What are NFTs?
Nonfungible tokens (NFTs) enable ownership of virtual, unique digital assets. NFTs are tradeable, secure digital assets, and can be seen in the form of jpegs, videos, cartoons, songs and even sometimes the most bizarre art pieces (have you seen the NFT of a potato!?). In essence, any unique item and creation can be a non-fungible token that has financial value.
But what the ‘fung’ is a non-fungible thing? Essentially, it’s something that is unique and can’t be replaced by something else. Hence why we’re seeing unique pieces of art, tweets and gifs being sold as NFTs – because they’re one of a kind. An example of something that is ‘fungible’ would be bitcoin, because you trade one for another bitcoin and what you’re left with is the same thing.
We’ve seen such a huge growth in the popularity of NFTs for a number of reasons – from rising reliance on the use of blockchain to growing legitimacy of cryptocurrency. The NFT space has expanded with numerous companies entering to create their own developments. We’ve seen collectible items, online gaming, gifs and unique art and so much more. Next thing we often hear is “but we can save the same image and video for free?” Weird stuff, right. Yes, you can copy a digital file infinitely – but there lies that beautiful little caveat: ‘copy’. NFTs aren’t designed for copy and paste jobs. They give people ownership of the work of art itself holding the monetary value. (BTW the artist/creator still has rights to copyright and reproducing the artwork). So, when people copy the digital file, it’s the same as when you buy Van Gogh’s Starry Night print, but you don’t own the original.
More recently we’ve seen an explosion of NFTs being fuelled from within Asia. Southeast Asians made up the most of NFT based web traffic last year, with Central and Southeast Asia accounting for approximately 35% of the $22 billion in global NFT trades. But we’ll come back to this one later.
What’s the hype?
NFTs are a part of the Ethereum blockchain, but more recently other blockchains have also created their own versions. Ethereum itself is a crytpocurrency, like the popular bitcoin, however its use of blockchain is what keeps tabs on who has what NFT, when it’s traded and so forth.
Whilst these diverse tokens are available in numerous forms like mentioned above, including tweets, the angle of NFTs is driven more towards the world of fine art and evolving it into purely digital art. That being said Jack Dorsey, CEO of Twitter, sold his first tweet to crypto entrepreneur Sina Estavi last year for $2.9 million. And in spring this year, tried to resell it for $48 million (which didn’t quite go to plan).
Despite their complexity, the popularity for NFTs is also driven by its existence on blockchain. Blockchains are a way to store data independently, without a company or entity needing to keep things accurate and safe. There’s a lot more to it, but the safety element is a driving factor for so many people in our world of cyberattacks and unstable financial institutions. One of the reasons for its spontaneous growth can be witnessed in the NFT space through playing NFT play-to-earn games. Of course, like many other innovations and technological advancements, we saw radical growth and adoption when the pandemic hit us. People who were forced to stay home, or lost their jobs saw a blossoming opportunity in a new economy with play-to-earn games. So, whilst NFTs are cool and unique, they also act as a financial aid to keep a roof over peoples’ heads, and food in their tummies.
History in the making
Colored Coins: In 2012-13 the idea of NFTs emerged from Colored Coins. These tokens represent tangible and real-world assets that are on the blockchain. These could be anything from cars and precious metals to property and company shares. It was here that the possibilities ripped through our idea of purchasing.
First NFT: In May 2014 Kevin McCoy produced the first-known NFT called ‘Quantum’ which existed on the Namecoin blockchain. It’s this colourful octagon that changes colour whilst pulsating – pretty hypnotic stuff. From there we saw huge amounts of experimentation with NFTs and the development of platforms being built on the Bitcoin blockchain.
2014: A lot happened between the first NFT and this point, but we wanted to fast track you to the emergency of Counterparty, founded by Robert Dermody, Adam Krellensein and Evan Wagner. The financial platform built an open-source internet protocol on the Bitcoin blockchain. From here they allowed decentralised exchange and asset creation, giving users a way to create their own tradable currencies. This led to partnerships with Spells of Genesis in 2014 to pioneer in-game assets.
2016: *Memes slide in*. What a time to be alive! Memes entered the blockchain via the Counterparty platform. People begun adding assets to Rare Pepes, which featured a frog character with all the most voluptuous lips you’ll ever see on a frog. Pepe had originally entered the scene as a comic character, called Pepe the Frog, and became a sensation for memes across the board. By 2017, Rare Pepes begun being traded and there was even a Rare Pepe auction!
2017: ERC20 was the most common Ethereum Token Standard, but had limitations on creating unique tokens. So, in 2017, ERC721 sauntered in with purpose of becoming the new standard for NFTs on the Ethereum blockchain. Not only does it track ownership from its smart contract (of ownership and protected personal data), but it also tracked the movement of individual tokens. In essence it meant that a single unique asset could not be divided or interchanged. Thanks to ERC721 CryptoKitties began sprinting on the scene. The adorable little virtual cats exist in a virtual world for players to adopt, breed and trade their cats using Ethereum. The game landed with so much popularity that it even was featured in mainstream news. (BRB. Going to adopt a virtual kitty!)
2019-Present: What once started as a small low-key movement has transcended into a mainstream access to art. In 2018, artist Kevin Abosch led a charitable auction with GIFTO for Valentine’s Day which resulted in a whopping $1m sale of a crypto-artwork called the Forever Rose. From here it was love at first sight for those who were new to the scene. It became an exciting opportunity for expression, and encouraged artists to push further with new means of creative freedom. In most recent years we’ve seen the popularity and growth of NFT markets because of their creative license and flexibility in trading and transferring assets. 2021 saw trading of NFTs hit $17.6 billion, which was an increase of 21000% from 2020.
What’s to come from NFTs?
Since there is no limitation on who can create an NFT, or any experience required, it’s fair ground for anyone who wants to create one. The only thing you need to be able to do is prove that you created it or legally own the content. Additionally, anyone can purchase an NFT by gaining the rights on the blockchain to affiliate their name with the artwork, until they decide to resell it. The openness of the market feeds into its reputation of being a volatile market – which to some extent, it is. But on the flipside, it’s this volatility that creates room for profit, with opportunists using strategies like buying low and selling high for huge profit margins.
With so many platforms and blockchains, people are getting more versed in making money from NFTs, which was seen in the fact that there was a total of $5.4 billion in sale profits of tokens in 2021. Not only had it been a vessel for pushing creative boundaries, but also a means for developing new cultures and communities globally.
The boom in Asia
Further feeding into its booming presence, China’s ban on trading of cryptocurrency has only rerouted keen investors into the NFT pool, which is still allowed. As a largely cashless and digitalised continent, Asia’s economy and civilisation is already primed and ready for the adoption of new technologies, such as NFTs. So, that kind of makes Asia the Cinderella to the glass slipper of NFTs. Southeast Asia prevails as the leader in NFT ownership, especially in years to come, with an expected adoption of NFTs being as high as 41% across the region. Our trustee, Statista, conducted a survey in 2020 on crypto in 55 countries. The research showed that Vietnam had the second highest share of respondents that used or owned cryptocurrencies at 21.1%. This was followed closely at 19.8% by the Philippines and Thailand was fifth with 17.6%. The popularity of these decentralised financial methods in parts of Asia is particularly eye catching. Why? Because China isn’t alone, with regulations on crypto-related trading being limited in areas such as Thailand and Singapore, for its potential fraudulent and money laundering opportunities. But as they always say – where there’s a will, there’s a way! *Enter NFTs*.
NFT is nonetheless still largely based on speculation, so anything could happen. Blockchain technology is still evolving and being discovered daily, with NFT markets being considered as a technology in its infancy. It wouldn’t be crazy to project that Southeast Asia will continue to become the hub of NFTs, and as the grounds for testing public acceptance of the new money trade for the world. The huge online populations, thanks to high digitalisation, and keen interest makes the continent a prime setting. The variables lie in regulations and government perception of NFTs.
And the rest of the world?
In the long run, we see the paradigm shift that NFTs bring to monetisation of digital assets. Despite the intense hype over NFTs and valuable assets, we can see that the structure of NFTs with blockchain reinforces the revolutionary promises made by blockchain technology. With such growth in popularity and public trust, we can expect to see a wider implementation of NFTs in areas such as social media, music and beyond. In today’s day and age, people are seeking opportunities of easier income and greater functionality in society, and NFTs could most definitely become the plug for that gap.