Imagine your favorite artist creates a one-of-a-kind digital painting, and you want to own it. But how do you prove ownership in the digital world? That’s where NFTs, or non-fungible tokens, come into play.
An NFT is a unique digital certificate that verifies you own a specific digital item, whether it’s a piece of digital art, music, or even virtual property. Think of it like owning a rare collector’s item, but in the digital space or rather in the NFT space.
The term “non-fungible” simply means that the item is unique and cannot be exchanged for something of equal value, much like you wouldn’t trade a rare baseball card for a common one. Each NFT holds its own distinct value.
When you purchase NFT tokens, you’re not buying the digital file itself, but rather a certificate that confirms your ownership of that digital asset. This certificate is stored on a blockchain, a secure digital ledger that guarantees the authenticity and ownership of your NFT cannot be tampered with.
Non-fungible tokens have also revolutionized digital art. Like traditional art created with brushes and canvases, digital artwork uses digital tools and techniques but exists solely online.
Non-fungible tokens allow digital artists to sell and collectors to buy verified, unique digital artworks, ensuring originality. This new method gives digital art the same credibility and collectibility as traditional art, offering artists recognition and a new avenue to monetize their creations.
Source: Freepik
Essentially, what gives an NFT value is its ability to verify an asset’s authenticity, either digital or physical. This makes these assets unique and one of a kind, making it possible to prove ownership of digital assets. Aside from this, three main factors mostly impact the NFT price mechanism. They are the following.
It is no rocket science that the more an NFT collection grows in popularity, the more its floor price, which is the lowest amount of money you will have to spend to buy non-fungible tokens from a collection, will appreciate. One metric used to calculate the popularity of an NFT collection is its trading volume.
For instance, major NFT marketplace OpenSea lists the top collections of non-fungible tokens over the past 24 hours in terms of volume on its main page. These collections of non-fungible tokens are arguably the most popular ones currently, and thus, they are usually the most expensive ones.
Generally, not all non-fungible tokens of a collection are equal. Based on different features and attributes, different non-fungible tokens of one collection fetch different bids. This is basically because of the rarity of each NFT. There are some tools that can help users determine the rarity of an NFT.
Source: Freepik
A utility NFT is a non-fungible token with applications beyond the representation of a unique digital asset. Usually, a utility NFT refers to those non-fungible tokens that offer their holders privileges, rewards, or rights that they wouldn’t have found normally.
The price of an NFT can also vary based on its utility. For instance, users might find it reasonable to pay a couple of thousand dollars to get their hand on an NFT that offers them access to exclusive clubs, products, and even an upcoming virtual world (like a metaverse).
The first emergence of non-fungible tokens dates back to 2012 and 2013, when so-called “colored coins’ ‘ were first issued on the Bitcoin blockchain. Colored coins are BTC coins with a mark on them that specifies what they may be used for. These digital assets are considered the first form of non-fungible tokens.
Colored Coins uncovered the possibilities of being able to issue and prove asset ownership, but since the Bitcoin network was not able to support these features, an alternative method of exchange was created. Counterparty, an open-source peer-to-peer financial platform, was built for the BTC blockchain.
Subsequently, in early 2015, Spells of Genesis and Counterparty inked a partnership to create the first blockchain-based mobile game. In-game assets were available on Counterparty for trading. In 2016, Counterparty saw another team-up with the major trading card game Force of Will and successfully launched their cards on the Counterparty platform.
In 2017, with the growing popularity of Ethereum, the first non-fungible tokens were launched on the Ethereum blockchain. In July of that year, Cryptopunks, a collection of 10,000 24×24 pixel art images, with each being 100% unique, launched on Ethereum. Cryptopunks burst in popularity and led to the creation of NFT marketplaces where people can buy and sell non-fungible tokens.
In October 2017, another old NFT project on Ethereum was launched. Called Cryptokitties, the blockchain-based game allowed users to trade virtual cats, some of which were going for up to $100k.
As the popularity of the game grew, some of the virtual cats with higher rarity scores were even traded for millions of dollars, which made headlines across major outlets.
Nevertheless, the adoption and growth of non-fungible tokens continued, with 2021 marking the best year in the history of NFTs. Dozens of NFT collections, including Bored Ape Yacht Club, flooded the market last year, with different blockchains adding support for NFTs.
Here are the top five most expensive non-fungible tokens that were ever sold.
In December 2021, “The Merge” by Pak became the most expensive NFT ever sold, with a staggering total of $91.8 million. Pak, an enigmatic artist known for challenging conventional thinking through digital art, created a unique work that broke new ground in the NFT world. Unlike typical NFTs, “The Merge” wasn’t a static image or video but a dynamic piece allowing buyers to purchase “masses.” As collectors acquired more masses, their Merge NFT would grow in size, making each one unique. Hosted by Nifty Gateway, the sale attracted over 28,000 collectors, turning it into one of the most innovative and record-setting NFT events. While interpretations of “The Merge” vary—whether as a single artwork or a collection of individual pieces—it surpassed the previous record for the most expensive work sold by a living artist, previously held by Jeff Koons’ sculpture Rabbit, which sold for $91.1 million in 2019.
In March 2021, Beeple’s “Everydays: The First 5000 Days” made history, selling for $69.3 million at Christie’s auction. This groundbreaking NFT is a digital collage of 5,000 individual images that Beeple (real name Mike Winkelmann) created daily over 13 years. Each image captures different cultural and global moments, creating a time capsule of Beeple’s artistic evolution. This sale was especially significant as it marked the first time a purely digital NFT was sold by a major auction house, thrusting NFTs into the mainstream and triggering a massive surge in their sales and popularity in 2021.
In February 2022, “Clock,” a collaboration between Pak and Julian Assange, sold for $52.7 million. This NFT was created to raise awareness and funds for Assange’s legal defense, counting the number of days he has been imprisoned.
Its high price reflected not only its cultural and political significance but also Pak’s standing as a major figure in digital art.
Beeple’s “HUMAN ONE” sold for $28.9 million in November 2021 at a Christie’s auction, further solidifying Beeple’s prominence in the NFT space. Unlike traditional NFTs, “HUMAN ONE” is a hybrid physical-digital artwork, featuring a dynamic, ever-changing video sculpture. The ability for Beeple to remotely alter the visuals makes this a pioneering piece, contributing to its high value and innovation in digital art.
CryptoPunk #5822 is one of the rarest non-fungible tokens from the iconic CryptoPunks collection of NFTs, selling for $23.7 million in February 2022.
With only nine alien characters in the collection, this specific CryptoPunk, featuring an alien with a blue bandana, holds immense value due to its rarity. The sale underscored the cultural and historical significance of CryptoPunks within the NFT ecosystem.
Known as “Covid Alien,” CryptoPunk #7523 fetched $11.75 million at a Sotheby, one of the leading auction houses auction in June 2021.
Part of the rare alien series within the CryptoPunks collection, it features a character wearing a medical mask, a powerful symbol during the COVID-19 pandemic. The unique combination of its alien features and mask resonated deeply with collectors, making it an important moment in NFT history.
TPunk #3442, from the “Tron version” of the popular CryptoPunks collection, was purchased by Justin Sun, the founder of the Tron blockchain, for $10.5 million in August 2021. Resembling a Joker-like character, its sale marked one of the highest-value NFT transactions at the time, further highlighted by Sun’s high-profile involvement.
Selling for $10.26 million in December 2021, CryptoPunk #4156, featuring an ape with a blue bandana, is one of the rarest in the CryptoPunks collection. With only 24 ape CryptoPunks in existence, the sale reinforced the collection’s status as a cornerstone of the NFT market.
Crypto Punk #3100, featuring an alien with a white headband, sold for $7.67 million in March 2021. Its rarity and historical significance within the CryptoPunks collection contributed to its high value, making it one of the top-selling NFTs of its kind.
Often referred to as the “digital Mona Lisa,” Crypto Punk #7804, an alien wearing a cap, sunglasses, and smoking a pipe, sold for $7.6 million in March 2021. Its distinct look and place in the early days of NFTs made it one of the most valuable and culturally impactful sales in the non-fungible token movement.
Launched in 2017, OpenSea is one of the oldest NFT platforms and has hosted a wide range of popular non-fungible tokens, including virtual artwork, music, photography, trading cards, and virtual worlds.
It primarily operates on Ethereum, Solana, Polygon, Avalanche, and BNB, though it supports several other cryptocurrencies as well. However, fiat currencies like U.S. dollars or euros aren’t accepted, just cryptocurrency can be used for NFT transactions.
OpenSea is user-friendly, making it an ideal platform for beginners.
You can set up an account quickly and start browsing or even creating NFTs with ease. OpenSea charges a transaction fee of 2.5%, and additional fees may apply when listing an item on Ethereum for the first time. For those seeking simplicity and variety in an NFT marketplace, OpenSea is a solid starting point.
Rarible is a platform where users can buy and sell NFTs ranging from art and collectibles to video game assets. It supports Ethereum, Polygon, Tezos, and Immutable X. Unique to Rarible, holders of its native token, RARI, can vote on important platform decisions, giving it a decentralized touch.
Rarible’s collaboration with Adobe, launched in 2021, enhances digital content protection and verification, which benefits NFT creators. If you’re looking for a marketplace with strong NFT community involvement and solid industry partnerships, Rarible is a great option.
For basketball enthusiasts, NBA Top Shot offers NFTs capturing iconic moments from NBA and WNBA history, including video highlights and memorable plays.
Some of these NFTs, known as “Moments,” have sold for substantial sums, like a LeBron James dunk video that fetched $208,000 in early 2021.
NBA Top Shot is backed by the NBA itself, giving buyers confidence in its legitimacy. Transactions can be made with credit/debit cards or certain cryptocurrencies, including Bitcoin and Ethereum. It’s the go-to platform for collectors of official basketball NFT memorabilia.
In 2021, Binance, one of the world’s largest cryptocurrency exchanges, introduced its own NFT market place. It offers a variety of digital assets, such as artwork, gaming items, and collectibles. One of Binance NFT’s main advantages is its low 1% trading fee, making it one of the most cost-effective platforms.
The platform is easy to use, utilizing the same technology as the Binance exchange. Operating on its own blockchain, Binance offers the added advantage of seamless integration for users and artists already familiar with its ecosystem.
Known for exclusive and high-end NFT sales, Nifty Gateway has hosted record-breaking auctions, such as digital artist Pak’s “The Merge,” which sold for $91.8 million. Acquired by Gemini in 2019, the platform focuses on artwork, particularly celebrity and top-tier artist creations.
Nifty Gateway uses an “open editions” system, where new NFTs are available for a limited time only, increasing their demand. It allows users to purchase NFTs with credit cards, making it a suitable platform for those looking to invest in high-end digital art.
Positioning itself as a high-end art gallery in the NFT world, SuperRare is highly selective, rejecting “meme-style” NFTs in favor of more refined works. Due to this curation, buyers can feel confident in the quality of the NFTs listed.
SuperRare charges a 15% fee on first-time primary sales, with a 3% fee on subsequent transactions paid by the buyer. For those seeking fine, classical digital art, SuperRare offers a more exclusive environment within the NFT marketplace.
Source: Freepik
While NFTs are most commonly associated with the art world, their applications extend far beyond it, impacting a variety of industries. Here are several key examples of how NFTs are being utilized in innovative ways.
In the evolving metaverse, NFTs act as the foundational elements of virtual worlds. Users can purchase and trade virtual land, clothing, and accessories, all represented as NFTs. It helps to generate profits.
Platforms such as Decentraland and The Sandbox allow users to buy NFTs, sell, and exchange these digital assets, fostering thriving virtual economies where ownership and creativity are paramount.
The gaming industry has embraced NFTs as in-game assets, allowing players to own, trade, and even earn from their digital belongings.
In games like Axie Infinity, players can acquire unique characters, land, and items that hold real-world value. These NFTs grant true ownership of digital assets, which can be sold or traded on secondary markets, giving gamers more control and potential earnings from their gameplay.
Musicians are leveraging NFTs to transform the way they release and monetize their work. Through NFTs, artists can offer limited-edition releases, concert tickets, and exclusive content directly to their fans.
This approach gives musicians greater control over their work and fosters a deeper connection with their audience. Platforms like Audius have become prominent players in the music NFT space, revolutionizing the music industry by providing new revenue streams for creators.
Luxury brands are increasingly incorporating NFTs to authenticate and track their high-end products. These digital tokens serve as proof of ownership and authenticity, offering a layer of security to buyers.
Additionally, brands like Gucci and Louis Vuitton have launched their own NFT collections, seamlessly blending physical luxury items with digital experiences, enhancing consumer engagement in both worlds.
NFTs are beginning to reshape the real estate industry by representing ownership of both virtual and physical properties. Companies like Propy are exploring ways to facilitate real estate transactions using NFTs, making the process more transparent and efficient.
In the virtual world, individuals can purchase digital plots of land and fully constructed houses as NFTs. A well-known example is a plot of land sold for over $4 million in The Sandbox, highlighting the growing interest in virtual real estate.
Supply Chain
NFTs offer a powerful tool for tracking the provenance and authenticity of goods within supply chains.
By creating a digital record of a product’s journey from manufacturer to consumer, NFTs enhance transparency and help reduce fraud, particularly in industries like fashion, food, and luxury goods.
One company leading this initiative is Morpheus.Network, which is actively implementing NFTs to improve the integrity and traceability of supply chains.
These diverse use cases showcase the potential of NFTs to transform industries far beyond art, from enhancing digital ownership to streamlining supply chains and even redefining real estate.
The single most expensive NFT ever sold is Beeple’s “Everydays: The First 5000 Days.”
The single most expensive NFT, Beeple’s “Everydays: The First 5000 Days,” sold for around $70 million.
The single most expensive NFT in the world is Beeple’s “Everydays: The First 5000 Days.”
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Disclaimer. This material should not be construed as a basis for making investment decisions or as a recommendation to participate in investment transactions. Trading digital assets may involve significant risks and can result in the loss of invested capital. Therefore, you must ensure that you fully understand the risk involved, consider your level of experience, investment objectives, and seek independent financial advice if necessary.
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