NFT became one of the biggest stories in cryptocurrency last year. Their popularity skyrocketed in 2021, but the current year has resulted in a downward slope in the sales volumes making all of us wonder if the craze for NFTs is dimming.
As per the CryptoSlam data, NFT global sales have dropped after their record highs in January this year. While a downturn is also witness in a number of unique buyers and sellers and hence further dragging down the total transactions.
NFT global sales which stood at a record over $4.62 billion in January 2022, slumped to over $2.99 billion in February and further nearly halved to $2.44 billion in March. So far in April, the global sales were at $1.21 billion.
In April, up till now, there are unique 330,499 buyers and 361,198 sellers, while the total transaction came in at 2,116,657, as per the data.
Lack of clarity, theft, and risks are some of the major drawbacks for investors looking to enter cryptocurrency and NFT markets. The sentiments in NFT have been dampened after numerous thefts and scams. The most high-profile theft that has rocked the blockchain industry would be of Ronin Network which was hacked for $615 million in digital assets.
There are many new scams such as rug pull, NFT pump, and dump schemes, plagiarised NFTs and art theft, and phishing that have given cryptocurrencies enthusiastic investors some cold feet.
Chainalysis in its 2022 crypto crime report highlighted the popularity of NFT last year while also pointing out the threat of this new technology. As per the software company, a minimum of $44.2 billion worth of cryptocurrency was sent to ERC-721 and ERC-1155 contracts — the two types of Ethereum smart associated contracts with NFT marketplaces and collections — up from just $106 million in 2020.
However, Chainalysis in its report stated that “as is the case with any new technology, NFTs offer the potential for abuse. They observed two forms of illicit activity in NFTs – wash trading to artificially increase the value of NFTs, and money laundering through the purchase of NFTs.
Also, some buyers who bought NFTs at a remarkably higher price are finding it difficult to sell their digital assets.
However, not all NFTs are risky. Some creators strongly have held on to their investment in NFTs. As per the data, Axie Infinity, Cryptopunks, Bored Ape Yacht Club, Art blocks, and Mutant Ape Yacht Club are the top five all-time NFT collections by sales volume.
What makes NFTs unique?
Non-fungible tokens (NFT) are the cryptographic assets on a blockchain that are not exchangeable because of their nature of being distinguished from each other. Simply put, they are not replaceable or interchangeable with any other cryptocurrency avenues.
NFTs are packed with unique cryptographic tokens. Some of the examples of NFT are unique digital artwork, limited fashion-line, in-game items, an essay, digital collectibles, or tickets that give access to an event or a coupon, and even a domain name among others.
NFTs are unique, other cryptocurrencies that are fungible. That means, unlike NFTs, other cryptos are exchangeable or replaceable for another. For example, one bitcoin is equal to another Bitcoin, or one unit of Tether is similar to another Tether. However, no two digitally unique NFTs are the same.
This means every NFT has a respective owner with a public record and is easy to be verified. NFTs, give a broader panel to content creators who can sell their work anywhere while accessing the global market. These creators can retain their ownership rights on their work and can also claim resale royalties.
Bringing in market efficiency, NFTs give a platform for converting physical assets into digital ones which further removes intermediaries such as on the blockchain and enables the artist to interact and deal with his agents or her audiences directly.
That said, NFTs give clarity to identity management. Thereby, only one owner can have an NFT can at a time. The ownership is managed through the uniqueID and metadata that no other token can reproduce. You can either buy or sell that ownership of that particular NFT.
Many cryptocurrencies have opted for NFTs with Ethereum being the first blockchain to support the non-fungible digital assets with its ERC-721. Since then, many other blockchains have added NFTs and many are also warming up to the idea of adding support for NFTs.