NFTs – A Boom in the World of Digital Art and Trading or a Fad to Measure the Popularity of Celebrities?

The digital currency revolution is not limited to the world of bitcoin and trading platforms, but the world of art and sports are also two areas that have been positively affected by digital transformation and the dynamism of the spread of blockchain technology; the best evidence for this is the growing interest in the term (NFT), which is an acronym for (Non-Fungible Token).

NFTs have been around since 2012, and they exploded in 2020, as the market grew by 229%, to reach its value of $250 million, and in February 2021, more NFTs were traded in 24 hours than in the whole of 2020.

What is NFT?

According to the technology website The Verge, NFTs are ownership contracts for digital assets that are registered in virtual platforms in the name of the content creator, such as artwork, music, electronic games, videos, etc.

NFT has unique properties and cannot be replaced by anything else and relies on the blockchain technology that is also used in the mining of bitcoin or other cryptocurrencies.

Also, the NFT has an immutable and traceable history, but the NFT cannot be divided into smaller pieces (unlike digital currencies), according to the report published in August 2021.

Most NFTs trading platforms are based on the Ethereum blockchain and its currency, which is the second digital currency in the cryptocurrency market, which compels anyone who wants to enter the NFTs trade to own an Ethereum wallet to receive payments when buying and selling transactions.

According to those interested in digital markets, NFTs can be profited in two ways, the first is to earn by creating NFTs and selling it on one of their platforms and you will get a commission on every new content sale, the other is to buy ready-made content from the NFTs marketplace and then resell it again at a higher price.

On February 4, the US Treasury Department warned that NFTs may pose new illicit financing risks within the framework of money laundering or terrorist financing, this is due to the concealment of the original source of funds.

It is estimated that there are currently about $78 trillion in non-bank assets worldwide.

NFTs are a technological revolution that could replace many laws and practices in a simpler and more transparent way to unlock and interact with these non-bank assets, according to observers.

 

Crazy Phenomenon

This great interest and the rapid explosion of NFTs made individuals race to own these tokens before their price increases in the future, in the hope of getting rich and earning from them, according to a report published by the technology website Make Use Of in May 2021.

While many detractors say NFTs fall somewhere between insanity and fraud and believe that it is a big hoax that is being marketed very strongly by the NFTs websites and companies, to entrap those who seek to make a quick profit into the trap of buying these images, hoping to resell them, and to attract stronger traffic to the same websites.

But in fact, some artists have sold some very ridiculous NFTs at really crazy prices, which makes it difficult for people to take the idea seriously.

Recently, wealthy investors and collectors have rushed to acquire such digital artifacts, until NFTs became a staple in major auction houses, like Christie's, which sold a digital work of artist Beeple for a record $69.3 million in New York in March 2021.

The National Basketball Association (NBA) has also created a series of NFTs of iconic basketball moments over the years, this created a $250 million trading market overnight.

One of the exciting operations in this initial market is the announcement in March 2021 by Jack Dorsey, the co-founder of Twitter, that he sold his first tweet on the Twitter platform, which was published in 2006, as NFT for $2.9 million, according to the price of Ethereum at the time.

Fashion company Gucci has sold artwork as NFT via auction and has previously sold clothing for avatars within the game Roblox.

Recently, VISA purchased CryptoPunk, one of thousands of NFT-based digital tokens, for approximately $150,000.

So in a nutshell, NFT value is whatever price the buyer is willing to pay, and other factors play into determining price, such as: Rarity, character popularity, collectability, aesthetics, colors, and more, according to the report.

 

A fad or A Boom?

These days, NFTs investments tend to grab the headlines, in view of the large numbers associated with its sales, possibly related to the wave of boredom hitting world celebrities, which leads them to spend thousands and hundreds of thousands and millions of dollars to buy digital apes.

Bored Ape Yacht Club, which considered the first and most popular NFT collections, was launched by a startup called Yuga Labs in the spring of 2021, gained international fame due to the race of celebrities and influencers on the social media to buy it for fantastic sums, and its collection sold for nearly a billion dollars.

Sotheby's auction house recently sold a collection of 107 apes for more than $24 million.

With the so-called Halo Effect, individuals are racing to buy, trade, sell and earn from these tokens, it has also become a field for the rich to show their wealth by owning NFT tokens in the higher price groups.

For example: Justin Bieber bought the bored ape with code #3001 for $1.3 million, and before him was rapper Eminem, who spent $462,000 to buy the ape with the code #9055, also famous footballer Neymar, who spent $1 million to buy two bored apes, which bear the codes #6633 and #5269.

In this regard, the engineer and interested in the field of digital transformation, Abdulla Aldeaiji, published a series of tweets on his Twitter account, and said: “The follower of the world of Metaverses and Cryptocurrencies finds that the fad of NFTs is increasing day by day, and they are used in various fields such as: digital art, music, tickets, electronic games, and virtual real estate.”

In Aldeaiji's view, the main reason behind the huge popularity of the NFTs is the huge uproar caused by the global media, this is due to the fact that a number of celebrities such as Justin Bieber, Neymar and Paris Hilton, and major companies such as Adidas, Nike, Coca-Cola and Gucci, have entered this field.

“Another reason for the spread of this exciting fad is the deteriorating economic conditions and the absence of real job opportunities, in addition to the Corona pandemic, which led to the bankruptcy of many companies as a result of repeated closures around the world, some were forced to stay in their homes for a certain period and read about this technology, then experience investing in it,” he added.

As for the risks that may result from investing in this field, Aldeaiji stressed that “there are risks involved in investing in these digital tokens as they may be a passing bubble.”

But at the same time, he pointed out that people were previously reluctant to invest in the field of digital currencies and Bitcoin in its infancy, but after reading about it and the growth of its market, many of them started investing and understanding digital currencies.

“I see NFTs as a new revolution that may have a future in investing, but any investor should know his ability to take risks before investing in new technology,” Aldeaiji concluded.

Speaking to CNBC on February 10 about the exciting world of NFTs, Gary Vay Ner Chuk, chairman of VaynerX, said: “I think these are Grossly misunderstood by the mainstream consumer. People that Andy Warhols and Jackson Pollock should not have value. People thought that sports cards or sneakers should not have value.”

“The thought of people deciding on their opinion of what should or shouldn’t have value has made me laugh my entire life and has historically been incorrect,” he asserted.

“The market will decide if something has value. So for me it’s more about understanding why people buy the NFTs. It’s the same reason that people buy Chanel handbags, Nike sneakers and Mercedes-Benz. This is about brand and if you look at the behavior of the under 15 year-old crew (Fortnite, Roblox, and Minecraft),” he continued.

If you look at why people care about blue check marks on Instagram or how many followers you have on TikTok, we are living more and more increasingly in a digital landscape and NFTs became assets to communicate who you are and that’s something human beings have done forever bought things to communicate, and NFTs will be the scaled version of that,” Gary concluded.

 

Futuristic Approach

In January, the Financial Times reported that Facebook and Instagram are developing technologies that allow users to display NFTs on their profiles and building a marketplace that allows these digital art holdings to be bought and sold.

Barely a few days after those reports, Twitter allowed these tokens to be included on its app, as well as allowing users to display them as profile pictures.

YouTube is also seeking to introduce a feature associated with non-fungible tokens to give creators another source of revenue, according to YouTube CEO Susan Dean Wojcicki.

The popular short video app TikTok last September announced the NFT collection designed by some of the top creators.

Writer Scott Duke Kominers indicated in his report published on January 27 in Bloomberg that this move represents a major shift in the approach of the social media giants, which mostly profit by fully controlling the data that users post on their pages and using it to increase engagement and target ads.

He attributed this to the fact that NFT features allow people to confirm their membership in certain groups and be proud of them in front of others and help them show their standing in society.

These companies hope to benefit by opening the NTFs market to the growing value of the token market, which is now valued at more than $40 billion, according to Bloomberg.

Analytical data by crypto and research firm Messari indicated that NTFs are worth nearly $16 billion.

The NTFs market size crossed the $13 billion mark in 2021, according to figures compiled by The Block Research.

In turn, Jefferies Group LLC, an American investment bank, predicted last January that the market value of NFT would rise to more than $35 billion during 2022; it is also expected to reach more than $80 billion in value by 2025.