While non-fungible tokens (NFTs) have technically been around since 2014, it took until 2021 for the concept to really take off.
Research from early January 2022 revealed nearly $41 billion in crypto was sent to Ethereum smart contracts associated with NFT marketplaces and collections across 2021. This sum was impressive in light of a 2021 report that wrote how sales of traditional art and antiques reached $50 billion in 2020.
While statistics differ on NFT market growth across 2021 (as DappRadar noted the market reached $22 billion last year), the popularity and massive growth of NFTs can not be disputed. Digital collectible sales rested at just $100 million in 2020.
NFT popularity still remains at all-time highs in 2022 even as the wider cryptocurrency market is in bearish waters.
NFT marketplace OpenSea announced in February that January 2021 was a month with an all-time trade volume high of $5 billion. OpenSea, who also revealed it raised $300 million in a Series C round last month, explained its previous monthly trade volume was $3.4 billion in August 2021.
The impressive sum announced by OpenSea has had some analysts curious about the future of the NFT world. Messari’s Mason Nystrom told Yahoo News the breadth of NFTs could see them decouple from the wider crypto markets, where “one asset like art NFTs might perform well amidst the overall crypto market performing poorly.”
Nystrom also noted concepts like Ethereum Layer2 scaling and continued growth of Layer1 (non-Ethereum) blockchains could further expand the NFT ecosystem.
Still, some argue buying NFTs are risky moves and doubt the legitimacy of the entire industry. In February, the Cent NFT marketplace halted transactions after finding people were selling stolen or plagiarized content. The platform released a statement on February 6th explaining “they’d become aware of “bad actors” using Cent for the purpose of “tricking others into purchasing counterfeit work.”
Despite these headlines, the NFT market continues to grow in both breadth and popularity. What is driving the continued surge in notoriety and high NFT prices?
NFTs Are Much More Than Just Investments In The Eyes Of Many Holders
One aspect responsible for the sustained success the market has seen is the approach people take to NFTs.
While some invest purely to try and profit, others buy simply because they like a particular style or artwork or concept. Laura Shin told TIME Magazine how “I bought the Kings of Leon NFT when it came out because I love crypto and I love Kings of Leon.”
Others buy not because of potential profitability, but largely due to the status that comes with purchasing certain NFTs and the benefits that can be gained.
Board Ape Yacht Club (BAYC) An Example of NFTs with Real World Benefits
People often compete against each other to own one of the valuable NFTs in this collection, which counts Stephen Curry and Jimmy Fallon as holders.
There’s even exclusive Board Ape Yacht Club parties for owners. BAYC is one of the prime examples of how status and exclusivity keeps driving the NFT market forward even if other aspects of the crypto world are struggling.
NFTs also remain popular due to how they can create value for both buyers and sellers.
Some digital artists have collected tidy sums designing unique NFTs and offering exclusive collections that are based on their artistic creativity. NFTs have also opened up new conversations about value as they make clear demarcations about what (the NFT) represents ownership.
The Harvard Business Review noted how this concept makes it possible for markets to emerge where commerce can go on with “products that could never be sold before, or enabling transactions to happen in innovative ways that are more efficient and valuable.”
NFT Versatility Keeps Them Popular In A Dynamic Crypto World
Since blockchains are programmable, NFTs can also be home to additional features that have them operate like tickets, membership cards, or entry into exclusive online spaces.
These elements give NFT holders additional benefits aside from the actual value of the digital asset they hold, meaning NFT holders can essentially function as an investor, a club member, a shareholder of a brand, and a member within a loyalty program, all while supporting a unique business model.
All of the above elements make NFT ownership a popular trend as the crypto ecosystem keeps expanding and maturing. The unique nature of NFTs and the utility they can offer helps NFT markets grow and or sustain even as other crypto assets wade through tougher times.
