What are NFTs?

Non-Fungible Tokens (NFTs) are special kinds of digital smart contracts, mostly run on Ethereum that can’t be replicated or reproduced. In other words, no two identical NFTs can be created, all of them are completely unique.

What you more likely know about these tokens is the images associated with them–we’re talking Bored Apes, Crypto Punks, and similar buzzwords. But how can someone create these, how does this work?

The answer’s simple: anyone can associate an image/digital art piece with a non-fungible contract relatively easily, creating a brand-new piece of the NFTs we know. A popular site for the above is OpenSea, it’s definitely worth checking out.

NFTs in 2021

This year was certainly the year of NFTs, as the demand for digital art combined with the public’s generally amplified interest in the crypto market resulted in huge trends and astronomical prices. 

The popularity surge started during spring and continued throughout the year—we saw NFTs selling for thousands of Ethereum (ETH), equivalent to millions of dollars. Even some celebrities jumped on the trend: famous show host Jimmy Fallon, internet celebrity Logan Paul, and legendary basketball player Stephen Curry were among the first adaptors, each buying their own piece of the Bored Ape collection.

2021 also uncovered one of the biggest potential of NFTs, that is, they might have just started the new era of art trading and art collecting. When one mentions art collecting and trading, many of us think of beautiful old paintings and wealthy magnates, a handful of who control the whole market. The fact that NFTs and the new way of digital art can bring about a change to this old-fashioned system makes nowadays historic times, when art is accessible to everyone, but ownership still remains private.

NFTs and Ethereum

Since NFTs are also smart contracts, they tie directly to the blockchains we know well, and so it’s no surprise that most of them were launched on Ethereum. Naturally, because most NFTs are tied to Ethereum, their popularity surge also had a positive impact on ETH, namely on its price.

On the other hand, buying and selling these non-fungible tokens which count as simple transactions on the Ethereum blockchain resulted in an overloaded system where gas fees–transaction costs–skyrocketed to unprecedented levels. Unfortunately, this ended up hurting the smallest users of the network who actually make up the vast majority of the total base, as many of them were unable to transact due to the unaffordable fees.

In any case, Ethereum undoubtedly played a huge role in the NFT boom of 2021, and one could argue that it can take a vital part in a possible next run as well, so investors’ eyes remain on ETH.

Summary

All in all, NFTs are not new–they existed well before the public really picked them up. However, it’s not always the most recent innovation that disrupts the world, but the one with the best timing. 2021 turned out to be the time for NFTs, and we can say with the greatest confidence that they made every minute count: the art world of the future could look back at this year and call it the time that changed it all.