Non-fungible tokens or NFTs, products that operate like digital assets, have grown to encompass a €210 million market in 2020, a 299% growth over 2019.
In 2021, the NFT market will continue to grow at a record pace. In the last month alone, the main platforms or marketplaces where NFTs can be bought and sold have doubled the total volume, reaching almost 420 million euros in sales of digital assets.
One of the main reasons that can explain the market momentum is found in the interest that the development of NFTs has generated among global companies. Fashion and luxury brands are actively creating and monetizing NFT-based consumer goods and services. Those brands are Louis Vuitton, Breitling, and sports brands such as Nike, the NBA, and Formula 1, Only NBA with its NBA Top Shot portal has generated more than 194 million euros in sales from its birth, not only in direct sales.
However, NFTs operate differently from digital currencies. NFTs cannot be directly exchanged for each other, unlike popular cryptocurrencies like Bitcoin and Ether.
What is an NFT?
An NFT is a non-fungible token that exists on a blockchain network, that is, they are a special class of digital assets that cannot be exchanged for the same value or divided into smaller values like most currencies. Without losing the certificate of originality, NFTs use blockchain contract technology to create a representation of original content that cannot be plagiarized.
No NFT is the same as another, they are characterized by their unique qualities, their rarity, their uniqueness, their scarcity, their exclusivity, as well as their authenticity. Digital tokens cannot be duplicated and it is often functions as a type of collector’s item and there is no chance of them being duplicated.
NFT products encompass a wide range of items, including everything from digital artwork (the most common today), and digital fashion items, to collectible sports cards, virtual real estate, and video game characters.
To purchase an NFT, buyers must use cryptocurrencies such as Ethereum’s Ether (ETH) or the World Asset eXchange (WAX). While ETH is one of the most popular currencies to buy NFTs with, each platform chooses its digital wallet service. The most popular NFT purchase related to virtual characters and video games is WAX.
Opensea, Rarible, NBA Top Shot, and Sorare are the marketplaces or platforms with the highest sales volume where you can buy and sell NFTs.
Why are we willing to pay for it?
Buyers look for proof of ownership of that digital asset and not just the digital asset itself. The tokens can always be traced back to the original creator and it is easily verifiable. In this way, owners of NFT tokens can fully own the individual digital assets knowing that they have the only token of its kind.
The immutability of the product is the main criterion that decides the value of NFTs. NFTs cannot be destroyed, deleted, or duplicated, the token exists solely on its native platform stored on the blockchain network.
The pandemic has made it possible to consolidate the importance of content and virtual worlds in the world, demonstrating that society is ready to start a new chapter based on decentralization, and democratizing traditional systems.
However, as of today, there are several issues related to the NFT market. As the main cryptocurrency and network on which these markets are built is Ethereum, the transaction fees are very high, and it is common to have to pay more than 50 euros to transfer the ownership of an NFT from its creator to the buyer.
What industries could be transformed by NFTs?
A virtual dress closet, a cryptographic art gallery, a digitized document wallet… The future may be full of non-fungible tokens or NFTs.
Recently, there have been a number of highly successful NFT art sales, with some pieces selling for millions of euros. The development of NFTs has a lot more promise than just digital art, though. Let’s look at some examples of industries that could be transformed by the evolution of NFTs.
One of the biggest problems in the gaming industry is that when players buy in-game assets, game developers could actually delete them at any time.
People spend a lot of money playing games like Fortnite, but the assets are often owned by the video game developer and stored on their systems. Users risk losing the virtual assets they have previously paid for if the company goes out of business or goes bankrupt.
The user would be guaranteed that their assets are not subject to the decisions of the video game creators if the assets created in video games were created as NFTs. Users could send it or give it away to someone or auction it much more easily. Even a skin purchased in Fornite could be used in Roblox and sold to another user who could use it in Minecraft, facilitating cohesion between platforms and digital ecosystems.
Imagine for a moment buying virtual pants, shirts, and dresses, and then simply editing them into a photo and posting them to Instagram. Dress-X, XR Couture or The Dematerialized has this as an objective. Ensuring that the clothing cannot be duplicated, these companies sell digital clothing as NFTs which in turn allows brands to create scarcity and exclusivity. As we can see, these marketplaces or digital fashion platforms can become new business models for designers and brands.
RTFKT STUDIOS, a digital sneaker brand, has billed more than 2.5 million euros selling its digital models as NFTs. In addition, they can be digitally tested through a filter on Snapchat.
Could NFTs be the key to the digitization of fashion? It seems closer than ever that NFT fashion items are going to be as important, if not more so, than the ones we have in real life, all fueled as augmented reality matures.
Music is another of the industries that will inevitably be revolutionized and democratized by NFT development, ceasing to be controlled by record labels, radios, or any other means of transmission to be controlled by its true creator. Artists like Kings of Lion, Aphex Twin, Gorillaz, and even The Weeknd have already jumped on the bandwagon selling music through NFTs.
Kings of Lion, apart from releasing their new album, When You See Yourself, in NFT format, they put other NFTs on sales such as Golden Tickets, which contain benefits for life, such as front row seats to any Kings of Lion concert and Exclusive audiovisual art pieces representing the band and its legacy.