What is Driving the Recent NFT Craze?

Every now and then, a new trend in the crypto space comes and shakes everything up. Traditional cryptocurrencies remain relatively profitable for investors as the fundamentals remain strong, and the decentralized finance (DeFi) space is also doing relatively well on its own. Now, there is a movement from non-fungible tokens (NFTs) that doesn’t look to be slowing down at all.

What is Driving the Recent NFT Craze?

NFTs are a type of digital asset that run on blockchains. They have unique codes, and each NFT represents a unique asset. No two NFTs are the same, so it is impossible to duplicate an NFT or even exchange one for another. This removal of fungibility makes NFTs incredibly unique, as each NFT represents ownership of a specific asset that holders would love to have.

It is worth noting that NFTs have been around for quite a while. Many have been using them for several functions, although they haven’t been overly prominent. In the past few months, however, there has been an explosion in the market. Many people have harnessed their power to benefit from owning and selling NFTs.

Today, the NFT craze has been especially prominent in the entertainment industry. Artists, musicians, designers, video directors, and much more have been able to sell their works as NFTs and make money.

Data from NonFungible.com, an NFT data tracking site, shows that there have been over 160,000 NFT sales in the past month alone. Things have gotten so heated that OpenSea, the largest marketplace for NFTs, announced recently that its transaction volumes have grown by over 100 times in the past six months alone. Monthly sales on the platform hit $95.2 million in February 2021 alone.

Significant Work With NFTs

The first prominent link between the celebrity world and NFTs came in August 2020, when Paris Hilton sold an Ethereum-based artwork for $17,000. At the time, many seemed to brush it off as just a celebrity cashing out on some crypto frenzy. Things took a bit of a silent turn since then until Tennessee-based rock band Kings of Leon announced that they would sell their new album as an NFT.

Grimes, the Canadian singer (and girlfriend to Tesla CEO-turned Bitcoin enthusiast Elon Musk), sold an artwork as an NFT for $6 million. 3BLAU, a famous EDM disk jockey, sold an NFT collection for a staggering $11 million at an auction, while Steve Aoki sold an NFT art to T-Mobile CEO John Legere for almost $900,000.

As for sports, the NBA is now selling NFTs representing sports highlights through NBA Top Shot - a new product that it developed. Top Shot’s website shows that it already sold over $400 million in collectibles sales.

There are more examples of NFTs making waves in the media and entertainment worlds. These tokens continue to provide a simple and effective monetization method, and people are starting to cash out in their droves.

Why So Popular?

Beyond the hype and the noise, NFTs are beneficial assets that can pose several benefits. Like cryptocurrencies, many are investing in NFTs and creating tokens for the sake of merely enjoying price gains. However, it is worth noting that NFTs can also pose several significant benefits. Some of these include:

Bolstering Market Efficiency

Perhaps the most significant benefit of owning NFTs is their ability to improve market efficiency. NFTs make it easy to convert physical assets into digital ones. Even better is the fact that they don’t run with intermediaries. You could convert your physical asset into a digital one by yourself.

An NFT representing a physical artwork removes the need for you - the artist - to hire an agent to connect with your target audience. So, you can make sales and increase your profits.

Most of the artists who have created and sold NFTs have sought to take advantage of this benefit. Beyond just trying to capitalize on a growing trend, this is a significant benefit that can improve profitability for the art and entertainment industry - which, at times, might have meager margins.

The Identity Management Benefit

Another hidden benefit of NFTs is their ability to help with effective identity management. Think of having a passport. When you convert your passport into an NFT, each of these tokens comes with unique identification characteristics. In essence, it becomes much easier for you to enter and exit locations.

Expanding this functionality, it will be possible - easy, in fact - to use NFTs for identity management in the digital space.

Reducing Investment Barriers

With NFTs, you can fractionalize investing in physical assets. Think of real estate - it is much easier for you to divide a digital piece of real estate among several owners than dividing a physical piece of real estate.

Expanding this benefit, you can also fractionalize investments in artworks and much more, allowing more people to make investments. This reduction in barriers makes the investment much more accessible and allows more people to enter different spaces. With multiple owners accounting for a fraction of a painting’s worth, the asset’s revenues and value can be optimized.

This fractional investment scheme can also be optimized further in the future. Consider a real estate investment piece being broken down into multiple divisions, each containing different property types and characteristics. One division might represent an entertainment complex, while another might be for a residential area.

For this property, you could have different NFTs representing different parts of the real estate project. Each piece of land is sold uniquely with its distinct value and price. Just like that, NFTs can simplify the complex and layered real estate investment space.

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