Only a small group of people knew what non-fungible token were.
The market for digital artwork and collectibles was worth more than the global art market by the end of the year, according to the latest data.
The NFT market exploded from a sub-billion dollar market to a multi-decabillion industry this year, according to Mason Nystrom, research analyst at Messari.
The first sale of its kind at the auction house was a Beeple piece that sold for $69.3m. The artist, whose given name is Mike Winkelmann, reacted with a message.
Corporate players from art, sports, and music quickly started minting NFTs, essentially digital ownership certificates registered on a blockchain, to cash in on the hype and find new ways to engage with fans.
There is a bus shelter in Manhattan with a display of a coin.
Other hits included numbered collections of NFTs that went viral, including Bored Ape Yacht Club, and which are used as avatars on social media profiles.
The core value is still exclusive, and includes access to gated channels on chat platform Discord and to parties.
There is a high barrier to entry, a capital cost, and you are around high net worth and other individuals.
According to Chainalysis, the amount of money poured into the ethereum contracts that are used to create NFTs in the year to December 15 was $40.9 billion. The total would be higher if NFTs were included.
The global art market was worth $50.1 billion last year, according to figures from Art Basel.
More than 75% of the market is accounted for by small transactions of under $10,000, according to Chainalysis.
The market for cryptocurrencies is dominated by a few large players.
There were 360,000 NFT owners between February and November. Some 9 per cent of the wallet population held 80 per cent of the market value.
Many whales are sitting on hundreds of millions of dollars of the boom in the price of cripto
Others say they approach the market as traders. A well-known NFT investor who started out with an initial investment of $600 now has an NFT portfolio worth more than $20m, they said.
Some of the projects they invest in have a higher daily trading volume, while others have a more niche appeal. They had specific pieces I plan to keep as long term investments.
According to an analysis for the Financial Times by a platform that uses the internet to analyse technology, the cost of buying NFTs on the secondary market has yet to be recovered by most new NFT collectors.
The real world identities of buyers and sellers are difficult to discover in the unregulated space, which is also plagued by fraud, scam and market manipulation.
In the 30 days to mid-December, a $2m of suspect activity was found in the Bored Ape and CryptoPunk collections. Some NFTs were sold at a 95 per cent discount to the average sale price, either because of mistakes by buyers and sellers, tax write-offs or some other scam exploiting unskilled users.
The market is likely being inflated by wash trading, when a trader takes both sides of a trade in order to give a false impression of demand.
Rdiger K Weng, chief executive of Germany-based Weng Fine Art, said that it is possible to buy and sell an NFT on a public platform and make it look like there is interest in the piece.
He said that if a person tries to wash trading by consigning an artwork to the auction house, they will have to pay 25 per cent of the sale. He said that the costs are a fraction of what it would cost to buy an NFT.
The market is maturing and will eventually offer features such as allowing artists to collect royalties in perpetuity, as supporters believe that the market is maturing.
Benedict Evans, an independent technology analyst and a former venture capitalist, asked, "What can you do?" He said that it could be things like the artist getting a share and subsequent secondary sales.
In some communities, the financialisation of NFTs is taking place, for example, using NFTs as collateral for loans or breaking down ownership of a single piece into smaller parts.
In the long term, enthusiasts hope that token power will one day allow for online shopping in virtual worlds. Here, NFTs could designate ownership of virtual goods, such as clothing or art for the walls of their digital houses. Nike bought a virtual shoe company to make virtual sneakers.
An NFT is displayed on a billboard in New York.
As the freewheeling market develops, the future of the NFTs market will depend on the stance that regulators take.
NFTs may be considered securities by regulators because of their similarities to certain digital investment vehicles. Companies looking to issue NFTs are often asked if they will be viewed as a financial instrument. Will it be considered a security for the company?
The Internal Revenue Service is yet to address NFTs directly, but some experts think they could be subject to capital gains taxes.
The partner at White & Case said that impending regulation was a looming issue for the entire industry.
Eva Szalay and Siddharth Venkataramakrishnan have additional reporting to do.
