THE BILLION-DOLLAR RISE OF NON-FUNGIBLE TOKENS
Digital technology developments such as blockchain provide a network-based technology solution that is used to record transactions efficiently and securely, and the most popular cryptocurrency – Bitcoin – has stimulated a mass of new retail and institutional investor growth.
This heightened speculation of opportunistic investments has revolutionised the financial ecosystem and resulted in the introduction of non-fungible tokens (NFTs), a blockchain product that has gained significant public attention in recent years.
NFTs exist as unique digital token assets which represent tradable digital goods, such as collectable art, profile pictures, sports cards, videos, music and in-game items.
Although sceptics have mocked NFTs as being simple digital images that can be just as easily copied and pasted, the NFT has become one of the most utilised components of the Ethereum ecosystem, creating a billion-dollar economy.
The unique value of NFTs
An NFT is a unit of data stored on a blockchain. It certifies a digital asset is unique and, therefore, non-interchangeable, while offering a unique digital certificate of ownership. As a result, an NFT can be equated to being a proof of ownership.
The unique value of NFTs signifies them as being ‘non-fungible’. In other words, they cannot be traded, but the digital asset they represent can be. The NFT’s function is to guarantee the value intended by the creator, for an owner or buyer.
The NFT market began to attract attention in February 2021 when ‘CrypoKitties’, an NFT digital collection of artistic images representing virtual cats used in a game of Ethereum, allowed players to purchase, collect, breed and sell ‘cats’. The emerging purchases made in-game using cryptocurrency reached £1.5m in value.
Jan-Mar 2023 Issue
Henley Business School