Until the year 2021, limited numbers of crypto enthusiasts understood what non-fungible tokens (NFTs) were. Nearly $41 billion was spent on NFTs by the end of the year, putting digital artwork and collectibles almost on par with global art sales.
Mason Nystrom, a research analyst for crypto data company Messari, said the NFT market grew from a billion-dollar space to a multi-billion one this year. He added buyers were rushing to find art that sat with their “digital identities”. These certificates represent digital ownership based on a blockchain – a permanent, immutable record that cannot be altered. Tokens are typically generated by smart contracts, self-executing contracts, as part of the code of a blockchain. Which then can be exchanged for cryptocurrency on the secondary market.
The art world is enriched by the NFTs
NFTs reached mainstream popularity in March when a collage by Beeple sold at Christie’s for $69.3m. This was the highest amount ever sold by the auction house for NFT. Although the concept originated in the art world, corporations from sports and music have also taken advantage of the trend to engage fans and cash in on the hype. It created a marketplace called NBA Top Shot where buyers and sellers can trade video highlights of its players.
Among the other hits were viral numbered collections of NFTs, such as CryptoPunks and Bored Ape Yacht Club, which were used as avatars on social media profiles and indicated the clubby status of their owners.
Chainanalysis on NFT market
As of mid-December, a crypto analytics group called Chainalysis reported $40.9bn invested in Ethereum blockchain contracts, that are typically used for creating NFTs. If NFT’s minted on other blockchains like Solana are included that would raise the total even further.
Based on Chainalysis, NFTs have provided access to the crypto world to a large number of retail investors. With less than $10,000 transactions accounting for more than 75% of the market. Much like the cryptocurrency market, it remains dominated by a relatively small number of giants. A total of 360,000 NFT holders owned 2.7 million NFTs between late February and late November. Around 9% – or 32,400 wallets – held 80% of the market’s value, Chainalysis reported.