artist and political activist Banksy was burned after it has been encoded into an NFT. That means Banksy’s work is no longer tangible but is somewhere in a block of the ethereum blockchain, encrypted as Galaxy property.
Art doesn’t even need to exist in physical form to become NFT. An exciting new range of digital works is making the NFT space as valuable in creating and releasing new works as any museum or gallery. Just look at the intricate data pictures of Refik Anadol or the surrealistic illustrations of FEWOCiOUS will understand that.
And beyond the visual arts space, all sorts of collectibles are brought into the NFT space. MF Doom’s final innovative project is a set of virtual reality masks, while the NBA has even licensed official blockchain goods in the form of digital transaction cards with a transaction volume of up to $ 32 million in a day.
This seemingly absurd world has been and is breaking the lines between money, collectibles, and art.
The question here is whether NFT is valued as a physical work of art.
It has certainly brought a new medium of expression to artists, but for some connecting metadata to a cryptocurrency token and art does not make art immutable. Critics think just taking a screenshot is enough and all NFT buyers are doing is simply buying lines of code.
For many NFT proponents, the recent burning of Banksy “Morons” was a milestone and a step into a whole new medium of expression. However, some considered the burning ceremony simply to destroy a Banksy piece of art, and then replaced it with a few lines of ethereum’s code.