The financial sector has existed in a period of profound transformation and growth for some years now. The changes are unstoppable, from the digitalization of banking to the emergence of neo banks. Even currency itself has gone digital, with cryptocurrency emerging as one of the trendiest assets in finance.
Speaking of which: enter the “NFT”, the newest digital asset, which exploded over the course of 2021. The term even earned the honor of becoming the word of the year for the British Collins dictionary. Considering its staggering 11,000% growth in the last year, it’s safe to say that understanding the NFT is paramount in today’s digital landscape.
What exactly are NFTs?
The acronym itself stands for “Non-Fungible Token”. The British Collins defines it as a digital certificate that recognizes ownership of a unique asset, say a piece of art or a collectible. These NFTs use blockchain technology similarly to cryptocurrency, ensuring each token’s uniqueness and singular value.
Although the first-known NFT was created in 2014, it was in March of 2021 when the concept breached the mainstream consciousness. This happened when the digital art piece “Everyday’s – The First 5,000 Days”, a JPG file, was auctioned off for over $69 million. Since then, the NFT has grown and expanded its footprint into memes, stickers, and across a number of different market slices.
Of course, as with any unique asset, the name of the game in NFT’s in investment. What makes an NFT different from a physical work of art, however, is ease and convenience of sale and mechanical transfer. In fact, NFTs have proven to be incredible stores of value and are supported by a large number of trading platforms, again, similarly to the crypto market.
NFTs, cryptocurrencies or metaverses: major challenges for the financial sector
NFTs have joined cryptocurrencies and the concept of “metaverses” at the forefront of the digital marketing landscape. As such, the traditional banking system is being forced to ask pertinent questions about its future for one of the first times since the development of the computer. Is it wise to adopt new digital assets to meet customer needs? How do they take advantage of these trends? Which new development would be the best to bet on?
Regardless of the answer to any of these questions, the operant word of the day is flexibility. User adoption time is shrinking, and technology is constantly offering more portfolio variety. Thus the need for any company to embrace change in culture and adaptations to their business model to account for survival and continual growth.