What are NFTs?
Note: Data in this section last updated May 28th, 2022
An NFT – or “non-fungible token”– is a certificate of ownership for a digital good that is recorded onto a blockchain.
Almost any virtual asset can be represented by an NFT: a piece of art, a photograph, a song, a concert ticket, a passport or the deed to your house.
Each and every NFT is unique – in fact, the term “non-fungible” is just a fancy way of saying “unique” – and has three important properties:
Proof of Authenticity: NFTs use cryptography to prove their authenticity. As such, they cannot be counterfeited and it is relatively simple to spot a fake NFT
Record of Ownership: They maintain a record of ownership on a blockchain, which cannot be altered, destroyed, removed or confiscated
Inalienable Rights: Owners can often do anything they want with their NFT – they can sell it, rent it, license it and / or create derivatives works
The market for NFTs exploded in 2021, growing from $64.5 million on January 1st, 2021 to a $38.6 billion peak in January 2022 (nearly 600x growth) and registering multiple eight-figure sales.
Even today, during what many are calling a bear market, the space boasts a total market capitalization of $25.84 billion (> 400x growth from 2021).
The NFT Market has grown over 400x since 2021
While the idea of digital goods is not new, much of the excitement behind NFTs is likely due to the fact that they completely change the underlying structure of the entertainment industry.
Historically, content has been owned by centralized third parties and rented to consumers.
For example, if you bought an in-game asset (such as the ultra-rare, $16,000 Dragon Slaying Sabre in the game Age of Wulin), you would need permission from the developer to sell it and you likely wouldn’t be able to transfer it to other games. In addition, the gaming studio could easily choose to arbitrarily restrict access to your items and / or decide to charge you enormous fees.
NFTs change the game because – for the first time in history – they allow artists and consumers to truly own their digital goods. This eliminates the need for centralized third-parties and provides substantial benefits to all stakeholders.
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