Are NFTs the next big thing?

This year has already seen some of the most volatile market trends, and we’re not even a third of the way through. 

In January of this year, we saw trading platforms scramble to maintain market access as the Reddit vs Wall Street saga came to a head, but not before hedge funds had lost millions of dollars and the everyday investor appeared to come out on top.

We’ve also seen SPACs come to the fore, with the likes of fintech giants SoFi and eToro announcing multi-billion dollar SPAC deals, avoiding the long-promised fintech IPO boom.

And now it seems attentions have been turned to NFTs, but what are NFTs and why are they important? Well, AltFi took a look around the world of digital art so you don’t have to.

What actually is an NFT?

An NFT, or a non-fungible token, is a unique digital file that can come in the form of art, videos, audio or even Tweets, and are a form of cryptocurrency that can give a person ownership over them.

The NFT is essentially a unit of data stored in a blockchain ledger that can only have one owner, cannot be copied and cannot be lost or maliciously duplicated, unlike other forms of cryptocurrency.

NFTs can be bought and sold with any currency, however, most transactions tend to be completed with Ethereum, so if you don’t have an Ethereum wallet you could be left out in the cold when it comes to spending the big bucks on digital art. 

So, why are they big now?

Maybe it’s boredom from endless lockdowns, or maybe people are just spending too much time on the internet, but it seems as if trends nowadays fizzle out nearly as quickly as they take off.

Just last month, people were going mad for SPACs (special-purpose acquisition company) and companies were rushing to jump on the SPAC bandwagon. Now, it seems as if NFTs have grabbed the attention of the mass affluent on the internet.

Simon Taylor, venture director and co-founder of 11:FS, told AltFi that NFTs are getting hyped-up for two reasons at the moment. 

“One: There is a crossover into cultural significance, as major brands like the NBA and artists like Beeple are selling digital collectables for large sums of money. And two: there's clearly an element of hype around the technology too.”

Hype is definitely playing a huge part in the craze surrounding NFTs. Just look at Beeple, a digital artist who also goes by the name Mike Winkleman, and who sold a collection of over 5,000 works titled “Everydays — The First 5000 Days” for $69m.

The massive price tag makes his digital art the most expensive NFT sold to-date and also the third-most-expensive work by a living artist. 

Digital Mona Lisa

Still confused? Don’t worry, you’re not alone.

While NFTs seem to have come from nowhere, actually they’ve been around since at least 2014 when someone came up with the idea of selling coloured Bitcoins to anyone interested.

In 2021, a lot of the noise surrounding NFTs has largely come from the same people that seem to have been driving the ‘Meme Stock’ rise and fall.

Thanks to the often hefty price tags, your everyday investor is likely to be left out of buying high-ticket NFTs, and the crazy prices are not helped by the fact that the likes of Elon Musk and Jack Dorsey, founders of Tesla and Twitter respectively, have jumped on the bandwagon.

Last week, Dorsey’s

The buyer of Dorsey’s first tweet, Malaysia-based Sina Estavi, likened the tweet to one of the most famous paintings in the world, Leonardo Da Vinci’s Mona Lisa. One’s an irreplaceable priceless work of art and the other is a five-word tweet. I’ll let you be the judge of value.  

So, are NFTs the next big thing?

It’s safe to say that NFTs are certainly grabbing the limelight for now, but for how long is the real question.

There are very few people in the world that can both afford and justify spending $69m on art that other people still have access to and for free too.

The likes of Elon Musk, Jack Dorsey and notorious Meme Stock and SPAC investor Chamath Palihapitiya, who are all worth $164bn, $13bn and $1bn respectively, can afford to splash the cash when it comes to NFTs, but most people don’t have that luxury. 

Despite this, the rise of NFTs could be an important step towards helping digital artists get the recognition and protection they’ve been crying out for for some time now. 

Taylor said: “This may be a mania phase and a bubble, but it's also the beginning of provable digital scarcity.  What's really powerful about NFTs is how they support creators and artists.”

“An artist can make sure that every time their artwork is sold, they automatically receive 10 per cent of the proceeds of any sale. This completely changes second-hand art, music, movies or gaming markets which artists and creators do not benefit from.”

So, are NFTs the next big thing? It could be too early to tell, but we could also be caught up in the Reddit/Crypto echo chamber on the internet that is pushing us to believe NFTs hold immeasurable value and are vital to continuing on our current tech-focused path.

It’s hard to tell if the current NFT boom has been caused by people who have been starved of actual art galleries and who have too much disposable income, or if there is in fact a real desire for digital art to be protected in the same way that physical art is.