[Insight] Non-Fungible Tokens (NFTs) Skyrocketing
Not long ago, there was an interesting auction at Christie, the world’s largest auction house with a history of 255 years. The digital work of art made with images posted online over 10 years by a digital artist named Mike Winkelmann, known as Beeple, was put up for auction. The digital work of art titled “Everydays — The First 5000 Days” is said to be a collage of the images collaborated with a famous fashion designer Louis Vuitton and pop starts like Justine Bieber and katy Perry, but technically, it can be seen one big collage JPG file.
His big JPG file sold for USD 69.3 million or KRW 78.5 billion and this was a hot issue. Naturally, it was said that the price was a new high for a digital art work and the third-highest auction price achieved for a living artist after Jeff Koons and David Hockney.
As confirmed on the following day, it was reported that the work was bought by Metakovan (pseudonym), CFO of the Singapore-based crypto fund Metapurse. He paid for the work price and commission at Christie’s in Ethereum. What is interesting is that Metakovan said in a video interview, “I don’t know when but I think the digital artwork is going to be a billion-dollar piece (by going up tens of times more than the successful bid price).”
How can art works that are in the form of a single file and cannot be hung in the living room or house can be sold at such a large sum? This can be understood through a new concept of `Non-Fungible Token (NFT)`.
A NFT is literally a unique non-fungible token that is used to sell and buy. Digital currencies such as Bitcoin (BTC) and Ethereum (ETH) which are familiar to us are mutually interchangeable assets at same values. Contrarily, a NFT has a value from the aspect that something unique in the world can be stored safely.
Therefore, the NFT can be seen a kind of digital asset. While using the blockchain technology used for Bitcoin or Ethereum, it uses a method of verifying ownership and transactions of unique real-world items by granting separate unique recognition values unlike existing digital assets. Just like the auction, the items including a digital work, rare images or videos, game items, sports cards, and other various rare collections, may be traded.
In fact, the origin of NFTs is a blockchain game called CryptoKitties, where users can collect, grow, and exchange virtual cats. They also cross cats with each other to breed rarest cats. Such a unique cat was traded as one NFT. Recently, NFTs made with rare cards of well-known sports stars such as Michael Jordan are traded at higher prices. According to BNP Paribas, the trade volume of the NFT market in 2020 surpassed USD 250 million, four times increase from 2019.
Meanwhile, Grimes, a singer and wife of Elon Musk, CEO of Tesla, also sold 10 NFT digital artworks and this made headline. Grimes is said to have made USD 6 million (KRW 6,500 million) in 20 minutes. In addition, Twitter CEO Jack Dorsey’s first tweet “just setting up my twttr” on track is currently going for USD 2.5 million (approx. KRW 2,822 million).
As such, there must be reasons that NFTs are popular. NFTs are impossible to be reproduced or forged so that they can guarantee rarity or ownership of specific assets well. In addition, it is easy to trace NFTs because information such as NFT source, issue time, and owner’s details are disclosed on the blockchain, and they are good to invest into because the token can be owned by being divided into 1/n just like `share splitting`.
However, the more decisive reason may be that the perspective on ‘value’ has significantly changed as digital assets are widely used. The younger generation familiar with digital assets and digital is approaching NFTs without reluctance. In addition, even investors who have made money with digital assets are rushing into the NFT market to maintain their values. At the auction of Beeple’s artwork, Justine Sun, founder of Tron (TRX), giving the bid of USD 60 million actually competed with Metakovan until the last minute.
As such, NFTs are expected to expand their scope by digitizing more assets in the future. As a medium for trading NFTs, Bitcoin and Ethereum seem to be more utilized.
In the beginning, there can be side effects such as overheating and bubble. The excessive NFT investing frenzy could lead to some bubble in the digital asset market. Having a dig at NFTs saying that they are Non-Finite Tokens, Charlie Lee, creator of Litecoin also pointed out that “An NFT is a digital certificate to a collectable that can be easily, cheaply, and perfectly duplicated. We should not raise expectations too high.”
NFTs will continuously grow drawing a cycle of overheating, adjustment, and stabilization. It can be said that we are expanding the realm of traditional values in the digital environment.
*This research and analysis document has been prepared for the purpose of providing information that can be used as a reference based on our reliable data and information, but we cannot guarantee its accuracy or completeness.
*The document has reflected the individual’s opinion, and it may not be consistent with the company’s official point of view.