By Jasper Hamill
A team of researchers has analyzed data relating to 6.1 million NFT trades and discovered that most non-fungible tokens sell for a pittance.
In a paper published in the respected journal Nature, a team of academics set out to understand “the overall structure and evolution” of the NFT market, which has experienced record sales in 2021.
What they found is that a tiny proportion are bought for big bucks, whilst most can be snapped up for less than the price of a fast-food meal
If you’ve been hiding under a rock (and a long way from a wifi connection), an NFT is a unit of data stored on a blockchain that is unique and therefore not fungible, which means interchangeable. They often take the form of collectables, pieces of digital art or in-game items.
“An NFT allows [investors] to establish the ‘provenance’ of the assigned digital object, offering indisputable answers to such questions as who owns, previously owned, and created the NFT, as well as which of the many copies is the original,” the researchers wrote.
“Several types of digital objects can be associated to an NFT including photos, videos, and audio. NFTs are now being used to commodify digital objects in different contexts, such as art, gaming, and sports collectables. Originally NFTs were part of the Ethereum blockchain but increasingly more blockchains have implemented their own versions of NFTs.”
There have been some incredible NFT prices achieved this year, with an artist called Beeple selling an NFT for $69.3 million at Christie’s - the third-highest auction price achieved for work by a living artist, after Jeff Koons and David Hockney.
Three Cryptopunk NFTs - which are digitally-generated characters - also sold for $11.8 million, $7.6 million, and $7.6 million, whilst the first-ever tweet went for $2.9 million.
During the first four months of 2021 alone, $2 billion NFTs were sold - which is ten times more than the entire trading volume of 2020.
The huge sales and massive trading volume has gotten many investors extremely excited, with rumours suggesting the business guru and internet personality Gary Vee rounded up other web celebs including both Paul brothers and told them to buy NFTs because “this is the next Facebook”. YouTuber Logan Paul reportedly was so moved by Gary Vee’s enthusiasm that he bought $500,000 of NFTs.
However, the study found that the big numbers hitting the headlines masked a rather less exciting reality. It found that 75% of NFTs sell for less than $15 - and just 1% go for more than $1,594 dollars.
NFTs grouped into the categories of Art, Metaverse (which are “pieces of virtual worlds”) and Utility (items that have “a specific function” reached higher prices than other categories, with the top 1% of these assets achieving an average sale price higher than $6,290, $9,485 and $12,756 dollars respectively.
The highest prices were reached by assets in the Art category, with 4 NFTs selling for more than $1 million.
The authors wrote: “Overall, NFTs are a new tool that satisfies some of the needs of creators, users, and collectors of a large class of digital and non-digital objects. As such, they are probably here to stay or, at least, they represent the first step towards new tools to deal with property and the provenance of such assets.
“We anticipate that our study will help accelerate new research on NFT in a broad array of disciplines, including economics, law, cultural evolution, art history, computational social science, and computer science. The results will also help practitioners make sense of a rapidly evolving landscape and inform the design of more efficient marketplaces as well as the associated regulation.”
