Non-fungible tokens (NFTs)
Mieszko Mazur, Efstathios Polyzos
Abstract
This chapter provides an overview of non-fungible tokens (NFTs) as an investment instrument. The first part focuses on the NFT infrastructure including the primary and secondary markets for NFTs and the different types of NFT exchanges, aggregators, borrowing and landing, staking, and fundraising. The second part investigates the leading blue-chip NFT collections and their performance in the short- and long-term, both during the bull and bear markets. Analyzing close to two million NFT transactions, we find that profile picture (PFP) NFTs dominate the NFT market and yield exceptionally high returns both on a raw and market-adjusted basis. For example, NFTs from the collection Bored Ape Yacht Club (BAYC) earn close to 2, 000 percent on a buy-and-hold basis. Furthermore, NFTs from other categories (art, gaming, metaverse) do not perform as well as PFPs; however, they outperform the cryptocurrency market by a margin close to 100 percent.