NFTs have become one of the hottest digital trends for 2021, with total sales up 55% since 2020, from $250 million to $389 million. Here's how to create, buy and sell these popular digital assets.
Non-fungible tokens (NFTs), which are unique collectible digital assets, have been around as early as 2012 when the concept of (colorful) Bitcoin first appeared. These coins were distinct or “colored” satoshis (small parts of bitcoin) with distinct information that could link the coins to real-world assets.
However, the colored coins have mostly been used to create and trade artwork such as “Rare Pepe” digital cards on Counterparty, a peer-to-peer trading platform built on the Bitcoin blockchain.
These cartoon frogs from a viral internet meme were among the earliest examples of unique digital artwork associated with crypto symbols. This paved the way for thought and creation of new non-fungible token standards (a set of blockchain building blocks that allow developers to create their own “NFTs”).
Why does NFT have value?
Like all assets, supply and demand are the main drivers of price in the market. Due to the rarity of NFTs and the high demand for them by players, collectors, and investors, people are often willing to pay a lot of money for them.
Some NFTs also have the potential to make a lot of money for their owners. For example, a player on the virtual “Decentraland” platform decided to buy 64 pieces (from the game land) and combine them into a single property. Dubbed "The Secrets of Satoshis Tea Garden," it sold for just $80,000 due to its desirable location and road access.
Another investor who paid $222,000 to buy a portion of the Monaco digital racetrack in the F1 Delta Time game, NFT, the digital track piece, allows the owner to earn 5% of all races on it, including ticket fees access.
Why is NFT important?
“NFTs” have become very popular among cryptocurrency users and businesses alike due to the way they have revolutionized the field of games and collectibles. Since November 2017, a total of $174 million has been spent on NFTs.
Thanks to the advent of blockchain technology, players and collectors can become immutable owners of in-game items and other unique assets as well as make money from them. In some cases, players have the ability to create and monetize structures such as casinos and theme parks in virtual worlds.
They can also sell individual digital items that players need during gameplay such as outfits, avatars, and in-game currency on a secondary market.
For artists, the ability to sell artwork in digital form directly to a global audience of buyers without using an auction house or gallery allows them to keep a much larger portion of the profits they make from sales.
Proceeds can also be programmed into a digital artwork so that the creator receives a percentage of the sale profit each time their artwork is sold to a new owner.
William Shatner, better known as “Captain Kirk” from “Star Trek,” ventured into digital collectibles in 2020 and issued 90,000 digital cards on blockchain WAX showing various pictures of himself. Each card initially sold for about $1 and now provides Shatner with passive equity income every time a card is resold.