NFTs Explained – Memes, Tweets, and the Art Market

The past year has seen the rapid development of the use of Non Fungible Tokens. NFTs are a special class of digital assets that cannot be duplicated, exchanged with one another for equal value, or broken down into smaller bits. A part of the Ethereum blockchain, cryptocurrency technology is used to create and attach a digital certificate of authenticity to collectibles. This is different to copyright ownership, as NFT owners certainly do not have the right to print or distribute the work, and those who do not own the NFT are still able to access it. However, while the work can be copied, the token can’t- in a distributed ledger, it exists in a single copy, and by verifying ownership and tokenizing what was previously reproducible and replicable content, buying NFTs are more similar to buying a limited-edition poster, or an autographed copy of a book. This creates a form of artificial scarcity and value, accounting for the inflated values now attached to any digital item at all- ranging from art, to even memes and tweets.

The dramatic growth in the overall use of NFTs over 2021 is undoubted when tracking sales and trading volumes throughout the year. A report by states that more than $2 billion was spent on NFTs during the first three months of 2021- marking a 2,100% increase from the fourth quarter of 2020. Sales volumes recorded on the largest NFT trading platform, OpenSea, also hit $1.9 billion in August, compared to March’s $148 million, and January’s $8 million. In the third quarter of the year, trading volume surged to $10.67 billion according to analytics platform DappRadar, marking a 704% increase from the previous quarter. eBay’s introduction of the sale of NFTs in May also marked the blockchain technology’s immersion into the more accessible world of e-commerce, testament to its popular demand, and the growing footprint of NFTs on even the art market was evident when world renowned fine art auction house Christie’s accepted cryptocurrency as payment for the first time in March, where digital artist Mike Winkelmaan ended up selling a jpg file ‘as an NFT’ for $69 million.

However, many believe that this growth is unsustainable, with speculators pointing to a potential bubble. In June, a crash was rumoured when its growth rate began to slow, a difference being noticed between its peak on the third of May, when $102 million worth were sold in a single day, compared to just $19.4 million in NFT sales processed in one week in June. Such speculations are refuted by claims that a slight stagnation in sales and trading is normal within the cryptocurrency bullmarket, and more general arguments that the NFT market is nevertheless here to stay, as it reflects the creative preferences of a new digital generation. Yet only time will tell how the world of NFTs can continue to evolve and grow, and its potential impact on the future of cryptocurrency and blockchain technology.

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