NFT gaining value in the market.

Everydays: The First 5000 Days, a work of art, sold for $69 million at Christie's Auction House in March 2021. Eight-figure art purchases aren't uncommon, but this one drew a lot of attention because it was sold as a non-fungible token (NFT) — an electronic record corresponding to a picture that exists exclusively in the digital world.

To put it another way, someone spent over $70 million for an image on the internet.

Since then, NFTs have begun to infiltrate popular culture in a variety of ways. Saturday Night Live parodied them, and high-profile celebrities like rapper Snoop Dogg and NBA great Stephen Curry endorsed them. Each week, public marketplaces like Foundation, OpenSea, and Nifty Gateway, as well as custom-built applications like NBA Top Shot and VeVe, sell hundreds of millions of dollars in NFT.

However, many people are perplexed as to how internet tokens could be worth anything at all, especially when many of them simply indicate "ownership" of an online image or animation that you could theoretically download for free.

It's easy to see why NFTs elicit both enthusiasm and scepticism: they're a completely new asset class, and new asset classes don't come around very often. But what determines the value of an asset that is essentially a digital token that individuals may trade? To fully comprehend NFTs, we must first consider what they are and the types of market opportunities they open up. And after we've figured that out, we'll be able to figure out how to construct businesses around them.