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Non-fungible tokens, or NFTs, will become a fundamental part of the tech investment megatrend of the next decade.

This is despite the drops of around 80% over the past few days in the NFT market, from a $102 million peak in NFT transactions in one day in early May.

NFTs are digital collectibles encoded onto a blockchain that create a unique digital watermark indicating ownership and the digital rights to that collectible.

Over recent months, a number of major fashion brands, global sports franchises and household name artists and musicians have launched NFTS.

Back in April, auction house Christie’s sold “Everydays” the First 5000 Days,” a digital artwork in JPEG form by an artist known as Beeple, for US$69.3 million – the third-most-expensive work ever sold by a living artist.

The short-term fall in NFT transactions in recent weeks is not at all surprising. This market is still incredibly new, and something that the majority of investors still don’t understand or even know about.

Nevertheless, technology will inevitably be the decade’s investment megatrend. And it’s my view that NFTs will become an essential part of this.

There are four principal reasons for this.

First, our daily lives are increasingly tech-driven, and this is accelerating all the time.

Second, demographics. With the younger so-called ‘digital natives’ having grown up under the influence of the internet and other tech, demand will inevitably increase for tech-orientated products such as digital investments.

Third, interest and investment in cryptocurrencies is constantly on the rise – which is how NFTs are bought.

Fourth, NFTs are positively changing business models, particularly in the creative industries, which are growing in economic, cultural and social importance throughout Asia.

As an example, artists and musicians can offer enhanced virtual experiences for collectors and buyers, they can show their works aren’t forgeries and can include criteria to obtain royalties every time their works are resold in the future.

Of course, the NFT market is not without its sceptics.

A number of traditionalist commentators have rebuffed NFTs as a fad. Yet I would say these people would have likely dismissed the internet back in the 90s and ecommerce giants such as Amazon as pure hype in the 2000s.

The main factor in play is that millennials, especially Gen Z, lead digital lives and it’s a natural progression to want to take digital representations of luxury brands, music and art into these worlds. And this has value.

That said, although NFTs’ dominance will continue to grow over the coming decade, the market is still very new and highly speculative.

As such the risks are high and investors must be extremely cautious.

Photo: The Focal Project