Financial Times: How NFTs Will Make $ 40 Billion In 2021

2021 is a big year for NFTs, and consumers are buying almost as many digital labels as the traditional way of doing things.

As of 2021, only a handful of crypto enthusiasts will know what a non-drug token (NFT) is.

However, according to the latest data, by the end of 2021, nearly $ 41 billion in market share will be spent on NFTs, which will translate into digital graphics and integrated products. Commercial enterprises are almost like an international art market.

Mason Nystrom, analyst at Encrypted Data Group Messari, said: “This year the NFT industry has grown from a multi-thousand dollar company to a multi-thousand dollar company.

NFTs are important digital blockchain membership certifications and cannot be traded or tampered with.

These tokens are typically created or issued using smart contracts, which are self-established contracts written in blockchain code, and can be traded in the secondary market in exchange for cryptocurrencies.

NFT supporters attended Christie's highlights in March when a collage by artist Beeple sold for $ 69.3 million. This is the first NFT auction for the auction house. An actor by the name of Mike Winkelmann replied on Twitter, “Damn it!

Although she first gained fame in the theater, those involved in sports and music, and even the first wife Melania Trump from the United States, came up with the idea to complete the hype and interact with fans.

The American Basketball League NBA started their own NFT business to buy, sell, and trade player-to-player movies called NBA Top Shot.

Other favorites include NFT coding, including CryptoPunks and the Bored Ape Yacht Club, where the NFT state can inform club members who own the club of the law and can use them as relationship avatars. .

“The value is always unique,” ​​Nystrom said, noting that luxury provides customers with access to Discord's closed channel and parties and celebrations.

“They are country club style. Entry restrictions are high and the cost of investment is high.

CryptoPunk NFT broadcast in Manhattan © Dia Dipasupil / Getty

According to data from cryptocurrency analysis firm Chainalysis, a total of $ 40.9 billion was invested in the most commonly used Ethereum blockchain contracts to develop NFTs at the end of December 15. The inclusion of NFTs provided by other blockchains such as Solana will result in higher numbers.

On the other hand, according to data from UBS and Art Basel, the global art industry reached around $ 50.1 billion last year.

Chainalysis discovered that NFTs have introduced many investors to the cryptocurrency world, with small businesses under $ 10,000 accounting for over 75% of the market.

However, like the cryptocurrency industry, it is still run by a handful of big companies or 'whales'.

At the end of February and November, there were 360,000 NFT holders out of 2.7 million NFTs. Chain analysis shows that around 9% of the 32,400 portfolios hold 80% of the market value.

“Many whales are sitting around hundreds of millions of dollars in cryptocurrency because of the crypto boom,” said software engineer Stephen Diehl, who doesn't believe in cryptocurrencies.

Others say they market as professionals and collectors. A well-known NFT marketer known on Twitter as Pranksy said he started with a $ 600 investment in 2017 and now has more than $ 20 million in NFT data.

They tell the "Financial Times" that there is a mix of jobs they've invested in, "some jobs have big, modern products and some are less fun." In addition to the “hyping” benefits, said Pranksy, “we have work to do and plan to maintain our investment for the long term. "

So far, most new mid-market NFT entrants cannot recoup their purchase price, and according to Nansen's analysis at FT, the blockchain analytics platform, the early authors have learned about the value of NFTs and cryptography used for trading purposes. . Take advantage of the benefits.

Illegal sites are also vulnerable to fraud, fraud and traffic. Especially since it is difficult if not impossible to find the truth between buyers and sellers.

According to a Nansen review, unsolicited trades in the CryptoPunk and Bored Ape series reached US $ 2 million in the past 30 days, ending in mid-December. For example, some NFTs are sold at a 95% discount from the average sale price, which may be due to buyer and seller misconduct, tax evasion, or other fraud.

Analysts are also warning that the market appears to be going through a masquerade market where investors take both sides of the market to surprise demand.

“You can buy and sell NFTs on the open platform to see how many people are interested in your job, but in reality that's exactly what you are pushing,” said Rüdiger K Weng, CEO of German company Weng Fine Art. . . the price.

“This also always happens in the art world,” he added, “but if the operator puts the artwork in the Sotheby's store and wants to make clothes, he should ask the store . "It is an expensive company which accounts for 25% of sales.

“Using NFTs the price is only a fraction of the cost,” he said, referring to the exchange rate that must be given or bought to NFTs, called gas prices which can be changed according to needs.

However, there are still many supporters who believe the market will grow and provide the process, including affordable prices for performers.

“What can you do with the software? Asked Benedict Evans, technology analyst and former investor. He particularly highlighted the early developments in the cultural environment, saying: "There can be a collaborative performance and lead to a second sale."

So-called NFT funding has appeared in some communities. This is called fragmentation, for example using NFTs as collateral for the loan, or breaking down members of a single industry into smaller ones.

NFT video broadcast shown in Times Square, New York © Seth Wenig / AP

In the long run, supporters hope that tokens will one day have a powerful meta-world or meta-world (virtual world with future avatars). Here, NFTs can provide owners of virtual goods, be it the clothes of a digital avatar or artwork on the walls of a digital home. Nike recently announced that it bought a virtual shoe company to create virtual sneakers.

In any case, the future of the NFT market depends on the position of regulators in this independent design industry.

Even among businesses, there are concerns that NFTs have similar characteristics to digital products and may be considered safe by regulators.

Devika Kornbacher, partner of Vinson and Elkins, said companies wishing to leave NFTs often ask, "Is NFT considered a financial asset?" Does it count as our security company? "?

At the same time, tax authorities such as the US Internal Revenue Service do not deal with NFTs directly, but some experts consider them to be “collectibles” and may levy taxes on their income.

Regarding future regulations, "In business, it is a crucial issue for survival," said Platin Vallabhaneni, partner at the law firm White & Case.