In 2021, as our buying habits continue to shift online, boosted by the lockdowns and restrictions, this created the perfect climate for NFTs. NFTs were first created in 2014 and since then the sale and auction of NFTs has reached climatic highs, from tweets like that of Jack Dorsey, Twitter’s CEO, to music videos, to art, like the famous art burn of Banksy and now in game assets for Metaverse games, the rise and rise of NFTs continues to explode.
An NFT is at its heart a piece of code representing a digital item like a song, a GIF, or a video. Each NFT is unique and cannot be replaced by another in the same way as fungible tokens like Bitcoin can be swapped with each having the exact same value. The NFT takes the form of a token, which has been authenticated onto the blockchain and enables collectors to own, and trade their collectibles.
If someone buys an NFT from another, the buyer gets a certificate, secured onto the blockchain, which represents their ownership of that digital asset. Because of the nature of the blockchain, no one can change the code on the blockchain and it is open for all to see.
Recent stats by NonFungible, show the total value of NFT transactions leapt 400% to around $242m in 2020. In that time, the number of wallets trading them grew by 100% and the volume of sales leapt up to $10.7 billion in Q3 of 2021, representing a growth rate of over 800% since the same time the year prior, according to DappRada.
Main uses for NFTs
Gaming – NFTs can be used for in-game items for use in games that leverage blockchain technology. Examples of this include Metaverse games like Axie Infinity, Sandbox and SYNCITY. In these kinds of games users buy land, buy NFT items, like weapons and outfits which they can then collect and use, or trade for other items. The first example of this was Cryptokitties.
Art – There has been plenty of news in the mainstream media about major auctions taking place in places like Christie’s and Sotheby’s auction house. NFTs for art are unique pieces of art represented by tokens. Users may be able to copy paste the image on the art, but they will not have a certificate of authentication to show that they are the true owner. Cryptopunks is the earliest example of art as NFTs. These 24×24 pixel art images were generated by algorithms and were highly successful, Other well -known examples include digital artist Beeple’s work which sold for $69 million in early 2021, and a digital image of a New York Times column, which sold for $560,000.
Collectibles – Many celebrities and sports stars in 2021 released their own collectible NFTs for auction on platforms like Ethernity. Messi’s collection raised millions of dollars in the first 24 hours. Other celebrities to do this include Pele, and the Muhammed Ali Foundation.
Certification – As NFTs give the holder ownership over the media contained within, they have a really useful application in document owners, such as driving licenses, university certificates, medical records and birth certification. These can be made available for third parties to view through smart contracts.Using NFTs for these kinds of documents protects the data inside and helps avoid identity theft.
Identification – NFTs in the future may be used in the same way for passports and identity cards, which means you can never lose them, unlike a passport and they can never be stolen.
Financial NFTs – These include everything financial from insurance to bonds, to unique baskets of tokens, to tokenized real-world assets. An example was the liquidity NFT tokens that appeared on Uniswap v3, valued at $1.3bn.
Loans and investments – One company, Drops, provides loans for NFT and DeFi assets. Users can stake or lend their idle DeFi tokens and NFTs to get loans and earn extra yield. It allows users with any type of asset from NFT collectibles, metaverse items to financial NFTs to be loaned or for the purpose of creating lending pools.
As we step into 2022, and Covid restrictions appear not yet to be in our rear view mirror, it seems that the acceleration to online will continue to speed up. This paves the way for the success of NFTs and their real world applications for both business and pleasure continuing into 2022.