NFT – Non-Fungible Token
A non-fungible token (NFT) is a financial security that consists of digital data stored on a blockchain, a form of distributed ledger. Ownership of an NFT is recorded on the blockchain and can be transferred by the owner, allowing the NFT to trade and be traded. NFTs can be created by anyone and require little or no coding skills to create them. NFTs typically contain references to digital files such as videos, photos and audio. Because NFTs are uniquely identifiable assets, they differ from cryptocurrencies, which are functional. The market value of an NFT is tied to the digital file it references.
Proponents of NFTs argue that NFTs provide a public certificate of authenticity or proof of ownership, but the legal rights granted to NFTs can be uncertain. Ownership of an NFT, as defined by blockchain, has no inherent legal meaning and does not necessarily confer copyright, intellectual property rights, or other legal rights to the associated digital file. An NFT does not prevent the sharing or copying of the associated digital file, and does not prevent the creation of NFTs that reference the same files.
The NFT market grew rapidly in 2020–2021:
NFT trade grew to over $17 billion in 2021, a 21,000% increase to a total of $82 million in 2020. NFTs are used as speculative investments and are criticised for the energy costs and carbon footprint associated with verifying blockchain transactions, as well as their frequent use in art fraud. The NFT market has also been compared to an economic bubble or Ponzi scheme. In May 2022, the NFT market is expected to start collapsing.
The history of NFTs
The first known “NFT”, Quantum, was created by Kevin McCoy and Anil Dash in May 2014. It consisted of a video clip shot by Jennifer, McCoy’s wife. McCoy uploaded the video on the Namecoin Blockchain and sold it on Dash for $4 during a live presentation for the Seven on Seven conference at the New Museum in New York. McCoy and Dash talk about “monetized graphics” technology. It clearly links an unmistakable, tradable blockchain marker to the artwork via on-chain metadata (powered by Namecoin). This is in contrast to the multi-unit, fungible, metadata-free colored coins of other blockchains and counterparties.
In October 2015, the first NFT project, Etheria, was launched and demonstrated at DEVCON 1 in London, the first Ethereum developer conference, three months after the launch of the Ethereum blockchain. Most of Etheria’s 457 tradable hexagonal tiles remained unsold for more than five years until March 13, 2021, when renewed interest in the NFT sparked a buying frenzy. Within 24 hours, all tiles of the current version and the previous version, each hardcoded at 1 ETH ($0.43 at launch), were sold for a total of $1.4 million.
It wasn’t until the ERC-721 standard, which was first proposed in 2017 by the Ethereum GitHub, that the term “NFT” reached wider usage, following the launch of several NFT projects that year. The standard coincided with the launch of several NFT projects, including Curio Cards, CryptoPunks (a project to sell unique cartoon characters released by American studio Larva Labs on the Ethereum blockchain), and unique Pepe trading cards.
In 2017, the online game CryptoKitties became profitable by selling tradable cat NFTs, and its success drew public attention to NFTs.
The NFT market saw rapid growth in 2020, tripling in value to $250 million. More than $200 million was spent on NFTs in the first three months of 2021.
In 2020, the U.S. The Patent and Trademark Office has received three trademark applications for NFT. In 2021, the number of trademark applications jumped to more than 1,200. In January 2022, the U.S. The Patent and Trademark Office received 450 trademark applications related to NFTs. The growing list of brands marked for NFTs includes NYSE, Star Trek, Panera, Walmart, Elvis Presley, Sports Illustrated, Ticketmaster and Yahoo. In the early months of 2021, interest in NFTs increased following several major art sales and auctions.
In May 2022, the Wall Street Journal reported that the NFT market had “collapsed”. Daily trading of NFT tokens has decreased by 92% since September 2021 and the number of active wallets in the NFT market has decreased by 88% since November 2021. While rising interest rates affect risk bets in financial markets, the Journal says, “NFTs are among the most speculative.”
