In 2021, whether tech-savvy or not, NFT became the talk of the town with headlines of people reaching the height of buying Clipart of a rock at the price of a small house. We are talking six figures for NFT rocks- ridiculous right! As if we had not seen it all, Chris Torres, the artist behind Nyan Cat, auctioned his 10-year-old cat as a crypto art piece. Jack Dorsey the co-founder of Twitter also auctioned his autographed tweet as an NFT, and not forgetting how we were all perplexed by Beeple auctioning $69 million worth of digital artworks, a record for the most expensive art ever sold. This robust NFT explosion might seem confusing and leaves many wondering as to what an NFT is and the whole fuss about the NFTs.
What Is an NFT?
NFT stands for Non-fungible token. NFTs are cryptographic assets that depict real-world objects with the likes of art, music, videos, and in-game items on a blockchain with distinguishing codes and metadata. Still vague right!
Non-fungible generally means unique and irreplaceable. NFTs have been in existence for a longer time as in 2012, Coloured Coins popped in. They seem to however slowly move into public awareness between 2018 and 2021 and then spiked 21,000% in 2021. Tremendous, right!
What Distinguishes NFTs From Cryptocurrencies?
Most NFTs are around collectibles and range from digital artwork and even sports cards such as graphic art, music, designer sneakers, videos, GIFs, and video game skins. They are programmed the same as cryptocurrencies like Bitcoin. Both employ blockchain technology, but that is where their similarity ends.
Fiat money and cryptocurrencies are fungible, implying that they can be traded at an equal value. NFTs on the other hand tend to be different; each has its digital signature hence the value of each NFT tends to be different. Ownership of NFTs is to one person at a time.
Jack Dorsey’s First-Tweet NFT
Recently, there is the trending Jack Dorsey’s tokenized first-tweet where he wrote: “just setting up my twttr” for which he sold to Sina Estavi for a whopping $2.9 million in March last year. Estavi paid such a hefty amount of money based on the fact that the NFT was unique as well as the association with the reputable Twitter Company.
The justification for this bubble price made so much noise in the media space. In the same month that Estavi effected this purchase, the NFT market was on hype. As for March 2021, OpenSea sales rose by nearly $142 million from January 2021 for which Dorsey’s tweet only fetched a few thousand dollars.
On April 5, Estavi put the Dorsey NFT up for auction for about $50 million. Surprisingly, this NFT’s highest bid was just $280. This was quite embarrassing considering this bid was just made just a year ago.
The Current NFT Market Performance
Following the 99% drop in value for Dorsey’s first-tweet NFT, many have wondered if the NFT market has crumbled. It was clear that Estavi did not get the exposure he so desired from this NFT. This proved that the market was not hyped about getting anything a high-profile release as was in 2021. The Estavi saga seems to be a case of a misguided purchase. Current monthly OpenSea sales remain high ranging $2 to $3 billion, up from $150 million in the prior year.
The NFT market has however seen a slowdown emerging from hacks on OpenSea. Greater uncertainty has arisen over the security of the highly placed digital assets, contributing to a decline in demand for NFTs in recent months.
Should You Invest in NFTs?
The point of investing in NFTs depends on whether you are an artist or a buyer. The NFTs market is still new and risky as there is so much uncertainty about the sustainability of the market in the future. For an artist, it would be worth developing a cool digital idea, to get you more popular and fetch you more monetary benefits.
For buyers, the decision to invest in this market is a personal decision that might be worth considering based on the value one places on the digital assets sold in the NFT market. Just like any investment, it would be worth considering the value for which the NFT fetches in other people’s perspectives, as this determines the price for which one will be willing to pay for the NFT, to not sell or resale at a loss.