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A huge craze in buying digital collectibles called Non-Fungible Token, NFTs, is sweeping the world with some collectors paying out millions for the privilege of ownership.
Big sums of money are changing hands – a video clip by digital artist Beeple was snapped up for $6.6 million recently
If you don’t know about NFTs, this guide runs through the facts you need to know.
Table of contents
What Are NFTs?
Don’t say you have never heard of a non-fungible token (NFT). They are the digital version of trading cards, posters and other ephemera.
A leap forward in technology has allowed the blockchain to keep track of ownership of these assets.
The blockchain is a database maintained on a peer-to-peer network of computers that can’t be changed without the scrutiny of every device on the network. Similar software keeps the integrity of Bitcoin and other digital countries pristine.
But you cannot exchange an NFT for another as each is unique.
Because they are one-offs, NFTs are rare and have a special value to collectors in the same way as, Pokémon cards and Batman comics are to fans who must own the sets at any cost.
Collectors are piling into the market believing the blockchain ledger proves their ownership of a video, song or digital image while anyone can view them for free online.
How Much Money Is There In NFTs?
Where else would the NFT craze start but in the USA?
One of the most popular NFT repositories is NBA Top Shot, an NFT platform centred on the US basketball league. The site lets users trade action clips and match highlights.
The NBA licences the digital files to Dapper Labs, which publishes a few file copies to maintains scarcity and to push up the value of the NFT.
So far, the site has generated $280 million in sales, with the NBA picking up a royalty on each clip.
The business model has taken off in other sports and the world of art.
Sorare, a French start-up is selling collectors soccer trading cards, clocking up sales of $22 million.
London auction house Christie’s is lining up a sale for more Beeple video clips that has already generated pre-bids of more than $3 million.
Meanwhile CryptoKitties, the original ether blockchain-based NFTs have led the market with $40 million of sales.
A Craze Driven By Boredom
The experts put the rise of NFT sales down to boredom and the COVID-19 pandemic.
Research firm L’Atelier explains more people are at home without too much to do due to coronavirus.
Many turned to the internet and the world has seen a corresponding rise in online shopping, day trading with the GameStop fiasco – and they have had more to spend because they are not at work or paying to commute.
Bitcoin and other cryptocurrencies have surged in value at the same time.
For many, NFTs are a passing fad that they hope to flip to make some extra cash, but because many NFTs are traded in cryptocurrency ether, the price is prone to rise and fall without warning.
Ether started the year valued at around $1000 and has soared to $2,500 with some mighty falls along the way.
The Most Valuable NFTS
Checking out the best NFTs to trade depends on which tracker a collector watches.
Coin Market Cap, a well-established cryptocurrency tracker, has a NFT watchlist rating CryptoPunks as the top NFT which has a net worth of $262 million based on just 12,670 trades.
CryptoPunks is a set of 10,000 digital art portraits which the makers say are unique and can only have one owner. The cheapest trades at $51,000, with the most expensive (CryptoPunk #7804) changing hands for $7.57 million.
A CryptoPunk is a 24 x 24 pixel computer generated image. Most are men and women, but the set includes apes, zombies and aliens. Each image has a profile page detailing their attributes, like luxurious beards and crazy hair styles.
The big question for collectors is will the NFT craze last?
No one knows, but the same question was asked about Bitcoin more than a decade ago.
For traders and collectors interested in NFTs, here are some answers to the most asked questions about the phenomenon.
Fungible tokens are cryptoassets like Bitcoin that have an equal value, whereas non-fungible tokens are cryptoassets that are unique and cannot be traded at an equivalent value.
For instance, the value of one Bitcoin is, say, $40,000 and if two people have a Bitcoin each, both Bitcoin hold the same value.
But owning an NFT is like owning the Mona Lisa – only one exists and the value is unique to the Mona Lisa, the painting’s scarcity and how much a buyer is ready to pay.
First, you need a Chrome browser extension called MetaMask that lets authorised web sites access an Ethereum account.
Next, buy some Ethereum through MetaMask
The plug-in will then allow users to bid, buy and sell CyberPunks.
No one knows. The blockchain assigns a code to each buyer so their transactions are visible, but their identities are secret.
The top CryptoPunk owner has 440 NFTs with a current market value of $482,582 bought for $73,000. They have earned $5.34 million from trading NFTs.
New NFTs are coming to the market all the time. One of the latest was Autoglyphs, a set of computer generated images resembling snowflakes created over a few hours on April 19.
They are already the 12th highest ranking NFT.
The first recorded NFT was Quantum, a video of spinning dollar signs, in 2014. The NFT is valued at $7 million. CryptoPunks has some longevity, being created in 2017.
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