How NFTs generate $ 40 billion in 2021

As of 2021, only a handful of crypto enthusiasts knew what NFT was.

However, according to the latest data, nearly $ 41 billion has been spent on NFT by the end of 2021, bringing the value of digital collections closer to the cost of marketing printed art globally.

“This year, the NFT market has seen explosive growth from less than a billion dollars to the multi-billion dollar industry,” said Mason Nystrom, research director of Encrypted Data Group Messari. Digital identification. ”Similar art.

An NFT is essentially a digital certificate of the registered members of the blockchain, an exchange of information that cannot be associated.

These NFTs are typically designed or implemented using smart contracts (they start with contracts written in blockchain code) and can be traded on the secondary market in exchange for cryptocurrencies.

In March, artist Beeple's collage sold on Christie's for $ 69.3 million, which was still his first NFT venture, and slowly NFT became a staple.

NFT first gained popularity in the theater, but sports and music participants, and even First Lady Melania Trump of the United States, came up with the idea and found a new way to interact with their people. fans.

The NBA created the NFT industry known as the NBA Top Shot to buy, sell and trade key movies by players. Other notable developments include the collection of NFT numbers such as CryptoPunks and the Bored Ape Yacht Club, which represent the owner's club in accordance with the law and used as social media avatars.

“Value remains a monopoly,” Nystrom noted, adding that luxury gives customers access to Discord's encrypted channel and parties and parties.

"They are club style. They have a high barrier to entry and are surrounded by high profile people."

According to data from cryptocurrency analysis firm Chainalysis, a total of $ 40.9 billion was invested in the Ethereum blockchain contracts that created NFTs at the end of December 15. Such NFTs issued 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 dominated by small businesses.

At the end of February and November, 360,000 NFT holders held 2.7 million NFTs. Chainalysis found that 32,400 wallets, about 9% of them, hold 80% of the market value.

Stephen Diehl, a software expert who is unconvinced of cryptocurrencies, claims that many big investors "put hundreds of millions of dollars into cryptocurrency" during the crypto boom, in hopes of to reverse the trend of crypto in many cryptocurrencies. They market as traders and collectors. A well-known NFT investor, Pranksy started investing in 2017 with $ 600 and now has more than $ 20 million 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, Pranksy said, there are "special ops that we plan to hold on to for the long term."

According to a review report prepared by Nansen, the blockchain analytics platform for FT, most new secondary market NFT entries have so far been unable to recoup their costs.

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 Nanse's review, the CryptoPunk and Bored Ape series have recorded $ 2 million in unsuccessful trades in 30 days since mid-December. For example, some NFTs are sold at 95% off their average sale price due to buyer and seller misconduct, tax evasion, or other fraudulent use by non-users.

Scientists also warn that the market appears to be a show business, where traders take advantage of both sides of the market to create demand for the others. .

Rüdiger K Weng, CEO of German company Weng Fine Art, said: “The ability to buy and sell NFTs on the open platform gives the impression that a lot of hobbyists, but in fact it has pushed "said Rüdiger K Weng, CEO of German company Weng Fine Art. Price ..

“This also happens in the world of traditional art,” he added. “If the operator wants to clean the plate after putting the artwork at Sotheby's, he has to ask the store.” The 25% payment also increases the cost of the dishes.

“The prices that need to be advertised or bought for NFTs, aka oil prices, can change as needed. However, many proponents believe the market will grow and that ultimately it will come up with procedures that will allow artists to record their expenses ... forever.

"What should I do?" asked independent technology analyst and former venture capitalist Benedict Evans. “It could be something like a stake artist and the next sale,” he said, highlighting in particular new developments in this area related to personalized music.

The so-called financial non-financial assets has occurred in some communities, for example called fragmentation, in which the non-financial assets are used as collateral for the loan or what is known as the fragmentation of a property's ownership. object in smaller pieces. ntu.

In the long run, enthusiasts hope the symbol will have a good day across the meta world. Metaverse NFT allows you to become a member of virtual items, whether it's avatar clothing or graffiti on the walls of a digital home. Nike recently announced that it bought a virtual shoe company to create virtual sneakers.

However, the future of financial services does not always depend on the role of regulators in an independent economy.

Some people are concerned that NFTs will be viewed as safe by regulators because they have the same characteristics as digital currency devices.

Devika Kornbacher, partner of Vinson and Elkins, said companies looking for NFT 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.

Pratin Vallabhaneni, partner of White & Case law, stated the following rules: