Crypto Craze: Bitcoin’s Accidental Birth of a New Breed of NFTs

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© Reuters. FILE PHOTO: A sign saying “NFT FOR SALE HERE,” is seen in a small storefront that hosts digital art collecting platform Neon’s first in-person non-fungible token (NFT) vending machine in Lower Manhattan’s financial district of New York City, U.S., March 1

By Lisa Pauline Mattackal and Medha Singh

Cryptocurrencies have always been a strange phenomenon, and now they have become even weirder. A new type of non-fungible token (NFT) has emerged from the world of bitcoin, and it is selling for millions of dollars.

In early 2023, the bitcoin network underwent a series of upgrades that allowed each satoshi – the smallest unit of cryptocurrency – to store a few megabytes of data, from text and images to audio and video. This was an unexpected side-effect of the upgrades, and now crypto enthusiasts have embedded a total of 385,000 of these “inscriptions” into bitcoin since January.

One of the most successful of these NFTs is the TwelveFold collection, which consists of 300 3D objects rendered in a square grid. It was auctioned off for $16.5 million, and other top-selling pieces have sold for up to $273,010. Galaxy Digital Research forecasts that the market for bitcoin NFTs could grow to $4.5 billion by 2025.

However, there is still some way to go before the market reaches its full potential. As of March 2021, overall sales of NFTs (excluding Ordinals) were around $1 billion, a fraction of the $5 billion seen in January 2020. The lack of user-friendly marketplaces and the high transaction costs have also been a barrier to entry.

Not everyone is pleased with the proliferation of NFTs, particularly those who think that bitcoin should solely be used for payments. The average fee to make a bitcoin transaction has spiked to $1.981 and the time to confirm a transaction has also increased.

Despite the criticism, bitcoin NFTs have become a popular way of trading and are currently involved in about 7% of the total number of bitcoin blockchain transactions, according to Glassnode data.

GRAPHIC: Transactions aplenty- https://www.reuters.com/graphics/FINTECH-CRYPTO/WEEKLY/klvygnxeavg/chart.png

‘KIND OF FRIVOLOUS’

The surge of activity has been met with some resistance, as some purists believe that cryptocurrencies should only be used for financial transactions. They argue that the high costs and slow transaction times are pricing out everyday users.

However, the bitcoin NFT market continues to grow and could become even bigger in the years to come. Despite the various challenges, the blockchain technology has enabled a whole new type of digital asset, and it looks here to stay.

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