Hi y’all —
Even if you never quite learned what they are, you have to admit they were an absolute phenomenon a few years ago.
It seemed like every celebrity had an NFT: As of November 2021, Gary Vaynerchuk had put $32.6 million into 59 CryptoPunks. The following January, Justin Bieber purchased a Bored Ape for $1.29 million. Mark Cuban created a digital art gallery specifically to display his NFTs, and Liam Payne started a separate Twitter account for NFT discussion. Even Dolly Parton got on board.
NFTs were inescapable — and then, all of a sudden, they weren’t. I read a report the other day claiming that 95% of NFTs are now worthless.
Record scratch. Whatever happened to NFTs?
Bina Ramamurthy, a professor at the University of Buffalo and author of Blockchain in Action, agreed to help demystify the rise and fall of NFTs. She tells me the bubble burst largely due to supply and demand.
Though the first NFT was invented in 2014, they didn’t really take off until after the GameStop short squeeze in 2021, when much of the U.S. was in pandemic-induced lockdown. Bitcoin hit a new high, and Christie’s sold an NFT piece by digital artist Beeple for $69 million. Excited creators learned how easy it was to make their own NFTs, and soon “there was a deluge,” Ramamurthy says.
It's easy to see why. Especially in the collectibles space, NFTs offered a ton of perks and relatively few drawbacks (among them volatile pricing and environmental impact).
And, crucially, the potential financial kickback was huge, says Alex Rawitz, COO of Digital Infrastructure Inc. and cofounder of DIMO.
“The key business model for all the people creating these NFTs was, in the few clicks of a button, create a whole ton of images and sell them to everyone for 10 bucks to 100 bucks to 1,000 bucks,” he adds. “You can make millions of dollars pretty quickly.”
For a while, as supply exploded, so did demand. Because NFTs are unique ownership tokens that are linked to the blockchain, buyers generally had to use crypto in order to buy them. Most people who had crypto at the time tended to be wealthy early adopters with money to burn, inflating prices, according to Isaac Patka, co-founder of Shield3 and GLITCH residency NFT artist.