Introduction

Ethereum-based NFTs experienced a frenzy in the 2021 bull market, with the floor price of the popular Bored Ape Yacht Club collection (BAYC) reaching an all-time high of $420k per NFT. Skeptics were left baffled at the apparent lack of utility and inherent value in these unique digital tokens, which went for prices that could buy houses despite the ability of others to “right-click save” the same image. It wasn’t just newly monied crypto natives paying outrageous prices for profile pictures; buyers ranged from soccer superstar Neymar Jr. to popstars Justin Bieber and Post Malone.

Digital Status Symbols

What was the appeal that led to what could be considered crypto’s first mainstream breakthrough? Nonfungible tokens (NFTs) are unique digital tokens registered on a blockchain. These tokens are irreplaceable, non-duplicable, and can only be traded and sold by the person who holds them in their wallet. Unlike common cryptocurrencies or traditional currencies, these unique assets are not interchangeable due to their unique value derived from their specific characteristics and qualities. While profile pictures have emerged as the most common use case, NFT tokens can represent any type of data with unique attributes and ownership rights verified on-ch...