Non-fungible tokens (NFTs) exploded in 2021 and brought cryptocurrency and blockchain technology into the public consciousness. NFTs are essentially tokens on a blockchain like Ethereum (ETH -0.20%) or Solana (SOL 2.69%) that represent ownership of a unique asset. These assets can be anything from a piece of artwork to a character in a play-to-earn (P2E) game or even a plot of digital real estate in the metaverse.
People often ask why NFTs have value or staying power. My answer is that just as the lines between our digital lives and physical lives continue to blur, the lines between physical and digital artwork and memorabilia will similarly fade. In my view, NFTs can also be viewed as a 'status symbol' in that they have cachet and can convey prestige or status to the owner. This is something humans have been doing since ancient times. This isn't to say that all NFTs are worthy of investment -- like any type of collectible or artwork, some projects and pieces will have more staying power than others. Prominent artists like Dmitri Cherniak and Tyler Hobbs have created projects like Ringers and Fidenza as NFTs, indicating that the worlds of traditional art and NFTs are increasingly blending.
Blockchains have enabled NFTs because they have facilitated the possibility of exchanging them almost instantaneously and because they give the owners instant provenance; there is a public record of the authenticity of the NFT, who owns it, and the details of all of the transactions involving it. Investors who are interested in NFTs can start looking for them and buying them on exchanges like OpenSea and Magic Eden. Here are my top three blockchains for buying and selling NFTs.
Ethereum is the most established blockchain for NFTs. This is how they came into prominence and the public consciousness last year. Whether it's Bored Apes Yacht Club or Cryptopunks, there are some huge NFT projects on Ethereum, and no other blockchain can compete with it yet in terms of sales in the hundred-thousand or even million-dollar range. Bored Apes routinely sell for over a million dollars. The aforementioned Ringers and Fidenza projects were created on Ethereum. Last year, Beeple's Everydays: The First 5,000 Days NFT sold for $69,400,000 at Christie's.
OpenSea, valued at $13 billion, is the primary marketplace for Ethereum NFTs, and in some respects, it's the flagship exchange for the NFT space as a whole. Interested investors can browse and buy Ethereum NFTs and use a MetaMask wallet to connect to OpenSea. MetaMask is a popular, easy-to-use Ethereum wallet that is used by 21 million people worldwide.
In February, there was $2.4 billion worth of sales on Ethereum with an average price of about $2,260 per transaction. While these numbers are down from January, in the big picture, they are up from $136 million last February, representing a year-over-year increase of 1700%. There were also nearly 240,000 unique buyers in February, compared to just 9,000 in February 2021, showing that Ethereum NFTs are gaining traction and becoming more widespread.
Solana has established itself as the second-most-prominent blockchain for NFTs, and it is gaining momentum. While these may not have as high a sticker price as the top projects on Ethereum, there is a lot of activity going on. Magic Eden is currently the predominant marketplace for Solana NFTs, in terms of sales and volume.
Buying Solana NFTs is a simple process. You'll need to have a Solana wallet such as Phantom, the most prominent. You can then go to Magic Eden or another exchange and browse the collections. If you see one that interests you, you can click to connect your wallet, make sure that you have the necessary amount of Solana in that wallet, and then you can click Buy Now make your purchase. The NFT will show up in your wallet shortly after that in the "Collections" section.
In February, Solana saw $149 million in total volume with an average price of $469 per transaction. The total sales numbers are actually down since last fall, when Solana NFTs burst onto the scene, in part because the price of Solana has fallen since then. However, the numbers of unique buyers and sellers, as well as transactions are trending upwards.
If you're looking for an up-and-coming blockchain in the NFT space, it's Avalanche (AVAX -1.08%). While AVAX came into its own as a top-10 blockchain by market cap in 2021, it only started seeing serious activity for NFTs over the past few months. Volume has grown rapidly, from $12.6 million in December 2021 to $57 million in January and nearly $70 million in February.
The primary driver of NFT sales on the Avalanche blockchain is the play to earn (P2E) game Crabada, which has gained a lot of momentum and racked up $63 million worth of volume over the last 30 days. Other P2E games with their own NFTs like DeFi Kingdoms, which has been popular on the Harmony (CRYPTO: ONE) blockchain, are in the early stages of launching on Avalanche as well.
To buy NFTs on Avalanche, users can use a MetaMask wallet, which also works with many other cryptos like Ethereum, or they can create a wallet directly with Avalanche via the foundation's website.
While there was less total volume here than on Solana, with 36,938 transactions, the average sale price was much higher at $1,904. There were nearly 6900 unique buyers and nearly 2700 unique sellers in February.
The non-P2E NFTs on Avalanche have not reached the same profile as NFTs on Ethereum or Solana yet, but users can browse them and buy them on marketplaces like AVAX NFTs. The process is the same as with buying on Ethereum or Solana. Users just connect their wallets to buy the NFT they want. Avalanche's total NFT volume seems to be dominated by Crabada right now, but I foresee other NFT projects on Avalanche gaining more prominence over time as the Avalanche blockchain continues to gain momentum.
In conclusion, these are the top three blockchains with NFTs that I believe house some valuable projects. As with any form of artwork or collectibles, there are plenty of collections that will flop but also some that will appreciate over time. Investors can learn by getting their feet wet with a low-priced NFT that interests them. I like NFTs on Avalanche, Ethereum, and Solana because of the volume and average sale prices -- they all look like growing ecosystems with a decent amount of liquidity and activity.