If you did not spend the past year in the deep forest without the Internet, then you definitely read or heard something about NFT. It looks like this: crypto enthusiasts have thought of selling digital pictures and memes on the blockchain; there were also people who were ready to give millions of dollars for such a product.
The media is full of similar high-profile headlines: the artist Beeple sold an NFT collage of five thousand of his works for $ 70 million; the original Nyan Cat gif went under the hammer for $600,000; meme photo with “disaster girl” sold in NFT format for $430,000. Cryptopunks pixelated avatars are selling for millions of dollars, and the work “Pixel” by anonymous artist Pak was sold at auction for $1.3 million (it’s really a gray pixel, a canvas in the spirit of Malevich).
For some, the NFT phenomenon is evidence of the final withdrawal of the economy into the digital “metaverse”. Others see the NFT fever as signs of a dangerous financial bubble of unprecedented proportions. One way or another, today trading in NFT artifacts has become a global and highly liquid business, estimated at at least $20 billion. It doesn't look like this market is just going to disappear. The other day, the largest NFT marketplace OpenSea attracted $300 million in investments and updated the historical maximum in terms of monthly trading volume - $3.5 billion. And all this - despite the January collapse of the world's most important cryptocurrencies - bitcoin and "ether".
What will be the future of this fancy market? To find the answer to this question, I spoke with blockchain developers and our crypto investor partners.
Gray “Pixel” NFT was auctioned off for $1.36 million
The network is full of attempts to explain what NFT (non fungible token, non-fungible token) is, almost all of them are equally incomprehensible to a person far from “crypto”. So let's outline here the most important thing for understanding the market.
NFTs are tokens on the blockchain network. But if the tokens of the same cryptocurrencies in the blockchain are equivalent (like the coins and banknotes we are used to), then NFTs are special. Each of them has metadata that provides them with complete uniqueness, “non-interchangeability”.
This makes NFT a convenient tool for expressing rarity. We assign a unique token to the picture, and we can talk about it as the “same” original picture. This is how the demand for a rare object is formed.
NFTs are created on the basis of smart contracts (usually on Ethereum smart contracts). Blockchain allows you to securely record transactions for the purchase and sale of such objects - a record of a transaction is extremely difficult to change or fake. That's what the NFT market is all about.
A couple of years ago, the NFT industry was of interest only to a narrow circle of enthusiasts and artists, but last spring the market literally exploded. If in 2020 the trading volume barely reached the mark of $100 million, then by the end of 2021 it exceeded $20 billion. What will happen to him now?
It is difficult to predict something in the field of blockchain fashion trends, but experts and investors one way or another talk about such trends:
Ukraine occupies far from the last place in the global crypto industry (specifically, 21st place in the global ranking Coincub , one position above the Netherlands). We have promising NFT projects and experienced developers. On the NFT, following the example of Western colleagues , they are PR Ukrainian brands and pop stars. At the end of last year, the first local marketplaces began to work.
There is also groundwork for decent regulation of this market. In September last year, the Rada adopted a law on the legalization of virtual assets, which include both cryptocurrency and NFT. The project involves the creation of a whole supervisory body to control crypto assets. Since autumn, the final approval of the law has stalled, but such an initiative is very important and will probably be adopted sooner or later.
Is it worth investing in NFTs in 2022? I am not calling anyone to anything. It is important to remember that now the crypto industry is a digital “Wild West” with a minimum of control and high risks. But investors still go there in the hope of hitting the big jackpot.
Today, everything points to great prospects for NFT technology and smart contracts, and this applies not only to digital art and gaming. For example, the creation of a marketplace of smart contracts for business can be a big step forward for a number of industries: real estate, law, logistics, retail, cybersecurity, etc. All you need is a good idea and a team of smart developers who can bring it to life.