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63-429: Google Preferred was announced at Google's 2014 Brandcast on April 30 in response to complaints from marketers that it was difficult to reach top-tier channels. It was also introduced in an attempt by YouTube to increase artificial scarcity and ad revenue. In March 2015, after Google Preferred proved highly successful in its first year, YouTube decided to keep using Google Preferred. They implemented some minor changes to

126-510: A Ponzi scheme . At their peak, the three biggest NFT platforms were Ethereum , Solana , and Cardano . In 2022, the NFT market collapsed; a May 2022 estimate was that the number of sales was down over 90% compared to 2021. An NFT is a data file, stored on a type of digital ledger called a blockchain, which can be sold and traded. The NFT can be associated with a particular asset – digital or physical – such as an image, art, music, or recording of

189-469: A cigarette lighter . They uploaded (known as "minting" in the NFT scene) and sold the video as an NFT. The person who destroyed the artwork, who called themselves "Burnt Banksy", described the act as a way to transfer a physical work of art to the NFT space. American curator and art historian Tina Rivers Ryan , who specializes in digital works, said that art museums are widely not convinced that NFTs have "lasting cultural relevance." Ryan compares NFTs to

252-470: A limited edition , and can extract a monopoly price. This succeeds only to the degree that substitutions are unavailable or less desirable or the identity of the producer is considered important. For example, there is only one original Mona Lisa , which is very expensive, even though the work is out of copyright so that copies and reproductions are available at low cost. A luxury supercar might be manufactured in artificially low quantities to take advantage of

315-483: A speculative asset . The NFT buying surge was called an economic bubble by experts, who also compared it to the Dot-com bubble . In March 2021 Mike Winkelmann called NFTs an "irrational exuberance bubble". By mid-April 2021, demand subsided, causing prices to fall significantly. Financial theorist William J. Bernstein compared the NFT market to 17th-century tulip mania , saying any speculative bubble requires

378-428: A business had a strong need for a voice recognition program, they would pay to have the program developed to suit their needs. The business would profit not on the program, but on the resulting boost in efficiency enabled by the program. The subsequent abundance of the program would lower operating costs for the developer as well as other businesses using the new program. Lower costs for businesses result in lower prices in

441-500: A buying frenzy. Within 24 hours, all tiles of the current version and a prior version, each hardcoded to 1 ETH ( US$ 0.43 at the time of launch), were sold for a total of US$ 1.4 million. In 2016, Rare Pepes a "semi-fungible" NFT project centered around the Pepe the Frog meme involving a collective of artists contributing their works into a curated directory, emerged on Bitcoin through

504-864: A capitalist system or mixed economy is known as creating artificial scarcity. Artificial scarcity essentially describes situations where the producers or owners of a good restrict its availability to others beyond what is strictly necessary. Ideas and information are prime examples of unnecessarily scarce products given artificial scarcity as illustrated in the following quote: If you have an apple, and I have an apple, and we exchange apples, then you and I will still each have one apple. But if you have an idea, and I have an idea, and we exchange these ideas, then each of us will have two ideas. Even though ideas as illustrated above can be shared with less constraints than physical goods, they are often treated as unique, scarce, inventions or creative works , and thus allotted protection as intellectual properties in order to allow

567-493: A digital file asset. Ownership of an NFT is often associated with a license to use such a linked digital asset but generally does not confer the copyright to the buyer. Some agreements only grant a license for personal, non-commercial use, while other licenses also allow commercial use of the underlying digital asset. This kind of decentralized intellectual copyright poses an alternative to established forms of safeguarding copyright controlled by state institutions and middlemen within

630-466: A guaranteed price, and even deliberate destruction. This is typically done in agricultural markets to aid farmers. Examples: Restrictions on immigration artificially reduce the supply of labor . Artificial scarcity is said to be necessary to promote the development of goods or prevent source depletion . In the example of digital information, it may be inexpensive to copy information almost infinitely, but it may require significant investment to develop

693-485: A new kind of market for artworks that deviated from traditional gatekeeping norms and ushered in a different kind of collector. Artist Beeple sold an ERC-721 NFT of his composite artwork known as Everydays: The First 5000 Days at Christie's for $ 69 million and was the first instance of a legacy arthouse dealing in NFTs. The NFT market experienced rapid growth during 2020, with its value tripling to US$ 250 million. In

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756-421: A particular marketplace. The inefficiency associated with artificial scarcity is formally known as a deadweight loss . In a capitalist system , an enterprise is judged to be successful and efficient if it is profitable. To obtain maximum profits, producers may restrict production rather than ensure the maximum utilisation of resources. This strategy of restricting production by firms in order to obtain profits in

819-763: A partnership to simplify the verification and security of metadata for digital content, including NFTs. In 2021, a cryptocurrency exchange Binance , launched its NFT marketplace. In 2022, eToro Art by eToro was founded, focusing on supporting NFT collections and emerging creators. Sotheby's and Christie's  auction houses showcase artworks associated with the respective NFTs both in virtual galleries and physical screens, monitors, and TVs. Mars House, an architectural NFT created in May 2020 by artist Krista Kim , sold in 2021 for 288 Ether (ETH) — at that time equivalent to US$ 524,558. NFTs can represent in-game assets . Some commentators describe these as being controlled "by

882-650: A protocol known as Counterparty (which had been created in 2014 and used to create other assets). In 2017, several NFT projects emerged on Ethereum that utilized a "fungible" token standard known as ERC-20. Curio Cards in May of that year is credited with being Ethereum's first art NFT project using the fungible standard and features artwork in the shape of a card among a variety of image types including satirized corporate logos The generative art project of 10,000 pixelated characters known as CryptoPunks emerged soon after in June and would later establish itself as one of

945-415: A reference implementation. ERC-721 provides core methods that allow tracking the owner of a unique identifier, as well as a way for the owner to transfer the asset to others. Another standard, ERC-1155, offers "semi-fungibility" whereby a token represents a class of interchangeable assets. Because the contents of NFTs are publicly accessible, anybody can easily copy a file referenced by an NFT. Furthermore,

1008-433: A sports event. It may confer licensing rights to use the asset for a specified purpose. An NFT (and, if applicable, the associated license to use, copy, or display the underlying asset) can be traded and sold on digital markets. However, the extralegal nature of NFT trading usually results in an informal exchange of ownership over the asset that has no legal basis for enforcement, and so often confers little more than use as

1071-430: A status symbol. NFTs function like cryptographic tokens, but unlike cryptocurrencies, NFTs are not usually mutually interchangeable, so they are not fungible . A non-fungible token contains data links, for example which point to details about where the associated art is stored, that can be affected by link rot . An NFT solely represents a proof of ownership of a blockchain record and does not necessarily imply that

1134-538: A technological advance for people to "get excited about", with part of that enthusiasm coming from the extreme predictions being made about the product. For regulatory policymakers, NFTs have exacerbated challenges such as speculation, fraud, and high volatility. NFTs, as with other blockchain securities and with traditional art sales, can potentially be used for money laundering . NFTs can be used for wash trading by creating several wallets for one individual, generating several fictitious sales and consequently selling

1197-447: Is a monopoly , where a single producer has complete control over supply and can extract a monopoly price . An oligopoly - a small number of producers - can also sustain an undersupply if no producers attempt to gain market share with lower prices at higher volume. Lack of supply competition can arise in many different ways: Some products (e.g. works of art, non-fungible tokens , expensive cars) are manufactured as one-of-a-kind or in

1260-407: Is the common rationale behind open-source software . Social liberals , socialists and anarchists argue that artificial scarcity is beneficial for the owner, but unfavourable towards the consumer, as it enables the owner to capitalise off ideas and products that are otherwise not property in the physical sense. Socialists extend their argument to include "socially wasteful production" such as

1323-669: The United States Treasury assessed that there was "some evidence of money laundering risk in the high-value art market", including through "the emerging digital art market, such as the use of non-fungible tokens (NFTs)". The study considered how NFT transactions may be a simpler option for laundering money through art by avoiding the transportation or insurance complications in trading physical art. Several NFT exchanges were labeled as virtual asset service providers that may be subject to Financial Crimes Enforcement Network regulations. In March 2022, two people were charged for

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1386-952: The net art fad before the dot-com bubble . In July 2022, after the controversial sale of Michelangelo 's Doni Tondo in Italy, the sale of NFT reproductions of famous artworks was prohibited in Italy. Given the complexity and lack of regulation of the matter, the Ministry of Culture of Italy temporarily requested that its institutions refrain from signing contracts involving NFTs. No centralized means of authentication exists to prevent stolen and counterfeit digital works from being sold as NFTs, although auction houses like Sotheby's , Christie's , and various museums and galleries worldwide started collaborations and partnerships with digital artists such as Refik Anadol , Dangiuz and Sarah Zucker . NFTs associated with digital artworks could be sold and bought via NFT platforms. OpenSea , launched in 2017,

1449-459: The ERC-721 draft, the word deed was given consideration among other alternatives including distinguishable asset, title, token, asset, equity, ticket. Ultimately, through Entriken's initiative under the moniker "Fulldecent," a vote was held during the paper's drafting phase to decide which word would be used in the published version and "NFT" was chosen by the stakeholders. The term "NFT" and

1512-487: The art world thinks they have acquired. They definitely do not own the copyright to the underlying work unless it is explicitly transferred." Certain NFT projects, such as Bored Apes , explicitly assign intellectual property rights of individual images to their respective owners. The NFT collection CryptoPunks was a project that initially prohibited owners of its NFTs from using the associated digital artwork for commercial use, but later allowed such use upon acquisition by

1575-410: The awareness of the ERC-721 standard received significant exposure and adopted use through the popularity of CryptoKitties in 2017. While using the standard, CryptoKitties earned the recognition of being the first mainstream NFT dApp; the game's usage was significant enough to have overwhelmed Ethereum's processing power at the time. During the height of the breakout success of CryptoKitties and

1638-527: The blockchain and can be transferred by the owner, allowing NFTs to be sold and traded. Initially pitched as a new class of investment asset, by September 2023, one report claimed that over 95% of NFT collections had zero monetary value . NFTs can be created by anybody and require few or no coding skills to create. NFTs typically contain references to digital files such as artworks, photos, videos, and audio. Because NFTs are uniquely identifiable, they differ from cryptocurrencies , which are fungible (hence

1701-680: The collection's parent company. The first known "NFT", Quantum , was created by Kevin McCoy and Anil Dash in May 2014. It consists of a video clip made by McCoy's wife, Jennifer. McCoy registered the video on the Namecoin blockchain and sold it to Dash for $ 4, during a live presentation for the Seven on Seven conferences at the New Museum in New York City. McCoy and Dash referred to

1764-422: The competitive free market. Lower prices from suppliers would also raise profits for the original developer. In abundance, businesses would continue to pay to improve the program to best suit their own needs, and increase profits. Over time, the original business makes a return on investment, and the final consumer has access to a program that suits their needs better than any one program developer can predict. This

1827-548: The development of security firms; socialists argue that the allocation of resources to these activities is not socially useful. Some socialists argue that not only artificial scarcity but even the doctrine of scarcity itself is a creation of the capitalist system because any kind of property was considered a burden for the nomadic lifestyle when civilisation was in the hunter-gatherer stage. Along with some free-market libertarians and anarchists, they will argue for sharing economies and post-scarcity economics , both questioning

1890-417: The emergence of ERC-721 tokens in 2017, an NFT marketplace called OpenSea emerged to capitalize off of the new non-fungible token standard. It positioned itself early in the NFT market landscape and grew to a $ 1.4 billion market cap in 2021 during the then-ongoing NFT boom. In 2021, ArtReview's Power 100 ranked ERC-721 at the #1 spot, praising it as "the most powerful art entity in the world" for creating

1953-470: The execution of a million-dollar NFT scheme through wire fraud . The European Commission announced in July 2022 that it was planning to draw up regulations to combat money laundering by 2024. Several blockchains have added support for NFTs since Ethereum created its ERC-721 standard. ERC-721 is an "inheritable" smart contract standard, which means that developers can create contracts by copying from

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2016-684: The financial markets, the Journal said "NFTs are among the most speculative." In December 2022, a programmer named Casey Rodarmor introduced a new way to add NFTs to the Bitcoin blockchain called "ordinals". By February 2023, the popularity of ordinals had led to an increase in bitcoin's payment fees and may have also partially contributed to an increase in bitcoin's price. A September 2023 report from cryptocurrency gambling website dappGambl claimed 95% of NFTs had fallen to zero monetary value. NFTs have been used to exchange digital tokens that link to

2079-486: The first three months of 2021, more than US$ 200 million were spent on NFTs. In the early months of 2021, interest in NFTs increased after a number of high-profile sales and art auctions. In May 2022, The Wall Street Journal reported that the NFT market was "collapsing". Daily sales of NFT tokens had declined 92% from September 2021, and the number of active wallets in the NFT market fell 88% from November 2021. While rising interest rates had impacted risky bets across

2142-438: The form of NFTs. Artists involved in the entertainment-industry can seek royalties through NFTs. So far, NFTs have often been used in both the music- as well as the film-industry. By February 2021, NFTs accounted for US$ 25 million of revenue generated through the sale of artwork and songs as NFTs. On February 28, 2021, electronic dance musician 3lau sold a collection of 33 NFTs for a total of US$ 11.7 million to commemorate

2205-421: The formally published version of the standard in 2018. While experiments around non-fungibility have existed on blockchains since as early as 2012 with Colored Coins on Bitcoin, a community-driven paper called ERC-721: Non-Fungible Token Standard was published in 2018 under the initiative of civic hacker and lead author William Entriken and is recognized as pioneering the foundation for NFTs and enabling

2268-482: The growth of the wider eco-system. It introduced the formalization and defining of the term Non-Fungible Token "NFT" in blockchain nomenclature by establishing a standard for smart contracts known as "ERC-721" whose tokens would have unique attributes and ownership details, ensuring no two tokens are alike. The creation of derivative standards followed from its influence on Ethereum (like ERC-1155 enabling semi-fungibility) and other blockchains. Its versatility enabled

2331-429: The information in the first place. In the example of the pharmaceutical industry , large scale production of most drugs is inexpensive, but developing safe and effective drugs can be extremely expensive. Typically, drug companies have profit margins that extract much more excess profit than necessary to repay their initial investment. It is argued that this high payoff attracts more investment and labour talent, increasing

2394-489: The most commercially successful NFT projects. In December, a clipart based collection featuring images of rocks called EtherRock emerged. in November 2017, the widely acclaimed blockchain game on Ethereum known as CryptoKitties launched and is credited with pioneering what is considered to be the first bona fide non-fungible token standard, known as ERC-721. It used an early version of ERC-721 that differed from

2457-428: The name non-fungible token). Proponents claim that NFTs provide a public certificate of authenticity or proof of ownership , but the legal rights conveyed by an NFT can be uncertain. The ownership of an NFT as defined by the blockchain has no inherent legal meaning and does not necessarily grant copyright , intellectual property rights, or other legal rights over its associated digital file. An NFT does not restrict

2520-572: The need for a more advertiser-friendly product. In May 2020, Google Preferred was rebranded as "YouTube Select", with the former iteration to be phased out by the end of the year. This Google -related article is a stub . You can help Misplaced Pages by expanding it . Artificial scarcity Artificial scarcity is scarcity of items despite the technology for production or the sufficient capacity for sharing . The most common causes are monopoly pricing structures, such as those enabled by laws that restrict competition or by high fixed costs in

2583-415: The original authors to potentially profit from their own work. Robust competition among suppliers tends to bring the consumer price close to the marginal cost of production , plus a profit that makes entering the market worthwhile compared to other opportunities. Circumstances with insufficient competition can lead to suppliers exercising enough market power to constrict supply. The clearest example

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2646-410: The owner possesses intellectual property rights to the digital asset the NFT purports to represent. Someone may sell an NFT that represents their work, but the buyer will not necessarily receive copyright to that work, and the seller may not be prohibited from creating additional NFT copies of the same work. According to legal scholar Rebecca Tushnet , "In one sense, the purchaser acquires whatever

2709-414: The ownership of an NFT on the blockchain does not inherently convey legally enforceable intellectual property rights to the file. It has become well known that an NFT image can be copied or saved from a web browser by using a right click menu to download the referenced image. NFT supporters disparage this duplication of NFT artwork as a "right-clicker mentality". One collector quoted by Vice compared

2772-452: The pace of drug development . The expiry of patents works to limit the period of exclusive rights to sell a new drug. After a time of profiting from legally enforced artificial scarcity, the patent expires, and other companies can make generic versions, and compete on price in a free market. Some classical liberals and libertarians oppose artificial scarcity on the grounds that their lack of physical scarcity means they are not subject to

2835-493: The pioneering of numerous use cases, including digital artwork, deeds to physical items, real estate (including virtual), access passes, and game assets. Ultimately, the emergence of ERC-721 is recognized for having fundamentally changed the landscape of digital verification, authentication, and ownership. The term NFT, prior to the blockchain game CryptoKitties' adoption of ERC-721, is not known to have been used for earlier projects. Through discussion among stakeholders for

2898-516: The production of goods which are seen as "status" goods (e.g. diamonds or expensive cars). This sort of production leads to a situation of artificial scarcity of socially useful goods because a large part of society's resources are being diverted to the production of these goods. For example, capitalism has led to the growth of money-based activities like banking-retailing services, remedial measures to deal with trade union issues, and other such activities to protect capitalism such as weapons research and

2961-498: The program, however, such as reducing the number of categories from fourteen to twelve. The program was also expanded to include other countries besides the United States , including Canada . In January 2018, stricter requirements were set, under which videos eligible for the program would be "manually curated", and only videos that meet YouTube's guidelines for advertiser-friendly content would be eligible. The changes came in

3024-468: The reputation of the brand and the difficulty other suppliers have in replicating the design, even if not protected by intellectual property rights. Non-manufacturers can create artificial scarcity and extract monopoly prices (at least temporarily) by hoarding or cornering the market on a particular commodity. Governments use various types of price supports that create artificial scarcity, including payments for non-production, government purchasing at

3087-592: The respective NFT to a third party. According to a report by Chainalysis these types of wash trades are becoming popular among money launderers because of the largely anonymous nature of transactions on NFT marketplaces. Looksrare , created in early 2022, came to be known for the large sums generated through the sale of NFTs in its earliest days, amounting to US$ 400,000,000 a day. These large sums were generated in large part through wash trading. The Royal United Services Institute said that any risks in relation to money laundering through NFTs could be mitigated through

3150-461: The respective events or artists performing there to receive royalties on the resale of each ticket. NFTs have been proposed for purposes related to scientific and medical purposes. Suggestions include turning patient data into NFTs, tracking supply chains and minting patents as NFTs. The monetary aspect of the sale of NFTs has been used by academic institutions to finance research projects. NFTs representing digital collectables and artworks are

3213-507: The respective industry. Digital art is a common use case for NFTs. High-profile auctions of NFTs linked to digital art have received considerable public attention; the first such major house auction took place at Christie's in 2021. The work entitled Merge by artist Pak was the most expensive NFT, with an auction price of US$ 91.8 million and Everydays: the First 5000 Days , by artist Mike Winkelmann (known professionally as Beeple)

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3276-416: The same rationale behind material forms of private property , and that most instances of artificial scarcity, such as intellectual property , are creations of the state that limit the rights of the individual. An economic liberal argument against artificial scarcity is that, in the absence of artificial scarcity, businesses and individuals would create tools based on their own need (demand). For example, if

3339-401: The scarcity of physical and intellectual goods as currently imposed by artificial cultural, bureaucratic, or economic constraints. Non-fungible token A non-fungible token ( NFT ) is a unique digital identifier that is recorded on a blockchain and is used to certify ownership and authenticity. It cannot be copied, substituted, or subdivided. The ownership of an NFT is recorded in

3402-493: The second most expensive at US$ 69.3 million in 2021. Some NFT collections, including Bored Apes , EtherRocks , and CryptoPunks , are examples of generative art , where many different images are created by assembling a selection of simple picture components in different combinations. In March 2021, the blockchain company Injective Protocol bought a $ 95,000 original screen print entitled Morons (White) from English graffiti artist Banksy and filmed somebody burning it with

3465-477: The sharing or copying of its associated digital file and does not prevent the creation of NFTs that reference identical files. NFT trading increased from US$ 82 million in 2020 to US$ 17 billion in 2021. NFTs have been used as speculative investments and have drawn criticism for the energy cost and carbon footprint associated with some types of blockchain, as well as their use in art scams . The NFT market has also been compared to an economic bubble or

3528-641: The technology as "monetized graphics". This explicitly linked a non-fungible, tradable blockchain marker to a work of art, via on-chain metadata (enabled by Namecoin). In October 2015, the first NFT project, Etheria, was launched and demonstrated at DEVCON 1 in London, Ethereum's first developer conference, three months after the launch of the Ethereum blockchain. Most of Etheria's 457 purchasable and tradable hexagonal tiles went unsold for more than five years until March 13, 2021, when renewed interest in NFTs sparked

3591-648: The three-year anniversary of his Ultraviolet album. On March 3, 2021, an NFT was made to promote the Kings of Leon album When You See Yourself . Other musicians who have used NFTs include American rapper Lil Pump , Grimes , visual artist Shepard Fairey in collaboration with record producer Mike Dean , and rapper Eminem . A paper presented at the 40th International Conference on Information Systems in Munich in 2019 suggested using NFTs as tickets for different types of events. This would enable organizers of

3654-634: The use of " KYC best practices, strong cyber security measures and a stolen art registry (...) without restricting the growth of this new market". Auction platforms for NFTs may face regulatory pressure to comply with anti-money laundering legislation. Gou Wenjun, the director of a monitoring centre for the People's Bank of China , said that NFTs could "easily become money-laundering tools". He pointed to unlawful exploitation of cryptographic technologies and said that illicit actors often presented themselves as innovators in financial technology. A 2022 study from

3717-440: The user" instead of the game developer if they can be traded on third-party marketplaces without permission from the game developer. Their reception from game developers, though, has been generally mixed, with some like Ubisoft embracing the technology but Valve and Microsoft formally prohibiting them. NFTs have been proposed for use within the film-industry as a way to tokenize movie-scenes and sell them as collectibles in

3780-434: The value of a purchased NFT (in contrast to an unpurchased copy of the underlying asset) to that of a status symbol "to show off that they can afford to pay that much". The "right-clicker mentality" phrase spread virally after its introduction, particularly among those who were critical of the NFT marketplace and who appropriated the term to flaunt their ability to capture digital art backed by NFT with ease. This criticism

3843-415: The wake of controversies affecting YouTube's advertising platform in 2017, including the appearance of ads on content deemed objectionable to advertisers, as well as a recent controversy surrounding Logan Paul 's "suicide forest" video (which caused him to be removed from the program). In August 2018, a report was published on fake video views which contributed to the concerns around YouTube's reputation and

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3906-566: Was one of the first marketplaces to host various types of NFTs. In July 2019, the National Basketball Association , the NBA Players Association and Dapper Labs, the creator of CryptoKitties , started a joint venture NBA Top Shot for basketball fans that let users buy NFTs of historic moments in basketball. In 2020, Rarible was found, allowing multiple assets. In 2021, Rarible and Adobe formed

3969-417: Was promoted by Australian programmer Geoffrey Huntley who created "The NFT Bay", modeled after The Pirate Bay . The NFT Bay advertised a torrent file purported to contain 19 terabytes of digital art NFT images. Huntley compared his work to an art project from Pauline Pantsdown and hoped the site would help educate users on what NFTs are and are not. NFTs that represent digital art generally do not store

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