15 Apr Welcome to the NFTs world
Everything you need to know about this fast growing trend in the blockchain industry that opens up a world full of new possibilities for brands and content creators.
In recent weeks we have witnessed several news related to NFTs:
But what are NFTs?
NFT is the acronym for non-fungible tokens. They are basically unique and original assets in the digital world that can be bought and sold like any other type of property, but they have no tangible form in themselves.
These digital tokens can be understood as certificates of ownership of virtual or physical assets which use the same technology as cryptocurrencies (blockchain) to manage authenticity and ownership.
For example, cryptocurrency tokens (bitcoins) are fungible because a token can be exchanged for any other token. Fiat currencies, like the US dollar, are fungible because a dollar bill can be exchanged for any other dollar bill. But the NFTs cannot be exchanged with each other, since no two NFTs are the same.
During the encryption process of an NFT, each one is assigned a digital hash that distinguishes it from the other types of NFT guaranteeing the security and convenience of the blockchain, but for a specific asset with a specific value: the gif of the flying cat with cookie body is unique, and so is that digital artwork or any other intangible asset that falls within this definition.
NFTs were initially created on the Ethereum (ETH) blockchain. Currently they are available on many other blockchains, such as EOS, TRON, and NEO, and they have many use cases. NFTs can represent digital collectibles, artwork, or game assets.
NFTs began to catch on in June 2017 when Larva Labs launched CryptoPunks, a collection of 10,000 unique avatars that could be acquired on Ethereum, but it wasn’t until the launch of CryptoKitties (a virtual “digital kitty” trading game) later that same year, that NFTs went viral. Since then, sales volume on NFT has been increasing.
These unique digital tokens are gaining ground and connect many industries, such as games, virtual reality, electronic sports and even art, forming part of that new culture in which blockchain and cryptocurrencies are also fully integrated.
According to data from Messari, in February the NFT market grew eight times more than in January and the figures in exchange volume exceeded US$ 200 million.
Growth in trading volume of NFTs. Source: @MessariCrypto.
In other words, in one month the sales volume grew by 766% when in previous months the market was growing at approximately 40% steps.
This data highlights the incredible growth of the industry.
While this trend increases, platforms dedicated to the management of NFTs also begin to emerge. Some of the marketplaces that have gained the most attention with the rise of NFT’s are Dapper Labs, Super Rare, Foundation, Nifty Gateway and Zora.
While NFT’s are not something that has just been created, experts see market growth moving forward; a BNP study projects the value of NFT’s in a market of $ 250 million by the end of 2021, according to BNP Paribas for L’Atelier.
Why do people pay exorbitant prices for NFTs?
For the same reason that people spend big amounts in physical art or antiques. Aesthetics, passion for artists, trends and validations from the art world are some of the main reasons why collectors buy works of art. Collecting digital items is very similar to collecting physical items – they can be considered both a hobby and an investment.
In this regard, the value of NFTs is determined by the scarcity of the asset, its emotional value and its aesthetic value.
What are brands doing with Non Fungible Tokens?
Among the most emblematic cases of brands using NFTs we can find:
- NBA marketed video packages of NBA games and animated digital cards with the best moments of its history, through the NBA Top Shot platform, generating more than 228 million dollars just six months after its launch.
- Taco Bell released a series of gifs with tacos as the main protagonists. They published 25 tokens on Rarible, which half an hour later had already been sold.
Based on these examples we can see how the opportunities for brands, media and content creators are endless. If the NBA has been able to do business with the best plays in its history, it makes sense that publishers such as the New York Times could put NFTs of their historic covers or their best pieces on photojournalism up for sale.
What should we expect from NFTs in the future?
As NFTs continue to gain attention, we will begin to see brands experimenting through digital collectibles or opening up access to tokenized experiences to make them more desirable.
But there are still many questions to be answered about how to transfer them through different digital platforms, how to display them correctly both in virtual and real environments and, and how to measure and compensate for the enormous carbon footprint they generate.
Non Fungible Tokens (NFTs) promise to modify the way in which a digital piece is valued based on the possibility that they enable to buy digital assets, intangibles and with an emotional value, similar to what happens with a work of art whose value depends from the collector who has decided to purchase it.
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