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The rise of NFTs: An explainer guide

by Jessica Weisman-Pitts
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By: Patrick Ashworth, Founder & CEO, Vizzio Art & Homo Spacien

2021 has been an incredible year for NFTs. At the start of the year, it was recorded that NFT sales reached $2 billion, which was a 2,100% increase from the same time last year. In 2020, sales only hit $250 million, which is hard to believe as quarter three of 2021 has now recorded sales of $10.7 billion.

NFTs have clearly benefited from the crypto frenzy that we have seen in the last 12 months, but they are still not mainstream and remain something relatively unknown to most people. So, for those who are new to the NFT world, what are they?

Understanding NFTs

NFT stands for non-fungible token, which is a unique, non-interchangeable unit of data stored on a digital ledger using blockchain technology to establish proof of ownership. NFTs are collectable digital assets that are now being used across a variety of sectors such as art, gaming, music, real estate, entertainment, sport and many more, with their use only set to rise.

In simple terms, NFTs are digital tokens like Bitcoin and Ethereum, but an NFT is individual and can’t be exchanged like-for-like, thus making it non-fungible. All kinds of easily reproduced digital files can be stored as NFTs in order to identify the original copy and can be anything from photography, art and music or videos, tweets, and even memes. NFTs can be made from almost anything unique, as long as it can be stored digitally and holds value.

This means that instead of receiving a physical collectable item, an NFT owner will receive a JPEG file that comes with proof that they own the original copy.

Where are they stored?

NFTs sit on a blockchain ledger that maintains the unique identity and ownership of the NFTs. The NFT that identifies the owner of the digital asset can be bought and sold, and the price is determined primarily by market demand.

Each NFT comprises a smart contract that provides the license to use the digital asset. One of the benefits of NFTs is that the original creator also gets a percentage of future sales in addition to the original sale value. Given the high demand for many types of NFTs, NFT collections are often released as “drops”, so the buyers must be quick on the day and time of the drop and be registered, have enough cryptocurrency in their wallet and be ready to buy when the opportunity arises. After the purchase, NFTs are traded on many NFT marketplaces, such as Opensea, Rarible, Nifty Gateway, and many more.

NFTs have created a new asset class for almost anybody, meaning they are accessible to everyone and are no longer only available to the elite. This makes them even more attractive to current and potential users, with the NFT community set to expand in the months and years to come.

NFT owners and the huge growth potential

NFTs are only going to continue to grow in popularity, which has been reflected in the number of people getting involved in the trend. The following stats demonstrate the infancy of the NFT market:

  • 4,662.5M internet users
  • 2,890M Facebook users
  • 300M discord users
  • 2M Twitter users
  • 1M defi users
  • 3M opensea (NFT marketplace) users
  • as of September 2021, 0.0009% of internet users owned an NFT

Whilst we are still in the very early days of massive growth in the industry, the future remains exciting for NFTs. So if you aren’t in the space already, it’s time to get on board and see what you’re missing.

Running alongside the excitement is justifiable scepticism about NFTs. Many people don’t understand how the pieces that sell for these astronomical amounts can be viewed by anyone on the internet. While this can seem strange at first, it actually shows how the way we see and access art is changing. During the pandemic, we relied on the web to stay connected, and as mentioned above, using NFTs in this way also levels the playing field in terms of who can own the art while still making it possible for artists to be compensated for their work using the latest technology.

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