Remember Non-Fungible Tokens?
When’s the last time you thought about buying one?
NFTs: A Quick Recap
NFTs are “unique digital identifiers that are recorded on a blockchain, and are used to certify ownership and authenticity.” (Wikipedia). For example, Jack Dorsey wrote the first tweet in history. He sold the ownership of that tweet via an NFT. That doesn’t mean that the person who bought the NFT owns copyright or other IP rights. An NFT is more like a “certificate of authenticity” joined with a title or other certificate of ownership.
Consider something a bit more physical – say, a Mickey Mantle rookie card. If you bought one, you might get a COA saying “yes, this is really a Mickey Mantle rookie card and not a fake”. You wouldn’t need proof of ownership because you have the card in your hand. If the Mantle rookie was only ever a digital product – a .PNG, a tweet, virtual real estate a game, whatever – how would you prove ownership? Enter NFTs.
Practically speaking, they were a way for someone to say “hey, I own that”.
The Boom, er…It Busted Almost Immediately
Although there are earlier examples, NFTs really got going in 2020. In that year, over $200 million in NFTs was sold.
And then it was over almost as soon as it started. By 2022, the Wall Street Journal reported that the NFT market was “collapsing”. Between September 2021 and May 2022 – 8 months – NFT says cratered by 92%. The number active wallets – i.e., participants in the market – plummeted by 88%. Wired reported that a $17 billion market in January 2022 was a $400 million market in November 2022 – a collapse of 97%.
And that Jack Dorsey tweet?
BREAKING: An NFT of Jack Dorsey’s first-ever tweet, which sold for $2.9M last year, was put up for sale & only got 7 offers from $277 to $6. pic.twitter.com/X3P0dMI6Xw
— WhaleWire (@WhaleWire) April 13, 2022
Youch.
What happened? There are a number of factors:
- Crypto during this period got a black eye due to BitCoin’s instability, FTX, etc., and so while blockchain != cryptocurrency, in many people’s mind they are linked.
- Oversupply. I mean, heck, even LowEndBox launched one (as a bit of a joke).
- Rising interest rates constrained the amount of money available to throw at risky asset classes.
- It was always highly speculative.
- It was a fad.
That last on will rankle some people because NFTs are supposed to be part of the bright digital future but anything that roars to great heights overnight always comes back down with the same velocity.
And Now They’re Worthless
A new report states that the “vast majority” of NFTs are completely worthless, and those with some value are at paltry figures.
Some highlights:
- Of the 73,257 NFT collections identified, 69,795 of them (over 95%) have a market cap of 0 Ether (ETH).
- Less than 1% have a value above $6,000.
- The report feels that these horrifying numbers may be the best case scenario. As they put it, “It becomes clear that a significant portion of the NFT market is characterized by speculative and hopeful pricing strategies that are far removed from the actual trading history of these assets.”
Condolences if you got swept up in the fever and now have a valueless entry in a blockchain that no one will give you money for.
I could make you a good deal on an NFT for this post…
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I also enjoy using LEBs! I have an empire of little guys for VPNs, larger guys for apps, and big guys for databases and storage. When I'm not in front a screen I'm into German Shepherd dogs, quality knives, target shooting, theology, tabletop roleplaying games, and forest hiking.
I enjoy writing technical articles here on LowEndBox to help people get more out of their systems. You can find me on LowEndTalk @raindog308
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