The non-fungible tokens (NFTs) industry has exploded in popularity this year. Without a doubt, they’ve become the hottest thing in crypto.
So let me lift the veil for you on what the NFTs are, their best use cases, and what drives interest in NFTs. And most importantly, why are they a gateway drug to a digital society.
I promise you will look at NFTs differently and be prepared for what is coming.
The hottest market in the world
First, let’s take a look a the market. Sales volumes of NFTs surged to $10.7 billion in Q3, which is up more than eightfold from the previous quarter.
On the chart below, you can see the weekly NFT buyers have more than quadrupled since the beginning of the year.
OpenSea, the biggest NFT marketplace, saw sales volumes hit $3.4 billion in August. And sales remained at $3 billion even in September.
But that is not all. Binance, the world’s largest crypto exchange, entered the NFT market in June. Their main competitor, FTX, followed suit in September, and this week Coinbase, with 68 million verified users, opened its NFT trading too.
I think you’ll agree with me when I say NFTs are the hottest market in the world right now.
Tokenization of everything
NFTs suffer from a super broad terminology which makes it hard to contextualize. For a casual observer, it simply means crypto art.
But NFTs are much more than that.
Think of NFTs as a new type of file format. For example, when sending a photo over the internet, you can send it in JPEG or PDF format. Similarly, NFTs are a file format you can send over the blockchains.
But to fully get your heads around them, it’s crucial to envision NFTs in the notion of tokenization. To put it in perspective, NFTs could tokenize all digital and real-world assets like artwork, real estate, carbon credits, stocks, collectibles, and even personal identity. They’re traversing across different assets and have a wide range of practical applications that appeal to multiple industries and use cases.
In an incredible over-simplification, look at it like this. NFT are here to tokenize everything physical, digital, and even metaphysical.
If you want to learn more about the ecosystem, I encourage you to check out The ABCs of NFTs written by Gemini’s Cryptopedia.
Here are some mind-blowing use cases
One of the new concepts of NFTs is NFT avatars, where gamers want to have their profiles representative of themselves. CryptoPunks is perhaps the most popular application of NFTs, where 10,000 unique characters are stored on the Ethereum blockchain. You may purchase each character, and as you can see from the below list below, top CryptoPunks are sold for over $7 million.
Another viable use case is digital art. For example, Beeple, a conceptual 3D artist, became the third wealthiest living artist after an NFT containing his work sold for $69.3 million at an auction in March.
In like manner, a clip of NBA star LeBron James dunking sold for $387,000.
Sounds insane? Well, that is because it is insane. However, my all-time favorite is the virtual being named Alice that uses AI technology and can speak and answer questions. The team at Alethea AI is auctioning it at Sotherby’s as “the first intelligent NFT.”
Indeed, the AI avatar still needs some work to improve, but it shows how the digital world will be wildly different from the current analog world.
Humans are integrating with technology
What exactly is driving this phenomenon? The obvious answer is that people buy NFTs for the same reasons as they buy art. Some purchase it for artistic properties, while others use it for trading or as a store of value.
But here’s another perspective. As humans are integrating with technology, we could be at the intersection of turning from an analog to a digital society. In many cases, the new digital generation would rather own digital goods than physical goods. That is to say; they would rather spend $30,000 on digital art than on a new car and impress an even wider audience on social media.
Perhaps they’ve realized that the only way to generate wealth in the current bubble of everything is to start doing previously unthinkable things, like buying an NFT character for 7 million dollars.
It’s hard not to get overwhelmed by this market, but we can’t argue with evolution.
Sure, governments may slow it down with regulations and taxation, but they can’t stop it.
When it comes to companies, they must decide if they want to participate or ignore it. Just as they had to figure out an internet strategy in the 1990s, they’re going to have to figure out its NFT strategy as well.
And investors must realize there’s a wall of cash headed towards the market, whether they like it or not. The digital art and gaming characters will be minuscule in comparison to the incredible possibilities of NFTs.
I highly suggest you take the time to get up to speed or risk being left behind. Digital society could be closer than we think.