According to DappRadar, a platform that lists decentralized applications, NFT sales volume across the world totaled $24.9 billion in 2021. This volume was only $94.9 million the previous year.
This market explosion in 2021 is explained in particular by the bullrun of the crypto market during this period. Many individuals, entrepreneurs and institutions have gotten caught up in these NFTs. But what exactly are we talking about behind this term NFT?
How to define NFTs?
Created in 2014, an NFT, for “non fungible token”, is a unique digital asset based on the ERC-721 standard of the Ethereum network. being digital certificates of authenticity of physical worksthey contain the title of the work, the name of the artist, the date of creation and a complete description.
Owning an NFT is therefore having a right of ownership of a digital asset. It can be a work of art, music, video, avatar in a video game…. The latter is usually held in a personal crypto wallet (wallet) and its price is set by supply and demand. Furthermore, it is theoretically inimitable, unfalsifiable. Being present on the blockchain, they are however traceable and searchable by anyone.
One of the special features is the ability for everyone to create their own certified work, to transfer it or to buy other works. No special permission or skill is required.
The NFT ecosystem borrows the same codes as the art market. There are a multitude of platforms like OpenSea or Rarible, which are real “trading rooms” where enthusiasts, collectors or speculators meet.
What are NFTs used for?
There are as many use cases as areas of operation. It is found in video games, digital art, collectibles, or even virtual land (Metavers)…
In the case of video games, NFTs provide the player with a new gaming experience called “play-to-earn”. Now, the more time the player invests in playing a game, the more NFTs they will be able to get. He can then resell it, either in the game or on the NFT market and thus earn capital gains.
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Some NFTs are virtual land titles, the best known of which are Decentraland and SandBox. Others have a more “utilitarian” function such as giving access to a particular service or authenticating a signature…
The dangers to be aware of
This market is innovative and limitless. However, it is not without knowing a certain number of disadvantages that the investor must understand:
- A very volatile and risky market. Since NFT transactions are closely linked to cryptocurrency prices, the value of an NFT can go up or down very sharply.
- A highly speculative market. Twitter co-founder Jack Dorsey sold an NFT of his first tweet in March 2021 for $2.9 million. The buyer, Sina Estavi, wanted to resell it a year later for 48 million dollars. Unfortunately, this NFT is worth almost nothing. The best offers barely exceed one ethereum (about 1,000 dollars at the time of these lines).
- A market without barriers and regulations where many scams proliferate. There are indeed counterfeits, fake platforms, identity theft or even embezzlement.
Conclusion: an essential element of the cryptosphere
NFTs have become inseparable elements of the crypto and blockchain ecosystem. They are dedicated to revolutionizing the digital world. Indeed, in the near future, it will be possible to digitize everything easily with the ability to trace and authenticate.
Whether tickets to shows, video games, works of art within metaverses, legal documents (wills), shares of real estate… imagination offers no limits to the universe of NFTs.