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Are NFTs the Baseball Cards of the Digital Era?
NFTs seem to have boomed from nowhere. But something does not come from nothing.
How did NFTs come to exist in the first place? And how did they get to the point where sales in the month of August alone reached up to 3 billion USD? We’ll answer all of these questions in this article on the rise of the NFT.
What are NFTs and How Did They Start?
Before we jump into the history of Non Fungible Tokens (NFT), let’s briefly cover what an NFT is in the first place. An NFT is more or less a deed of ownership for a given asset, usually digital. However they are not limited to digital space, an NFT can be a deed for a house in the real world for example. For the most part though, NFTs are digital assets and that’s the focus of discussion today. These digital assets cover a wide range of items, but in particular collectables such as digital art for example.
NFTs trace their roots to the relatively recent history of 2014. The first NFT was created by a pair of artists, Kevin McCoy and Anil Dash, who unveiled it at the “Seven on Seven” conference at the New Museum in New York City. The key difference to this piece of art was that it had attached metadata, while previous cryptocurrency attempts at creating “digital deeds” had not used metadata. It is this metadata that is key to the value of NFTs, since this metadata is what acts as the “deed” to a given piece of physical or digital asset.
The Rise of NFTs
Etheria, the first major NFT project was launched in 2015, shortly after the Ethereum blockchain itself launched. Etheria launched with 457 hexagonal tiles, which were available both for purchase and trading with others. However these largely went unsold until March of this year. At the time, these tiles could be purchased for 1 ETH, which was only worth 43 cents at the time of Etheria’s launch. The tiles sold for a total of around $1.4 million USD.
NFTs as we know them today first came to significant prominence in 2017, when creating NFTs on Ethereum’s blockchain became extremely simple. The newfound accessibility into a previously unexplored domain gave rise to novel projects.
Among the earliest major successes in the field of NFTs was CryptoPunks, which was created by LarvaLabs, contributing to the surge in 2017. CryptoPunks is a collection of 10,000 unique collectable cartoon characters. Currently, the cheapest one has a value of around $290,000 USD.
Another early major success for NFTs was CryptoKitties. CryptoKitties tapped into the internet’s love of cats and quickly became a major hit. Players can breed, trade, and play with other players’ kitties. The project fetched $1.3 million in total sales within months of its launch.
The Current State of NFTs
NFTs boomed earlier this year and have been on a financial rampage ever since. A number of major sales have happened this year. To name just a few, the musician Grimes sold roughly $6 million USD worth of tokens on Nifty, a major NFT trading platform.
A famous internet meme NyanCat sold for around $600,000 USD. Jack Dorsey, creator of Twitter sold his first ever tweet for $2.9 million USD. These samples are only a drop in the ocean of total NFT sales this year compared to 2020, seen in the graph below.
OpenSea, the current market leader in NFT sales reports 3 billion USD in sales volume in the month of August alone. This is a pretty strong signal that a previously untapped market has been discovered. A generation of people raised alongside the internet value digital goods more than physical ones, and they’re willing to pay for it as we can clearly see.
NFTs can be used to play games with your friends, so having the top of the line NFT goodies can go a long way for internet status. You can only show off your McMansion to so many people, but an online avatar can have millions of users scrolling past every day. Art buyers also need not go through the middleman of art dealers. Finally, users may scroll through online stores such as OpenSea and Nifty to find pieces of their personal taste, rather than going off of what an art dealer tells them is particularly good or bad.
The Future of NFTs
With sales this strong, could NFTs keep booming? Potentially in the short term. It seems likely that this trend could continue into next year, but previous collectable booms from Dutch tulips to beanie babies indicate that such things never last for long. With this scepticism in mind though, NFTs could be around for a little longer than next year.
Unlike beanie babies, NFTs are user-generated and it becomes more a matter of who’s got the cash to pay for the provided price tags. Content generation online has the benefit of seemingly unlimited human potential and creativity behind it, rather than a single trendy manufacturer as was the case with beanie babies.
Many NFT collectables have a high price tag, however, it’s entirely possible that NFTs could be bought at a lower price and flipped after it was marketed correctly on social media. The iron is definitely hot in the NFT market right now, so if you’re interested in collectables now would be the time to strike it before the market cools down.
