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Crypto-assets

NFTs have never been so popular



Despite a record total amount in 2021, most transactions to NFT platforms still rarely exceed 10,000 euros. (Photo: Shutterstock)

Despite a record total amount in 2021, most transactions to NFT platforms still rarely exceed 10,000 euros. (Photo: Shutterstock)

2021 was a record year for transactions to exchange platforms for NFTs, certificates of authenticity for digital objects. An analysis of the past year reveals a real craze that no longer spares any region of the globe.

NFTs ("non-fungible tokens"), which came into being only four years ago, are now gaining in popularity. NFT users sent the equivalent of more than $26.9bn to specialist marketplaces in 2021, according to data from Chainalysis.

Like a token associated with a single good or asset, an NFT guarantees exclusive ownership by being registered on the blockchain. NFTs are tradable and can be bought and sold at prices that fluctuate due to the subjective value of the objects associated with them.

Looking at the figures, it is clear that the OpenSea exchange is by far the most popular, with over $16bn received. Unlike other marketplaces, OpenSea does not keep track of its users’ NFTs. This allows them to allocate the NFTs they hold to their own portfolios.

“We are only at the beginning of NFTs,” says Jil Haberstig, who recently founded the Luxembourg NFT Community, adding that “many people still don’t know what an NFT is.”

Both the total value sent to the platforms and the size of the transactions have increased significantly. Chainalysis concludes that NFTs, as an asset class, are becoming more valuable as they attract new users.

An integral part of the digital world

Along with its popularisation among new user profiles, the NFT industry is now reaching all regions of the world. In this regard, Chainalysis notes “a strong mix of web visits from several regions, led by Central and South Asia, North America, Western Europe and Latin America.”

The data shows that the NFT market is following the same trend as traditional cryptocurrencies.

And the analysis of the NFT industry data also tells us that the majority of transactions take place at the retail user level, with an average of no more than $10,000.

Still little return on investment

The published figures do, however, show an increase in the frequency of higher transactions. In the week of 31 October 2021 alone, 19% of transactions were between $10,000 and $100,000, compared to just 6% in March.

By entering the NFT market, many users expect a return on investment. However, according to Chainalysis, “the data shows that a very small group of highly sophisticated investors are reaping the majority of the benefits.” It is worth noting that on OpenSea alone, just 28.5% of NFTs purchased immediately after registration on the blockchain did not lead to a profit.

So far, we have not managed to regulate cryptocurrencies in a reasonable way. That’s why I guess it will be a while before we see any regulation on NFTs.

Jil HaberstigFounder of the Luxembourg NFT Community

While the financial sector watchdog, the Commission de Surveillance du Secteur Financier (CSSF), has opened the door to crypto-currencies for hedge funds under certain conditions, Haberstig says regulation on NFT investments is some way off: “So far, we have not managed to regulate crypto-currencies in a reasonable way. That’s why I guess it will be a while before we see any regulation on NFTs.”

Not just a speculative tool

For Haberstig, the NFT craze is not about to end. There are multiple applications in everyday life, such as “in San Marino, where NFT technology is used to prove the ownership of vaccine passports linked to covid,” she says.

We haven’t even begun to really use NFT technology to its full potential

Jil HaberstigFounder of the Luxembourg NFT Community

“We haven’t even begun to really use NFT technology to its full potential,” says Haberstig. It is necessary to “start differentiating between NFT, NFT art and then think about NFT in a more global way.” According to her observation of the sector, many contracts that will be concluded and files that will be exchanged in the future “will naturally be NFTs, without calling them NFTs.”

NFTs are becoming increasingly used in the art market and there is also a strong trend in the video game world. This is in addition to the various recent announcements about metavers, virtual worlds where NFTs will play an important role.

This story was first published in French on Paperjam. It has been translated and edited for Delano.