If you actively follow tech news, you’ve probably heard of NFTs (non-fungible tokens) once or twice in recent months.
The idea grew hugely popular over a short period of time, taking the market by storm. And while many were excited for the future possibilities surrounding this market, things didn’t exactly work out as some were hoping.
In the end, the NFT market proved to be a passing trend that eventually ended up collapsing. But it still left us with some food for thought.
Since it’s likely that we’ll see a similar concept soon, let’s discuss the lessons learned.
NFTs originated in the realm of blockchain, the same tech that powers popular cryptocurrencies like Bitcoin.
Some people confuse blockchain and cryptocurrencies, using the terms interchangeably. Blockchain simply refers to technology that allows users to store a list of records, all connected to each other through cryptographic methods. The final result is that the entire list is verifiable from start to finish, and can’t be modified without the consent of all participants (or more often, simply can’t be modified at all).
Somebody saw that idea and realized that it fits well within the art world, specifically around the idea of buying and selling exclusive, limited-edition art pieces. And so, the idea of NFTs was born.
The basic concept is that a person can pay for a unique copy of an art piece, and that ownership is then verifiable through blockchain records. As a result, only the buyer has the actual “rights” to the artwork, and this can be publicly verified.
People used the technology to trade all kinds of artworks, from pictures and music to more abstract concepts, like game assets and even physical products. Nobody seemed to have any issue with the fact that unlike real, physical artworks, NFTs did not guarantee exclusive ownership—meaning that two people could independently own two separate, unique copies of the same piece.
The idea was novel and quickly attracted a lot of attention, including from some high-profile celebrities. Nike were rumored to be eyeing the market as well, patenting tech that allowed them to link NFTs to real products, but this never really took off. In the span of just a couple of weeks, pretty much all mainstream media outlets were talking about NFTs and painting them as the future of both blockchain and the art world.
Transactions started rising in value rapidly; a LeBron James collectible card sold for significant money. Elon Musk eventually joined the NFT crowds too, announcing a plan to sell one of his tweets as an NFT. Some were already making big plans around the idea, and saw it as a great way to cash in on current tech trends over the next few years.