NFT Last year became one of the biggest stories in cryptocurrency. Their popularity skyrocketed in 2021, but the current year has resulted in a drop in sales volume, leaving us all to wonder if the craze for NFTs is waning.
According to CryptoSlam data, NFT global sales have fallen since their all-time high in January this year. Whereas many unique buyers and sellers have also witnessed a slowdown and hence there has been a further decline in the total transactions.
NFT global sales, which stood at a record over $4.62 billion in January 2022, exceeded $2.99 billion in February and nearly halved to $2.44 billion in March. Global sales so far in April stood at $1.21 billion.
In April, as of now, there are unique 330,499 buyers and 361,198 sellers, while as per the data, the total transactions took place at 2,116,657.
Lack of clarity, theft and risk are some of the major drawbacks for investors looking to enter the cryptocurrency and NFT markets. The sentiments in NFT have softened after several thefts and scams. The most high-profile theft to rock the blockchain industry will be that of the Ronin Network, which was hacked for $615 million in digital assets.
There are many new scams like rag pull, NFT pump, and dump scheme, plagiarism NFT and art theft, and phishing which have given some cold feet to cryptocurrency enthusiast investors.
Chainalysis in its 2022 Crypto Crime Report highlighted the popularity of NFTs last year, while also pointing out the dangers of this new technology. According to the software company, a minimum of $44.2 billion worth of cryptocurrency was sent to ERC-721 and ERC-1155 contracts – two types of Ethereum smart contracts linked to the NFT marketplace and collections – up from just $106 million in 2020.
However, Chainalysis stated in their report that “as is the case with any new technology, NFTs offer the potential for abuse. They observed two types of illegal activity in NFTs – to artificially inflate the value of NFTs.” Purchase of NFTs through wash trading, and money laundering.
Furthermore, some buyers who have purchased NFTs at significantly higher prices are finding it difficult to sell their digital assets.
However, not all NFTs are risky. Some creators have firmly maintained their investments in NFTs. According to the data, Axi Infinity, Cryptopunks, Bored Ape Yacht Club, Art Bloks and Mutant Ape Yacht Club are the top five NFT collections by sales volume.
What makes NFTs unique?
Non-fungible tokens (NFTs) are cryptographic assets on a blockchain that are not exchangeable due to their nature of being indistinguishable from each other. Simply put, they are not replaceable or interchangeable with any other cryptocurrency avenues.
NFTs are packaged with unique cryptographic tokens. Some examples of NFTs are unique digital artwork, limited fashion-line, in-game items, an essay, digital collectibles, or tickets that provide access to an event or coupon, and even a domain among others. There are names too.
NFTs are unique, unlike other cryptocurrencies that are convertible. This means, unlike NFTs, other cryptos are exchangeable or exchangeable for another. For example, one bitcoin is equal to another bitcoin, or one unit of Tether is the same as another Tether. However, no two digitally unique NFTs are the same.
This means that each NFT has an associated owner with a public record and is easy to verify. NFTs provide a comprehensive panel of content creators who can sell their work anywhere while accessing a global market. These creators can retain their ownership rights to their work and claim resale royalties.
To bring in market efficiency, NFTs provide a platform for converting physical assets into digital which further removes intermediaries such as agents on the blockchain and enables artistes to interact and interact with their audiences directly.
That said, NFTs give clarity to identity management. Thus, only one owner can have an NFT can at a time. Ownership is managed through a UniqueID and metadata that no other token can reproduce. You can buy or sell the ownership of that particular NFT.
Many cryptocurrencies have opted for NFTs, with Ethereum being the first blockchain to support 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.