The non-fungible token (NFT) market is one of the fastest growing sectors in the blockchain industry after reaching an astounding $41 billion in volume in 2021.
NFT companies are also seeing a rise in investment, with OpenSea, one of the biggest NFT marketplaces raising about $300 million during a funding round at the start of the year. This resulted in the firm being valued at $13 billion.
With the rising popularity of the NFT space, the prices of some NFTs have reached phenomenal levels, with some calling the NFT prices hyper-inflated. This could be because of the fact that the most expensive NFT sold at over $90 million.
With this being said, let’s take a deeper look at what exactly an NFT is and how expensive they can really get.
What are Non-Fungible Tokes?
Non-fungible tokens (NFTs) can be defined as cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other. In other words, it is unique and can’t be replaced with something else. They, in essence, create digital scarcity.
NFTs can also be described as digital assets that represent real-world objects like example, art, music, in-game items, and videos.
In contrast with traditional cryptocurrencies as we know them, they can not be exchanged or traded at equivalency.
An NFT also allows the buyer to own the original item. In addition to this, it contains a built-in authentication, which then serves as proof of ownership. For many, this is almost worth more than the art itself.
Although they have been around since 2014, they are only now starting to gain real popularity as a way to buy and sell digital art. The NFT market was worth an eye-watering $41 billion in 2021. This number approached the total value of the global fine art market.
How do NFTs work?
NFTs exist on a blockchain, which is basically a public ledger that records transactions. More specifically, NFTs are held on the Ethereum blockchain, but they are supported on other blockchains as well.
An NFT can be created or “minted” from digital objects that represent both tangible and intangible items. These can include graphic art, GIFs, videos, collectibles, virtual avatars, designer sneakers or music.
Even Tweets can be an NFT. Twitter co-founder, Jack Dorsey, sold his first ever Tweet as an NFT for more than $2.9 million.
NFTs are basically like a physical collector’s item. Only, instead of buying an actual oil painting to hang on a wall, the buyer gets a digital file instead.
Buyers also get exclusive ownership rights. NFTs can only have one owner at a time, and their blockchain technology makes it easy to verify ownership and transfer tokens between owners.
The owner can also store specific information in an NFTs metadata. For instance, artists can sign their artwork by including their signature in the file.
How to buy NFTs?
There are a few things you need to get in order before you buy an NFT.
Most importantly, you will have to get a digital wallet that allows you to store NFTs and cryptocurrencies. You will also have to purchase a cryptocurrency, like ETH, depending on what crypto the NFT provider accepts.
You can buy crypto using a credit card on platforms like Coinbase, Kraken, eToro, and even PayPal and Robinhood.
You will then be able to move the crypto from the exchange to your wallet of choice. There might be some additional fees, which is why it is important to do your own research before jumping into the NFT space and making a purchase.
Most exchanges charge at least a percentage of your transaction when you buy crypto.
What is Blockchain Technology?
As mentioned, blockchain technology is the technology that has made NFTs possible. So what exactly is a blockchain? Well, a blockchain is a decentralized digital ledger.
What this basically means is that the control and maintenance of a blockchain is not the responsibility of a handful of people or a central entity like an organization or an individual. Instead, a blockchain is powered by the people that use it! Every person that uses a blockchain, and runs a computer on the network, makes a blockchain a distributed and global network.
This is a very high-level overview of what a blockchain is, but it is important that we go over it to understand how NFTs came to be. By utilizing the privacy, transparency, autonomy, and decentralization of blockchain technology, NFTs can be used to represent anything digitally as well as verify ownership of these digital representations and make them transferable; feats that were very difficult to achieve before the invention of blockchain technology.
Now the part that you have been waiting for, why the hype behind NFTs?
The NFT Hype
The hype around NFTs started when art began being turned into NFTs. When this happened, it brought the fairly large collector’s market to the blockchain space. It also contributed to cryptocurrency and blockchain’s existing speculator market.
Art speculators and collectors from around the world could now collect, purchase, and sell artworks on the blockchain network. They could also do so anonymously and securely, plus verify that they own the artwork. All of this was considered extremely difficult, if not impossible, to accomplish before blockchain technology.
After NFTs made their way to the art world, companies started exploring what else NFTs could be used for. This is one of the contributing factors to the creation of a metaverse. By using NFTs, in-game assets can now be transferable. So anyone can buy, exchange, and sell in-game assets with other players in the metaverse.
This transferability of in-game assets introduced the play-to-earn space to the world. Meaning, anyone can now play blockchain-powered games and earn money from doing so.
As you can see, the creation of NFTs created a snowball effect. From making its way to the art world and giving artists a way to earn money for their work during the lockdown, to now giving anyone around the world the ability to earn by playing games in the play-to-earn space.
The innovation around NFTs has been a focal point for the majority of companies in the blockchain space as each of them is eager to keep the hype around NFTs going.
Is the Hype Around NFTs Justified?
To determine whether or not any form of hype in the blockchain and cryptocurrency space is justified, simply look at the utility around what is being hyped. With this in mind, NFTs solved a major problem in the art world.
They give artists around the world an online platform where their art pieces could not be replicated. In this online platform, artists can also reach a wider audience in the art speculation and collection space, as well as verify that the artwork they were publishing was the original. This scenario on its own gives NFTs a lot of utility.
The utility of NFTs is further expanded in the play-to-earn space. People can now play blockchain-powered games and earn money for doing so. This is mainly through the trading of in-game assets in these games, and these assets are all NFTs.
The timing of the debut of the play-to-earn space was perfect because it was during the Covid-19 pandemic. As people around the world lost their jobs due to Covid-19, they turned to NFTs and blockchain games to make money, and they were not disappointed.
Another big fact around NFTs is that they are slowly becoming the new blockchain-enabled store of value. Before NFTs, the biggest public blockchains were used as a storage of value as people transferred portions of their fiat currency values into cryptocurrencies like Bitcoin and Ethereum.
However, the price of NFT in-game assets is now proving to be less volatile than these large cryptocurrencies. This makes NFT in-game assets more stable store of value.
As you can see, the utility of NFTs is already there. With the intense innovation and exploration around NFTs, their utility will only continue to increase. Maybe the hype around NFTs is a bit much for the amount of utility the technology has at the moment, but the market is always excited with new technology that has potential.
If the current rate of innovation around NFTs continues, we could see the closing of the small gap that exists between the technology’s utility and its hype.
The most expensive NFTs in the world
Number 10: A Coin for the Ferryman ($6 million)
A Coin for the Ferryman is an NFT that was created by the artist known as XCopy. This NFT was created in 2018 and sold for $6 million worth in Ethereum in November of 2021.
The NFT was previously owned by 0xclipse who bought it for around $139 in 2018, but Coin for the Ferryman is currently owned by a social media user known as jPeggyGiffenheim.
Another NFT that was created by XCopy sold for around $4 million.
Number 9: Crossroads ($6.6 million)
The Crossroad NFGT was created by an American digital artist known as Mike Winkelmann. In the NFT world, he is known as Beeple and is one of the most renowned artists around the world.
The Crossroads NFT sold for $6.6 million in February of 2021 on the crypto marketplace called Nifty Gateway.
The NFT depicts a reaction to the 2020 presidential election. It is in the form of a video and is only about 10 seconds long.
Number 8: CryptoPunk #7804 ($7.6 million)
CryptoPunk #7804 is currently owned by the social media user known as peruggia_v.eth. Before this, the NFT was owned by Dylan Field who is the CEO of Figma, a software company. The NFT was sold for 4,200 ETH.
Field linked the NFT to the well-known Monal Lisa on many occasions. He even went as far as to call it the digital version of the iconic masterpiece.
CryptoPunk #7804 features a blue alien wearing a hat and smoking a pipe.
Number 7: CryptoPunk #3100 ($6.67 million)
This is another blue alien-themed NFT and is currently owned by a social media user that goes by the name 7B8961. This NFT depicts a blue alien wearing acoloured headband and was sold a day after CryptoPunk #7804.
CryptoPunk NFTs are part of 10,000 uniquely generated characters, none of which are similar to the others. Each of these NFTs can be owned by a single person on the blockchain.
Number 6: CryptoPunk #7523 ($11.75 million)
This is the third NFT character in the series that was created by Larva Labs in 2027 and was sold for just under $12 million in June of 2021. It was sold by the well-known auction house known as Sotheby’s.
The NFT was sold after a special online auction that featured the work of 27 artists from around the world. The whole auction fetched around $171 million in proceeds.
Number 5: CryptoPunk #5822 ($23 million)
This is the most expensive NFT in the CryptoPunk series that was sold so far and features a blue alien wearing a bandana.. It was purchased in February of 2022 by Deepak Thapliyal, the CEO of Chain, and it cost him about 8000 ETH.
The original owner of the NFT paid less than 1 ETH for the artwork.
The trading volume around CryptoPunk has been over $9 billion ever since it was launched. This means that CryptoPunk is the most expensive NFT series.
Number 4: HUMAN ONE ($28.9 million)
HUMAN ONE is another NFT that was sold by Beeple for a record price as it was sold for just under $30 million in November of 2021. The NFT was sold during the 21st Century Evening Sale of auction house Christie’s.
According to the auction house, HUMAN ONE is a “generative work of art which the artist intends to seamlessly add and evolve creativity over the course of his lifetime”.
Number 3: Clock ($52.7 million)
This NFT was created by Pak and Julian Assange and counts down the days since Assange has been imprisoned. The clock was also created to fund the legal defense of Assange.
The NFT was purchased by AssangeDAO, which is a group of people who decided to pool their money together to buy the NFT and fund the legal expenses of Assange. Assange DAO used the Juicebox platform to raise proceeds for the Justice token that ultimately collected over 16,000 ETH to purchase the NFT.
Clock was sold in February of 2022 and is the second-most expensive NFT with multiple owners.
Number 2: The First 5000 Days ($69.3 million)
Once again, this is another Beeple NFT and is the most expensive NFT with a single owner after being sold in March of 2021.
The NFT is a collage full of pieces of art that Beeple has worked on since 2007. In this very year, Beeple committed to working on one piece of art every day. This means that the NFT is a collection of art that was worked on in over 5000 days.
In the early days of Beeple’s career, his art did not have much traction in the industry, but NFTs changed that. Now, he is the third most valuable living artist in the world.
Number 1: The Merge ($91.8 million)
The Merge NFT was created by artist Pak, who is one of the mentors of the above-mentioned Beeple.
The Merge is the most expensive NFT with more than one owner as more than 30,000 collectors pooled their money to purchase the NFT in December of 2021.
The Merge has the ability to expand over time and is also described by many as “code on art”. This references the complicated programming behind the NFT that gives it its unique capabilities.
When looking at the top NFTs in the market, it is obvious that Beeple and the CryptoPunk collection are the most well-known names in the NFT world.
Who is Beeple?
Mike Winkelmann, who is 40, is known as Beeple. He is a digital artist whose work includes short films, VJ loops, and what is known as “everydays”.
This is a practice where an artist creates a new piece of art each day. Beeple has done this consecutively for almost 15 years. Beeples’ compilation of work called The First 5000 Days, was sold as an NFT for $69 million.
Beeple lives in Charleston, S.C. with his wife and children.
Types of CryptoPunks
The Cry[ptoPunk collection consists of 9 aliens, 24 apes, 88 zombies, 3,840 females, and 6,039 male Punks. All of the Punks possess some distinct features, including things like mutton chops, 3D glasses, blushy cheeks, blue teeth, lipstick, hats, and many more.
The first 1,000 CryptoPunks were created specifically for the development team known as the Dev Punks.
There are about 8 Punks with no distinctive features at all. These are referred to in the NFT space as Genesis Punks.
CryptoPunk #8384 has seven attributes and is the most sought-after CryptoPunkin the market.
To Conclude
The NFT market boomed in 2021 and many are clinging to the hope that the same will happen in 2022. The prices of NFTs have surged with the growing popularity of the NFT and crypto industry leaving many to believe that the NFT prices might be a bit hyper-inflated.
This might hold some truth when looking at the fact that the most expensive NFT sold at a whopping price of $91.8 million. Despite this, it seems like NFTs are breathing new life into the believed to be dead art industry.
