Digital avatars listed on the non-fungal drawing platform CryptoPunks.
Ryan Browne | CNBC
The crypto-currency world is teeming with digital collectibles, unique virtual tokens that can represent everything from art to sports memorabilia.
People have paid hundreds of thousands of dollars for these NFTs, or non-fungible tokens. One investor, Sheldon Corey of Montreal, Canada, told CNBC he was paying $ 20,000 for one of thousands of computer-generated avatars called CryptoPunks.
CryptoPunks is not a new phenomenon – it was released by developer Larva Labs in 2017. But recently it has become popular, generating $ 45.2 million in sales in the last seven days alone, according to the website NonFungible, and ‘ inspired a broader “crypto-art”. “movement.
CryptoKitties, one of the original NFTs, generated $ 433,454 in sales last week, according to NonFungible. The digital cats, developed by a company called Dapper Labs, were once so popular that they blocked the network of digital currency eaters.
NBA Top Shot, a platform created by Dapper Labs in partnership with the basketball league, has attracted $ 147.8 million in sales over the past seven days, according to NFT data tracker CryptoSlam. With the service, users can buy and sell short tracks that show match highlights of top basketball players.
The increase in momentum for these tokens comes because bitcoin and other cryptocurrencies have risen significantly over the past few months, and at a time when people are spending more time indoors due to coronavirus restrictions.
What are NFTs?
NFTs are non-fungible tokens – meaning you can not exchange one NFT for another – operating on a blockchain network, a digital ledger that records all transactions of cryptocurrencies such as bitcoin.
The difference with bitcoin and other signs, however, is that each NFT is unique and cannot be repeated. Each earns value independently. Crypto investors say NFTs derive their value from how scarce they are. It is stored in digital wallets as collector’s items. In addition to arts and sports, people have also found uses for NFTs in virtual real estate and games.
Nadya Ivanova, chief operating officer of research firm L’Atelier, with BNP Paribas, says the collectible digital assets can be considered a better version of an MP3 file. Musicians have struggled to take advantage of their work in the digital age, and Ivanova says some turn to NFTs to prove their ownership of their work and find an additional source of income.
“It allows content creators to own the property for what they create, that they can utilize in different ways, that they can’t do with physical art,” she told CNBC, adding that crypto-art is the strongest growing subdivision is of the digital collection market.
The total value of NFT transactions tripled to $ 250 million last year, according to a study by NonFungible and L’Atelier. The number of digital wallets they traded nearly doubled to more than 222,179, while some merchants could earn more than $ 100,000.
“We’re seeing a new generation of traders within the NFT market; people who are digitally indigenous looking for digital indigenous asset classes outside of established asset markets,” Ivanova said. “These are people who have built reputation and prosperity and want to invest it in purely virtual assets like NFTs.”
Ivanova says the NFT market has aged. The famous auction house Christie’s auctioned off an NFT-based artwork created by Beeple, a well-known digital artist who created videos and graphics for celebrities such as Ariana Grande and Justin Bieber.
Crypto-mania
An NBA Top Shot video highlight featuring LeBron James recently sold for a record $ 208,000. But sales could be volatile – according to NFT data discovery CryptoSlam, NBA Top Shot and CryptoPunk transactions have fallen over the past 24 hours.
The rise in prices of these virtual items has feared the recurrence of speculative crypto-mania. It reminds some investors of the initial coin offering, or ICO, that was bubbling up in 2017, when several new businesses issued new digital tokens to raise money. Hardly any of the ICO projects exist today, and some have even defrauded investors of millions of dollars.
There are some parallels with the ICO frenzy – celebrities like Lindsay Lohan and Mark Cuban, for example, recently sold NFTs.
“We had a very similar moment in 2017,” Billy Rennekamp, awards manager for blockchain research firm Interchain Foundation, told CNBC. “Every gallery considered an NFT. Every blue chip artist considered it. But there was just too much risk when the market went down and it was an embarrassment to be involved with NFTs when prices went down.”
“I would not be surprised if we go through another bull market and bear market,” Rennekamp added.
After all, the businesses behind these signs do not think it’s a fad.
“NFTs are here to stay,” Caty Tedman, head of partnerships at Dapper Labs, which spearheaded the NBA Top Shot project, told CNBC. “Flow will be the blockchain to take on large consumers. The future is now.”
NBA Top Shot now has more than 100,000 active collectors and $ 215 million in sales so far, Tedman said. It’s working on a digital collectible based on the UFC mixed martial arts league and has also attracted the support of Warner Music to develop NFTs for music fans.
“The billions spent on Fortnite skins point to the importance of our online lives and personas, and how valuable they are to people,” Matt Hall, co-founder of Larva Labs, told CNBC.
“What NFTs offer is a formalization of digital ownership, and a way to keep that ownership permanently beyond the lifetime of one enterprise, game or platform.”
Hall said Larva Labs does not charge users of its market, although it does pay blockchain processing fees. “We are CryptoPunk owners, just like everyone else,” he added. “So, as the overall market rises, so do those who own it.”
The cheapest ‘punk’ available on CryptoPunks is currently worth $ 36,000, Hall said. Larva is working on a successor to CryptoPunk, Hall added without elaborating on the company’s plans.