The NFT market topped US$40bil in 2021

In 2021, over US$40bil was spent on non-fungible tokens. — AFP Relaxnews

Still virtually unknown at the beginning of 2021, the market for NFTs has grown tremendously. According to a report from blockchain specialist Chainalysis, US$40.9bil (RM171bil) was spent on NFTs last year.

The equivalent of US$40.9bil (RM171bil) was spent on non-fungible tokens (NFTs) in 2021 – almost unreal growth for an industry that generated barely US$1bil (RM4.19bil) in 2020. It’s clear that NFTs have taken on a particular significance as society continues to go digital.

NFTs are tokens with an associated digital property certificate, based on blockchain technology. For the holder, this provides proof that they are the genuine owner of the digital object, and the technology allows past transactions to be tracked.

In 2021, the sales record for a non-fungible token was set in March at a Christie’s auction, where a work by the artist Beeple sold for a whopping US$69.3mil (RM289.74mil). Since then, the phenomenon has only grown.

At first, there was still a lot of scepticism around these digital assets, but by the end of 2021, the sheer number of projects involving NFTs seems to have changed the game.

Mini communities of investors

Whether in video games, sports, fashion, music or art, non-fungible tokens are all the rage. Although some sneer at their utility, the advent of the metaverse could well allow collectors to finally show their digital wealth or fuel digital commerce in these virtual universes.

Another thing to take into account is that the fundamental value of a token remains its exclusivity. More and more mini-communities are being created among collectors and sellers, especially via the online communications platform Discord, or even at trade shows and private parties. Entry into these close-knit circles can depend entirely on one’s digital assets – what, and how much you own.

But mistrust remains prevalent in this still unregulated market. The trend of “wash-trading” is a particularly unsavoury occurrence. More and more investors are using the properties of blockchain to drive up prices, simply putting an NFT up for sale and then buying it back themselves with another digital identity at a much higher price. This makes it look like interest in the token is rising.

Also, like the cryptocurrency market, a small portion of collectors hold a huge portion of the tokens (32,400 owners hold 80% of the market according to Chainalysis). So in 2022, NFTs will inevitably continue to gain value, but how much remains to be seen. – AFP Relaxnews