When you buy an NFT, it represents a creative work, again, it's the birth certificate, you don't get a physical copy of it. Much like cryptocurrencies, NFTs are stored on digital ledgers—or a blockchain—which makes them both verifiable and unalterable. An NFT is essentially a unique digital asset. NFTs are secured through smart contracts on the Ethereum blockchain. Unlike cryptocurrencies, which are identical and therefore interchangeable, these tokens are ‘non-fungible’, meaning they are each unique.
This sense of uniqueness has seen NFTs take off quickly in the art world. The First 5000 Days, a digital artwork by artist Beeple, sold as an NFT at auction house Christie’s in March 2021 for just shy of $70 million. That's the third-highest auction price ever for an artwork by a living artist.
NFTs have also resonated well with the sports world, tapping into the collectible culture.
Solare is a European startup that creates and sells collectible virtual soccer cards from top leagues around the world. There’s also NBA TopShot, a range of basketball cards produced officially by the NBA. These are more than just stats of your favorite players. You can buy and own specific moments, like a legendary slam-dunk from basketball icon LeBron James.
Why NFT is so popular?
NFT popularity has been fueled by the growing trend towards digital assets in general. “This is just like what boomed the popularity of cryptocurrencies. People are getting more and more into digital,” explains Murat Kristal, associate professor of operations management and information systems at Schulich School of Business at York University in Canada.
The trend has also boomed off the back of the same scarcity that cryptocurrencies thrive off. Each NFT, in a sense, is limited edition, much like original artistic prints or vinyl pressings are in the analog world.
But what distinguishes NFT popularity from that of cryptocurrencies? Lory Kehoe, professor in technology trends at Trinity Business School in Dublin, points to the ‘AMC’ of NFTs.
‘A’ stands for access. “NFTs provide an access point which was unavailable for the majority of people on the planet,” Lory says. This has been particularly true during COVID-19: if you can’t go to museums, or go see musicians live, how can you interact and engage with their art?
‘M’ stands for the market. Sites like SoRare and TopShot, and even auction houses like Christie’s, create a market of willing buyers and sellers. Without this, as with any product, there would be no demand.
‘C’ stands for community. For Lory, this is the biggest differentiator. Buying into an NFT is more than just purchasing a piece of art or a collectible. It’s like buying into and engaging with a specific community. This could be for the purpose of selling your asset, or more importantly for engaging with a shared interest around a topic. For soccer or basketball fans, for instance, NFT collectibles give you access to a global community of like-minded individuals.
Conclusion
It’s difficult for some to wrap their minds around the concept of NFTs, but that's understandable. I mean, why would someone spend millions of dollars on something they can’t even touch? Well, think of non-fungible tokens as a niche for high-brow, digital-art enthusiasts. The same way art collectors wouldn’t mind giving up an arm and a leg for a one-of-a-kind Picasso painting, there are virtual-art lovers who see the true value in owning the original source of a scarce, culturally-relevant digital asset.