Nonfungible tokens, or NFTs, have gained significant traction in the crypto space in recent months, with some tokens selling for millions of dollars. Even though the current excitement over NFTs will eventually simmer down, the concept will live on, according to the CEO and founder of MyEtherWallet, Kosala Hemachandra.
“NFT is currently a hot topic, but I’m sure the hype around it will soon die down,” Hemachandra told. “Similarly, ERC-20-based tokens were a hot topic in 2017 because of ICOs, now it’s not news to anyone, as people use those tokens daily.”
All non-fungible tokens are provably unique, and therefore distinct in value. They can not be interchanged one-for-one with another asset of their kind, because each NFT contains verifiably distinct characteristics. These differences affect each token’s rarity (and sometimes their utility within an ecosystem), even if they appear to be superficially similar at first glance.
“The value of an NFT is purely based on how much a person who is interested in it is willing to pay,” Hemachandra said, adding:
“If someone is really interested in an NFT sold in 2021, I’m sure that person will pay any amount to buy it in 2030. That’s why we cannot say that 2017 cryptokitties aren’t valuable now. I’m pretty sure even now some people’d love to get hold of some of those unique items for a higher price if the current owner is willing to sell.”
CryptoKitties, the first functional NFT implementation, were notably popular in the crypto space back in 2017.
The NFT scene also resembles initial coin offerings, or ICOs, in 2017, according to Nadav Hollander, co-founder of Dharma. “NFTs feel like they’re going to play out a lot like ICOs — 6-9 months of increasingly high-value and nauseatingly cynical sales, followed by a multi-year crash,” he tweeted on Feb. 24.
Hemachandra sees big potential for the NFT niche, although he questioned the rationale behind the market’s current hype. “Is it the ownership or the status of ownership? Right now the appeal of NFT’s is the status of owning one,” he said, adding:
“NFTs are hot in the same way lambo’s are hot to bitcoin purists. I think this current version of non-fungible tokens will continue to evolve into bigger and broader use cases. Things like real estate and proof-of-ownership of tangible property; wherever NFTs can help execute legal actions. That is when things will start to get really interesting.”