From art to sports trading cards, people are spending millions of dollars on digital collector’s items.
These crypto collectibles, known as NFTs, have exploded in popularity lately. This collage, created by digital artist Beeple, whose real name is Mike Winkelmann, was auctioned for a record $69 million today at Christie’s. The sale positions him “among the top three most valuable living artists,” according to the auction house.
A few factors explain why Beeple’s work has become so valuable. For one, he’s developed a large fan base, with around 2.5 million followers across social channels. And he’s famously prolific: as part of a project called “Everydays,” Winkelmann creates and publishes a new digital artwork every day. The project is now in its 14th year.
At the same time, NFTs have blown up over the past month and Investments in NFTs rose 299% in 2020, gaining popularity as cryptocurrencies like Bitcoin continued to boom — for the moment, at least — are being seen by many as the way digital art will be acquired and traded going forward. For collectors who believe that’s true, the escalating prices are nothing compared to what NFTs will be worth down the road, when the rest of the world has caught onto their value.
Proponents of NFTs say they fix a big problem with the internet: artists not getting paid for the distribution of their content online. At the same time, critics see the NFT craze as another potential speculative frenzy in crypto that’s sure to fizzle out eventually.
So what exactly are NFTs? And why are they suddenly being sold for millions? We run through everything you need to know.
What are NFTs?
NFTs allow you to buy and sell ownership of unique digital items and keep track of who owns them using the blockchain. NFT stands for “non-fungible token,” and it can technically contain anything digital, including drawings, animated GIFs, songs, or items in video games. An NFT can either be one-of-a-kind, like a real-life painting, or one copy of many, like trading cards, but the blockchain keeps track of who has ownership of the file.
NFTs have been making headlines lately, some selling for millions of dollars, with high-profile memes like Nyan Cat and the “deal with it” sunglasses being put up for auction. If you (understandably) still have questions, you can read through this NFT FAQ.
Why are they so popular?
The coronavirus pandemic played a big role in the NFT boom. Last year, the total value of NFT transactions quadrupled to $250 million, according to a study from NonFungible and BNP Paribas-affiliated research firm L’Atelier.
That’s in no small part because of stay-at-home restrictions that resulted in people spending a lot more of their time on the internet and saving cash from a lack of commuting. It’s similar to the rise of retail traders betting on GameStop and other historically unloved stocks promoted on the Reddit board WallStreetBets.
Meanwhile, it also arrives at a time when bitcoin, ether and other digital coins have surged in value, with bitcoin briefly topping $1 trillion in market value last month.
“Right now we’re living in a point in the world whereby the majority of the population is spending 50% of their time online and a significant amount of their time on a PC,” Whale Shark, a pseudonymous NFT collector who claims to have amassed a collection worth over $2.7 million.
How to Buy & Sell NFT’s
Many investors buy NFTs as a speculative investment in the hope that they’ll be able to flip them at a much higher price than what they originally paid. But a growing number of people are also holding them long term as collectibles.
Today, many reputable trading sites have popped up to serve the NFT community.
Rarible. The world’s largest NFT marketplace has hosted more than 30,000 users in the past month. Most of these sales are small pieces of digital art worth in the tens or hundreds of dollars.
Nifty Gateway. Grimes favorite. Nifty works directly with the Artist and also allows users to purchase with a credit card as well as crypto.
OpenSea. The second-largest NFT market hosts fewer users but has more volume because of its higher-ticket items. Users can buy domain names, digital art and trading cards on this site.
SuperRare.co. The average sale on the site goes for over $10,000, according to Dappradar, an NFT tracking site. The site specializes in higher-end digital artworks and has professional curators suggest artworks.
Direct. The NBA, for instance, hosts a site to sell highlight reels. Other sites like Decentraland operate independent marketplaces for users to trade digital goods.
Regardless of where you choose to buy, know this: make sure you’re buying something that’s 1) limited in quantity and 2) high in quality.