Like NFTS 2021, a 40-billion dollar market became

At the beginning of 2021, only a niche group of crypto enthusiasts knew, which are not fungal tokens (NFT).

By the end of the year, however, almost $ 41 billion for NFTs were issued according to the latest data, which makes the market for digital works of art and collectibles almost as valuable as the global art market.

"This year the NFT market exploded from a sub-billion dollar market to a multi-decabillary industry," said Mason Nystrom, Research-Analyst at the crypto data company Messari and added that the buyers were to discover that art ".

NFT mania reached the mainstream in March, when a collage of the artist Beeple was sold at Christie’s for $ 69.3 million, when the kind of sale of this kind was first sold in the auction house. The artist, who is called Mike Winkelmann in a bourgeois name, reacted with a tweet: "Saint fuck".

Corporate actors from art, sports and music - even Melania Trump - quickly began to shape NFTs, essentially digital property certificates that are registered on a blockchain to benefit from hype and find new ways to get in touch with fans.

The other hits numbered by NFTS, which became viral, including Cryptopunks and Bored Ape Yacht Club, which have been used by their owners and are used as avatars in social media profiles.

"The core value is still exclusivity," said Nystrom, noting that expensive collections also offer buyers access to closed channels on the chat platform Discord as well as on meetups and parties.

"You are Country Club-like: There is a high entry barrier-capital costs-and you are near wealthy and other individuals," he added.

A total of 40.9 billion US dollars were put into the Ethereum blockchain contracts that are normally used to create NFTs in the year until December 15, said Chainalysis, a group for crypto analysis. The total amount would be even higher if it contained NFTS that were shaped on other blockchains such as Solana.

In comparison, the value of the global art market was $ 50.1 billion in the past year, according to UBS and Art Basel.

chainalysis showed that NFTs have introduced a large number of private investors to the crypto world, with small transactions under $ 10,000 out of $ 75 percent of the market.

But similar to the market for cryptocurrencies, it is still dominated by a few large players or "whales".

Between the end of February and November 360,000 NFT owners kept 2.7 million NFTs. Of these, around 9 percent - or 32,400 wallets - kept 80 percent of the market value, found Chainalysis.

Stephen Diehl, a crypto-skeptical software engineer, said that many whales are "people sit on hundreds of millions of dollars of crypto" from the boom in crypto prices "to transform their crypto into more crypto.

others say that they tackle the market as a professional dealer with collectors. A well-known NFT investor, known as Pranksy on Twitter, which started in 2017 with an initial investment of 600 US Dollar More than $ 20 million, it said.

You told the Financial Times that you invest in a mixture of projects, "some of which have a higher daily trading volume and others have more niche attractiveness". Apart from the fact that lucrative projects are “turned over”, said Pranksy that they “had certain pieces that I would like to keep as a long -term investment”.

So far, most new NFT collectors on the secondary market have not yet paid for the costs of their purchases, according to an analysis for the FT of the Blockchain analysis platform Nansen, in which early collectors also benefited from an increase in price of the NFTs as in the cryptocurrency with which they are traded.

Un -regulated space is also plagued by fraud, fraud and market manipulation, especially because the identity of buyers and sellers in the real world is difficult, if not impossible to discover.

The analysis of Nansen showed suspicious activities of $ 2 million in the Cryptopunk and Bored Ape collections in the 30 days to mid-December. For example, some NFTs were sold to the average sales price with a discount of 95 percent, either due to errors of buyers and sellers, tax depreciation or other fraud stitches in which unskilled users were exploited.

researchers have also warned that the market is likely to be bloated by wash trading-if a trader takes both sides of a trades to give the wrong impression of demand.

"You can buy and sell a NFT on a public platform and give the appearance as if there is great interest in the play if only you are going up the price," said Rüdiger K. Weng, Managing Director of Weng Fine Art.

"This also happens in the traditional art world," he said, but added that when a manipulator hands over a work of art to Sotheby’s and tries to be a washing trade, he has to pay the auction house 25 percent of the sale, which makes it a costly company. "With NFTS, the costs are only a fraction of it," he said, referring to the transaction fees that are known as gas fees that are necessary for the embossing or purchase of a NFT and can fluctuate depending on demand.

Nonetheless, there are many supporters who believe that the market will be more mature and will finally offer a number of functions, for example the opportunity to give artists the long term.

"What can you do because it is software?" asked Benedict Evans, an independent technology analyst and former risk capital provider. "These can be things, such as the participation of the artist and subsequent secondary sales," he said, especially referring to early innovations in the field of musical rights.

In some municipalities, the so -called “financialization” of NFTS already takes place - for example by using NFTS as security for loans or the distribution of ownership into a single piece into smaller parts, which is referred to as fractionalization.

In the long term, enthusiasts hope that tokens will one day drive e-commerce in every meta verse or meta verse, futuristic digital avatar-filled virtual worlds. Here NFTs could describe the property of virtual goods, be it clothing for digital avatars or art for the walls of their digital houses. Nike recently announced that it bought a virtual shoe company to shape virtual sneakers.

In any case, the future of the NFT market will also depend on the attitude of the supervisory authorities to develop the freewheel market.

Even with corporate compartments, there are concerns that NFTS share characteristics with certain digital investment vehicles and can therefore be viewed as securities by the supervisory authorities. Devika Kornbacher, partner at Vinson and Elkins, said that companies that want to spend NFTs regularly ask: "Is this NFT viewed as a financial instrument? Is it regarded by our company?"

In the meantime, tax authorities such as the Internal Revenue Service have to deal directly with NFTs, but some experts argue that they could be considered "collectical", which means that they would be subject to capital gains tax.

"It is a emerging existential problem for the entire industry," said Pratin Vallabhaneni, partner at White & Case, about the upcoming regulation.

Additional reporting by Eva Szalay and Siddharth Venkataramakrishnan