At the beginning of 2021, humanity witnessed an entirely new technology. The first Twitter publication, made by the platform’s founder Jack Dorsey, allegedly went under the hammer for almost three billion euros. A short shot from an NBA game was “sold” for $208,000, and a rainbow GIF of Nyan Cat suddenly became someone’s property. And not just owned, but worth a whopping $600,000.
Behind this literally bizarre and even absurd news is the same acronym — NFT. Cat gifs, LeBron James videos, memes, mashups, tweets, Reddit posts — everything can be linked to an online token that will unequivocally confirm your ownership of that particular file, picture, web page, or even an actual physical object.
In this article, we will talk about NFT meaning and how it has become one of our time’s most popular and promising crypto technologies. We will also discuss what kinds of NFTs exist and what makes them so valuable and expensive. In the end, you’ll learn about the 5 most expensive NFTs projects ever created.
An NFT (non-fungible token) is a non-interchangeable or unique digital unit to account for some unique object. Such a token can be assigned to a picture, clip, photo, song, tweet, or any other item. These digital records have come to represent a certain value, highlighting the fact of ownership of some content.
By purchasing an NFT token, the user acquires a certificate for the work. The work itself does not move anywhere. It sits in perpetual storage (IPFS). The certificate is essentially lines of code that confirm that it is the owner of the token who owns the original copy of the object. The NFT token can be compared to a painting, which may belong to a gallery, museum, or individual, but the audience can see it in a catalog or at an exhibition.
NFT differs from ordinary ownership in its cryptographic component. The token is stored in a blockchain, making it virtually impossible to steal or counterfeit. All data about the purchase, sale, and all NFT owners will be securely stored on the network. Experiments with encrypted NFT tokens began back in 2012. In the fall of 2015, the Etheria game project was launched, which offered to secure ownership of one of the special hexagonal slabs with NFTs.
For several years, the technology was just a companion option in the cryptocurrency market and did not arouse much interest among traders. That all started to change in 2020 when the value of all existing NFTs skyrocketed to about $250 million. In the first three months of 2021, users spent more than $200 million on token transactions.
All NFT projects can be classified into several groups. Below are the most common categories of projects on the NFT marketplace.
Combining physical assets with NFT helps make the process of proving digital ownership. For example, real estate uses physical ownership documents, but creating tokenized digital assets of these documents can move highly liquid assets (house or land) to blockchain. This way of applying NFT requires serious work, but it already seems promising.
Collectible NFTs can be not only images or videos but also audio files — they can be considered the first digital edition of a song. Although creating NFTs with music is similar to creating NFTs with art, the uses of these tokens are different. Creating NFT music has proven to be a great use of non-interchangeable tokens, but without the support of music labels, it is quite difficult to succeed in this area.
There is a huge demand in the gaming industry for collectibles that can be sold and bought. It has long been common among gamers to purchase digital items whose value is determined by their rarity. Microtransactions and in-game purchases have created a multi-billion dollar gaming industry that can use NFT and blockchain technology. NFT tokens for video games combine elements of art and collectibles, as well as provide benefits to players.
NFTs are not only used to buy art and collectibles. For example, decentralized finance (DeFi) offers unique financial advantages. Although these tokens are usually used to purchase digital items, the main value is their functionality.
For example, JustLiquidity offers an NFT staking model. A user can add a pair of tokens to a staking pool for a certain period and get NFTs to access the next pool: NFTs serve as an entry ticket and are destroyed after joining a new pool. This model creates a secondary market for selling NFTs with the provisioning function.
Along with NFT art, collectible tokens make up a significant share of sales on NFT marketplaces (like Opensea or Treasureland).
Collectibles and art often have a lot in common, so an NFT token can sometimes combine both. These two uses are the most developed and widespread today.
Why are NFTs so expensive? What gives them value? Many people who are new to NFT technology often ask these questions. To understand why many people pay huge money for NFT projects, let’s consider a few factors that determine their value in the market.
It is common for NFTs to be tied to tangible objects, providing an undeniable right of ownership with each NFT.
In fact, anything can be attached to an NFT to secure the right of ownership, although this does not make the object unique or sought-after. The primary value of such an object would be determined by its practicality, rarity, and the personal satisfaction it brings its users.
The usefulness of an NFT stems from its actual use in the physical or digital world. For example, some NFTs are more than just collectibles because they can be used in games as virtual lands, spells, or characters. Such characteristics give NFTs a value that accumulates over time depending on the popularity of the underlying project. As the community of decentralized game players grows, more of them will be willing to pay significant sums for a unique card.
This factor reflects how rare and hard to find a particular NFT is. Examples of high rarity are a first-of-its-kind piece of art from a famous author in the digital art industry or an NFT created by a celebrity. Another rarity factor is an NFT’s action, such as in a video game. People are attracted to such NFTs because of their intrinsic value as well as the on-chain proof of ownership of such an asset. This gives a sense of exclusivity and determines the premium value of an NFT.
Now that you’ve learned why NFTs are so expensive, it’s time to look at the 5 most expensive NFTs ever created in the crypto industry.
If you’re wondering how much the most expensive NFT is worth, look at the Merge, which literally brought together over 28,000 collectors worldwide. This collection was a brand-new token mechanism that contained secret classes and a unique yield structure.
The Merge was designed with a built-in scarcity mechanism. When the supply of tokens decreases over time, the Merge’s NFT token is transferred and merged with the buyer’s wallet. During the merge process, one token is recreated with each transaction. In the sale, when all 312,686 tokens were merged into one creation, the total amount of revenue exceeded anything ever sold in the NFT world to date.
The most expensive NFT token from the world of the animation movement, American artist M. Winkelman’s Everyday’s: The First 5000 Days sold in 2021 for $69.3 million on the MakersPlace platform.
Everyday’s: The First 5,000 Days collection is the result of 13 years of work by the artist, which is sold as a collage of these works. The author of the token, known as Beeple, began working with tokens in 2007, and in 2021 he created and published new artwork daily to reflect views on his personal and professional growth. Within 5,000 days, the crypto-artist has not missed a single day for a new creation. By the way, Beeple got his own place in the history of the most expensive and, in principle, of all NFTs because the repeated record sales of his tokens opened the doors for digital creators worldwide.
Digital artist Pak’s NFT was sold on Feb. 9, 2022, for 16,593 ETH ($52.7 million), making it one of the most expensive NFTs ever. The proceeds from the sale of the work, titled “The Clock,” will pay for the legal defense of Julian Assange, who faces 18 criminal charges in the United States, including violations of the Espionage Act. “The Clock” counts down the days Assange has been incarcerated. The work was bought by DAO, a decentralized cypherpunk community that supports the WikiLeaks founder.
The generative artwork has seriously pushed the boundaries of NFT innovation. $28.9 million brought one of the most expensive NFT tokens to its creator, Beeple, at the end of 2021. When the idea to create “Human One NFT” emerged, the plan was to create a sculpture that reflected the idea that art need not be a finite object, which triggered the kinetic video structure.
Beeple’s “Human One NFT” is a dynamic sculpture with LED screens inside that tells the story of the universe’s first human being. By the way, the initial estimated value of this NFT from the list of the most expensive tokens was $15 million.
NFT CryptoPunk #5822 is a token with an image of an alien punk wearing a bandana. There are a total of 10,000 images in the CryptoPunks collection, but only 9 of them show aliens. In addition, there are 333 bandana tokens, so CryptoPunk #8522 is really rare.
Crypto Punk is one of NFT’s most valuable collections. NFT’s CryptoPunks collection was created in 2017 by Larva Labs. It originally consisted of 10,000 uniquely generated pixel images in the Ethereum blockchain. Receiving minted punks was available for free to anyone with an Ethereum wallet. CryptoPunks are known as one of the earliest NFT projects. They continue to enjoy great popularity.
In the fall of 2021, NFT CryptoPunk #5822, a token featuring an alien punk wearing a bandana, was sold for a record 8,000 ETH, which at the ETH exchange rate at the time of sale was over $23,700,000.
Will this type of digital art increase in value? Will the most expensive NFTs stay at their proper level of value? It’s reasonable to expect that the most expensive NFTs will remain in their positions, joining other offerings. There’s no denying that the NFT marketplace is booming — in the previous year alone, we saw a spike in NFT sales, some of which were worth millions of dollars. This trend shows no signs of slowing down; more and more people are using NFT for digital art, and the industry has begun to take interest from large companies and world-renowned brands.
The market continues to grow and develop, so now it is becoming increasingly difficult to ignore the potential of this new asset class. Incidentally, NFT sales represented only 1.6% of all global art sales in 2021, but digital art is not going anywhere, and its value will only increase.