FT: How will NFTs create a $40 billion market in 2022?

In a breakthrough year, collectors are spending almost as much on digital collectibles as on traditional art.

At the beginning of 2021, only a small percentage of cryptocurrency enthusiasts know what a non-fungible token (NFT) is. But according to the latest figures, nearly $41 billion had been spent on NFTs by the end of the year, making the digital art and collectibles market almost as valuable as the global art market.

"This year has seen the NFT market explode from a sub-$1 billion market to a multi-billion-dollar industry," said Mason Nystrom, a research analyst at encrypted data group Messari, adding that buyers are eager to discover what's relevant to their "numbers." Identity" consistent artwork.

NFTs are essentially digital certificates of ownership registered on the blockchain — a record that cannot be altered or tampered with.

These tokens are typically created or minted using smart contracts — self-executing contracts written into blockchain code — and can be traded on secondary markets for cryptocurrency.

The NFT mania was thrust into the mainstream in March, when a collage by artist Beeple sold for $69.3 million at Christie’s, the first digital art auction at Christie’s. The artist, Mike Winkelmann, tweeted that this is a crazy thing.

While initially popular in the art world, players from sports and music — even former US first lady Melania Trump — have used the concept to hype and find new ways to engage with fans.

The NBA created its own NFT marketplace for buying, selling, and trading video highlights of its players, called NBA Top Shot.

Other hits that have gone viral include limited digital series of NFTs, including CryptoPunks and Bored Ape Yacht Club, which signify the status of their holders and are used as social media avatars.

“The core value remains exclusivity,” Nystrom said, noting that expensive collectibles also provide buyers with access to gated channels on the social chat platform Discord, as well as the chance to attend parties and parties.

"They're country clubs: there's a high bar -- the cost of capital -- and you're surrounded by high net worth people," he said.

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An ad for CryptoPunk NFT in Manhattan © Dia Dipasupil/Getty

A total of $40.9 billion was put into ethereum blockchain contracts typically used to create NFTs in the year ended Dec. 15, according to cryptocurrency analysis group Chainalysis. The total amount would be higher if NFTs minted on other blockchains, such as Solana, were included.

By comparison, the global art market was worth $50.1 billion last year, according to UBS and Art Basel.