How NFTs are taking the art world by storm?

The Storm 

Entrepreneur Gary Vaynerchuk, an early investor in Facebook, Uber, and Coinbase, and a famous internet personality came into the news recently after announcing the launch of his first NFT collection “VeeFriends,” a series of 10,255-character tokens available for purchase via the cryptocurrency Ethereum. He is one of the many personalities that have joined the NFT ‘Boom’. 

The NFT space is often referred to as a boom because NFTs (Non-Fungible Tokens, or blockchain-based units of authenticity) make the digital internet ownable, which is making artists, commentators and early-adopter collectors alike lose their minds over potential new wealth. According to Coingecko‘s data, NFTs have a nearly $28 billion market cap with sports-related NFTs — such as the NBA’s Top Shots trading cards being the most popular. The exchange also notes that Google searches for “NFT” surpassed “DeFi” as of March 2021.   

The major NFT marketplaces such as Opensea and Rarible have witnessed formidable growth in sales by 50 to 100 times in the last three months. For instance, Opensea has witnessed around $82.5 million in transaction volume, against $24.2 million for Rarible in March 2021.  

Many Critics have dismissed the NFT art craze as just the latest bubble, similarly to this year’s boom-and-bust mania around “meme stocks” like GameStop. The phenomenon is attracting a strange bunch of not just artists and collectors, but also speculators looking to get rich off the latest fad.  

The picture of NFT as a fad, is seen to strengthen as prices for digital collectibles in art and sports fall after a peak in Feb 2021.  

However, the groundwork for the digital-art boom is not sudden and was laid in 2017 with the launch of CryptoKitties. Fans since the launch, have spent more than $32 million collecting, trading, and breeding these images of wide-eyed one-of-a-kind cartoon cats. Video gamers too have been pouring cash into cosmetic upgrades for their avatar, such as in Fortnite (a free-to-play battle Royale game) where players spent on an average, $82 on in-game content in 2019, mainstreaming the idea of spending real-world money on digital goods.

At the same time, cryptocurrencies have been booming in value, fuelled in part by celebrity enthusiasts like Elon Musk and Mark Cuban. Bitcoin, for instance, is up more than 1,000% over the past year, and anything remotely crypto including NFTs is reaping its benefits.    

Sensing an opportunity, tech entrepreneurs and brothers Duncan and Griffin Cock Foster last March (2020) launched an NFT art marketplace called Nifty Gateway. Nifty Gateway prioritized accessibility and usability, helping fuel wider adoption. Despite it being launched when NFT was unknown, Nifty Gateway users ended up buying and selling more than $100 million worth of art during its first year. Similar platforms, like SuperRare, OpenSea and MakersPlace, have seen similar surges; they typically pocket 10% to 15% of initial sales. 

Big businesses and celebrities, seeing potential, are building on their existing digital base: NBA Top Shot, the National Basketball Association’s official platform is built to buy and sell NFT-based mementos. It has had over $390 million in sales since its October 2020 launch, according to parent company Dapper Labs.

Football star Rob Gronkowski has sold NFT trading cards of Super Bowl highlights for over $1.6 million. Further, the artwork named ‘Everydays:The First 5000 Days’, a digital work by American artist Mike Winkelmann, popularly known as Beeple, was sold for $69,346,250. It is a collage of 5,000 discreet images, created over a time span of over 13 years. 

     Source: https://nypost.com/2021/03/11/the-first-nft-sold-by-christies-was-just-bought-for-69-3m/  

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 Twitter founder Jack Dorsey put his first-ever tweet up for auction as an NFT, and it sold for at $2.9 million.  

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Source:https://www.liveauctioneers.com/news/top-news/general-interest/twitter-ceo-jack-dorsey-sells-nft-of-first-tweet-for-2-9m/  

To add to this, the technological storm in the art world through NFT has also been brought in by the so-called Whales, who are making the biggest deals in the NFT art world. These deep-pocketed investors and cryptocurrency enthusiasts stand to benefit financially from hyping anything remotely related to crypto.  

The Current Trend   

After a booming first quarter for non-fungible tokens (NFTs), with monthly sales on NFT marketplace OpenSea hitting $95.2 million in February, up from $8 million in January, the market for blockchain-based digital assets ranging from art and videos to songs and tweets slowed in April, platform, and product data shows.  

While anyone can view an NFT, the buyer who has the status of being the official owner, will be considered a digital brag. For example, a picture taken of the Mona Lisa cannot be equated to the value of the original as it doesn’t have the exclusivity or the history of the work. Moreover, all kinds of property – from event tickets to houses, will eventually have their ownership status tokenised in this way, as believed by enthusiasts. 

For artists, NFTs could solve the problem of how they can earn on their digital artworks. They can receive more income from NFTs, as they get a royalty each time the NFT changes hands after the initial sale.  

A surge in interest in NFTs in 2021 is attributed to people spending more time online with cash to spare during the lockdown. Meanwhile, cryptocurrency price gains over the past few years have also created a new group of crypto-rich speculators looking for the next big thing. 

But after explosive growth in February and March, NFT sales volumes generally dipped in April. On OpenSea, monthly sales were $93.6 million in April, having hit almost $150 million in March, compared to $95 million in February and $8 million in January. A year ago volumes were steady at around $1 million a month. 

Sales data from NonFungible.com, a site that aggregates transactions from the Ethereum blockchain, shows weekly trading volumes in April were below March’s peak, but significantly higher than before 2021. On Nifty Gateway, monthly sales in April were $60.9 million which is less than in March (half $144 million), but significantly more as compared to January ($8.75 million). 

Although NFTs fetching six-figure sums have caught headlines, Top Shot (The U.S. National Basketball Association’s marketplace) said that the average sale price in April was $65, compared to $157 in March, $182 in February and $80 in January. 

NFT bubble?  

The happenings in the NFT ecosystem today are nothing short of a paradigm shift for an evolving sector of cryptocurrencies, that brings new products and/or services every few months. As avid collectors frame their digital art, there’s no denying the vast majority of buyers are there to speculate. While the crypto market is a recent boom, the multi-year bear market gave rise to a strong wave of foundational companies and products like Uniswap and Compound that are here to stay.  

Similarly, NFTs are another push that could help cryptocurrencies further into mainstream finance and largescale acceptance.  

Areas of improvement 

While the sales figures showcase a clear demand for NFTs, it’s not without hiccups. 

The vast majority of NFT platforms today require users to be familiar with Ethereum wallets like MetaMask. Once they’re there, they need to pay upwards of $100 worth of fees to make a transaction and place a bid. The same goes for artists creating NFTs, causing community funds like MintFund to pop up and cover the operational costs of launching their first NFT. 

Luckily, platforms like Audius are addressing these pain points head-on with 2 million monthly active users, the most of any Ethereum application today.  Audius replaced MetaMask with an email and password login wallet called Hedgehog. By removing key management and transaction costs, users can access the world of crypto without significant start-up costs. 

Another issue linked to the NFT space is its carbon footprint. Most NFT artists use Ethereum to “tokenize” their work on a blockchain and Ethereum uses about 31 terawatt-hours (TWh) of electricity a year, nearly as much as Nigeria. This causes various artists to think twice before entering this space. The French digital artist Joanie Lemercier recently canceled the sale of six works after calculating the associated energy costs. The sale would use, in just 10 seconds, enough electricity to power the artist’s entire studio for two years. However, many are trying to find solutions. For instance, Ethereum’s promise to launch a new framework by 2022 that would use far less energy than the current system, highlighting that innovation as the solution to all problems. 

In conclusion, no matter whether NFT is a boom or not, as people spend more time online, always plugged in, it makes sense to add real value to the time spent and pave the way for a world in which people live, socialise, and make money in virtual environments. 

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