Only about a third of South Africans actually know what non-fungible tokens (NFTs) are, however they are expected to become more mainstream as awareness grows.
And only about 8.3% of South Africans own NFTs just below the global average of 11.7%, according Finder.com’s Global NFT Adoption report.
Here are 7 questions answered to help you understand this growing market.
What is an NFT?
An NFT (a non-fungible token) is a unique digital asset that represents real-world objects such as art, music, videos and even a tweet.
They are bought and sold online, mostly with cryptocurrency.
Recenly NFT marketplace Momint auctioned an NFT of the original 1961 Warrant of Arrest for Nelson Mandela for R1.9 million. A digital version of the original 1961 Warrant of Arrest for Nelson Mandela was specially minted for the auction.
How does it work?
NFTs cannot be exchanged for another token like with cryptocurrencies instead the creator of the NFT has to launch it on a blockchain and then offer it for sale.
Can a marketplace for NFTs be hacked?
Yes. In February, the world’s largest NFT marketplace, Open Sea was hit by a phishing attack and at least 32 users lost their valuable NFTs worth $1.7 million (R24.5m)..
Who can own an NFT?
The NFT marketplace is open to anyone and everyone. Celebrities such as rapper Snoop Dogg, tennis player Serena Williams, rapper Jay-Z, YouTuber Logan Paul and billionaire entrepreneur Mark Cuban all own NFTs.
How did NFTs become popular?
The hype around NFTs started during the pandemic as more people discovered the NFT market. The millions of dollars in sales for NFTs, including the NFT of Twitter CEO Jack Dorsey’s first tweet which sold for $2.9 million (R42.2 million), also added to popularity of the digital asset
What determines the value of the NFT?
The rise and fall in the value of an NFT is determined by five key categories, including:
- The Artist: If the digital version of the asset was created by a well-known artist or musician then that NFT will cost more.
- Uniqueness: If the NFT is a part of a collection with unusual qualities, the NFT will have more value.
- Relevancy: NFT can gain value depending on the asset’s relevancy in history and culture.
- Utility: Other than being digital assets, some NFTs have utility can be used as collector’s items such baseball cards.
- Popularity: If the NFT collection is popular then it will hold more value.