Grandstand. Non-fungible tokens, or NFTs (“non-fungible tokens”), have been around for several years, but interest in them has grown rapidly with several high-profile sales in 2021, including one at Christie’s for $69.3 million (approx. 63.2 million euros), from NFT Every day. First 5000 daysA digital artwork by American artist Beeple.
Despite concerns about the environmental impact of the underlying technology, NFT sales hit $2.5 billion in the first half of 2021, an all-time high.
But why are some NFTs sold at such high prices? This question is the focus of a new study funded by the Turing Institute that we recently published Scientific report – The first comprehensive and quantitative overview of the NFT market.
First, let’s review its basics.
An NFT is a unique unit of data that can be used to certify ownership of a digital asset. NFTs are created using blockchain technology – typically the Ethereum blockchain – and can represent any digital object, including photos, artwork, memes, music, digital collectibles, and even tweets.
500,000 buyers and sellers
There are many marketplaces for NFTs, where sellers offer either an auction or a buy-it-now option. The novelty of NFTs compared to “physical” works of art is that digital assets can theoretically be reproduced and/or downloaded an unlimited number of times, hence “owned” by anyone.
So the idea behind NFT is to determine, among many copies, which one is original, and who it is for.
To map the evolution of the NFT market, we looked at a dataset consisting of 4.7 million NFTs traded by more than 500,000 buyers and sellers between June 23, 2017 and April 27, 2021. Articles included digital art as well as other collectibles such as digital maps. and items used in video games (such as weapons and clothing).
NFT prices analyzed showed great variability, with only the top 1% of items trading over $1,500, with 75% of items selling for less than $15.
To find out what determines the selling price of an NFT, we developed a “machine learning” model taking into account three factors: first, visual characteristics; Then the previous sales of related NFTs, and finally the popularity of buyers and sellers.
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