Each day, thousands of artists work to create images to sell as digital tokens (NFTs) on online exchanges. The markets are booming, the most popular pieces can sell for millions, but it is not clear to outsiders why anyone would be willing to pay anything at all for a jpeg.

How do NFT purchases work?

These transactions do not involve the exchange of physical pieces of art. Those who purchase art use cryptocurrencies and receive NFTs in return&nbsp;for a unique piece of computer code relating to that work that is stored on a blockchain, a kind of digital ledger that cannot be altered.

When did the craze for NFT's start?

In 2021, the market for NFTs exploded, driven by high-profile auctions, with sales worth more than $40 billion, according to analytics firm Chainalysis.

Also read |&nbsp;<a href="https://www.wionews.com/photos/in-pics-in-seattle-a-nft-museum-opens-its-door-to-public-450047">In Pics: In Seattle, a NFT museum opens its door to public</a>

There's no reason to believe that last year's prices won't hold up in 2022; for instance, Justin Bieber paid more than $1.3 million last week for an NFT from the collection "Bored Apes Yacht Club".

With 10,000 cartoon ape images with variations to the background and other details generated by an algorithm, the collection sold dozens of NFTs daily for an average price of $250,000.

Why would anyone buy an NFT?

Some critics suggest that big transactions are motivated by pure profit, with major players using technobabble and celebrity endorsements to mask their true motives.

Nevertheless, fans see the technological complexity as an inherent part of the value of these and have a cultish devotion to it.

Malaysian artist mumu_thestan describes it as a varied landscape.

Also read |&nbsp;<a href="https://www.wionews.com/technology/what-is-a-non-fungible-token-nft-explaining-the-internets-latest-craze-437385">What is a non-fungible token (NFT)? Explaining the internet's latest craze</a>

"You can't treat the whole NFT community as one,"&nbsp;

"The mainstream audience thinks NFTs are about selling a jpeg for millions or making a monkey picture. That's not all it is."

Yet, one of the most common narratives surrounding NFTs is one in which speculators make crushing profits by flipping their assets.

How do these artists find sellers?

Buzz generated by social media and celebrity endorsements fuels the boom.

The must-have collection in 2021 was CryptoPunks, a collection of blocky images of punk rock in the 1970s. The likes of Jay-Z, Snoop Dogg, and YouTuber Logan Paul own some of these for millions.

Now, it is Bored Apes,&nbsp;Justin Bieber dropped an image of an ape to his 200 million Instagram followers, giving a powerful boost to an already popular collection already hyped by the likes of tennis star Serena Williams.

Also read |&nbsp;<a href="https://www.wionews.com/entertainment/hollywood/news-justin-bieber-gets-trolled-for-buying-bored-ape-nft-for-129-million-449643">Justin Bieber gets trolled for buying Bored Ape NFT for $1.29 million</a>

It is crucial to maintain a buzz around the work, whether it is meticulously crafted original artwork or algorithmically generated ape pictures.

How does this compare to "traditional" art?

It is evident that this community-building has parallels to the traditional art market, in which young artists often work as hard to cultivate a following as on their work.

The auction house Christie's helped cement this connection last year when it sold an NFT by American artist Beeple for $69 million, making him the third most valuable living artist.&nbsp;

Watch |&nbsp;Non-Fungible token sales hit $25 Billion dollars in 2021

<div class="videoWrapper trancodeVideo"><iframe allowfullscreen="" autoplay="1" class="includeVideo" frameborder="0" height="350" src="https://www.wionews.com/videos/non-fungible-token-sales-hit-25-billion-dollars-in-2021-443780/embed" style="width:100%;max-width:560px;" width="560"></iframe></div>

It may surprise you to know that it would not have been a stretch for the buyer to acquire a Van Gogh or a Monet work for similar prices last year.

Much like the art market, the small players in the NFT sector believe that their business is much more than just money.

Each day, thousands of artists work to create images to sell as digital tokens (NFTs) on online exchanges. The markets are booming, the most popular pieces can sell for millions, but it is not clear to outsiders why anyone would be willing to pay anything at all for a jpeg.

Each day, thousands of artists work to create images to sell as digital tokens (NFTs) on online exchanges. The markets are booming, the most popular pieces can sell for millions, but it is not clear to outsiders why anyone would be willing to pay anything at all for a jpeg. How do NFT purchases work? These transactions do not involve the exchange of physical pieces of art. Those who purchase art use cryptocurrencies and receive NFTs in return for a unique piece of computer code relating to that work that is stored on a blockchain, a kind of digital ledger that cannot be altered. When did the craze for NFT's start? In 2021, the market for NFTs exploded, driven by high-profile auctions, with sales worth more than $40 billion, according to analytics firm Chainalysis. Also read | In Pics: In Seattle, a NFT museum opens its door to public There's no reason to believe that last year's prices won't hold up in 2022; for instance, Justin Bieber paid more than $1.3 million last week for an NFT from the collection "Bored Apes Yacht Club". With 10,000 cartoon ape images with variations to the background and other details generated by an algorithm, the collection sold dozens of NFTs daily for an average price of $250,000. Why would anyone buy an NFT? Some critics suggest that big transactions are motivated by pure profit, with major players using technobabble and celebrity endorsements to mask their true motives. Nevertheless, fans see the technological complexity as an inherent part of the value of these and have a cultish devotion to it. Malaysian artist mumu_thestan describes it as a varied landscape. Also read | What is a non-fungible token (NFT)? Explaining the internet's latest craze "You can't treat the whole NFT community as one," "The mainstream audience thinks NFTs are about selling a jpeg for millions or making a monkey picture. That's not all it is." Yet, one of the most common narratives surrounding NFTs is one in which speculators make crushing profits by flipping their assets. How do these artists find sellers? Buzz generated by social media and celebrity endorsements fuels the boom. The must-have collection in 2021 was CryptoPunks, a collection of blocky images of punk rock in the 1970s. The likes of Jay-Z, Snoop Dogg, and YouTuber Logan Paul own some of these for millions. Now, it is Bored Apes, Justin Bieber dropped an image of an ape to his 200 million Instagram followers, giving a powerful boost to an already popular collection already hyped by the likes of tennis star Serena Williams. Also read | Justin Bieber gets trolled for buying Bored Ape NFT for $1.29 million It is crucial to maintain a buzz around the work, whether it is meticulously crafted original artwork or algorithmically generated ape pictures. How does this compare to "traditional" art? It is evident that this community-building has parallels to the traditional art market, in which young artists often work as hard to cultivate a following as on their work. The auction house Christie's helped cement this connection last year when it sold an NFT by American artist Beeple for $69 million, making him the third most valuable living artist. Watch | Non-Fungible token sales hit $25 Billion dollars in 2021 It may surprise you to know that it would not have been a stretch for the buyer to acquire a Van Gogh or a Monet work for similar prices last year. Much like the art market, the small players in the NFT sector believe that their business is much more than just money.

Explainer: What is the hype behind pricey pixels, why people spend fortunes on NFTs or digital art?

In the wake of serious concerns raised about cryptocurrencies and the misuse of them for money laundering and hawala transactions by terrorists and criminals, a new report indicates that money laundering via non-fungible tokens (NFTs) is becoming a growing sector.

A&nbsp;report by Blockchain data platform Chainalysis indicates that money laundering is a small, but growing, part of the activity on NFT marketplaces.

Also read |&nbsp;<a href="https://www.wionews.com/world/explainer-what-is-the-hype-behind-pricey-pixels-why-people-spend-fortunes-on-nfts-or-digital-art-450100">Explainer: What is the hype behind pricey pixels, why people spend fortunes on NFTs or digital art?</a>

"While money laundering in physical art is difficult to quantify, we can make more reliable estimates of NFT-based money laundering thanks to the inherent transparency of the Blockchain," the report said late on Wednesday.

During the third quarter of 2021, illicit addresses sent over $1 million worth of cryptocurrency to NFT marketplaces.

Again, the figure grew in the fourth quarter, capped at just under $1.4 million.

"In both quarters, the vast majority of this activity came from scam-associated addresses sending funds to NFT marketplaces to make purchases," the report informed.

Also read |&nbsp;<a href="https://www.wionews.com/photos/in-pics-in-seattle-a-nft-museum-opens-its-door-to-public-450047">In Pics: In Seattle, a NFT museum opens its door to public</a>

Additionally, both quarters saw a significant amount of stolen funds being transferred to marketplaces.

"Perhaps most concerningly, in the fourth quarter, we saw roughly $284,000 worth of cryptocurrency sent to NFT marketplaces from addresses with sanctions risk," said the researchers.

With NFTs, data can be stored on blockchains and those data can be paired with images, videos, audio, physical objects, memberships, etc.

The popularity of NFTs skyrocketed in 2021. According to Chainalysis, at least $44.2 billion worth of cryptocurrency is now being sent to ERC-721 and ERC-1155 smart contracts associated with NFT marketplaces and collections, up from just $106 million in 2020.

"Wash trading" is another way some NFT sellers make money.

Another area of concern for NFTs, Wash trading has a single person/party on both sides of the transaction, i.e. the same person acts as&nbsp;both the seller and the buyer, creating&nbsp;a false impression about an asset's value and liquidity.

Based on Blockchain analysis, the researchers identified 262 users who sold NFTs to self-financed addresses more than 25 times.

Watch |&nbsp;Non-Fungible token sales hit $25 Billion dollars in 2021

<iframe allowfullscreen="" autoplay="1" frameborder="0" height="350" src="https://www.wionews.com/videos/non-fungible-token-sales-hit-25-billion-dollars-in-2021-443780/embed" width="560"></iframe>

A total of nearly $8.9 million in profit was made by the 110 profitable wash traders, dwarfing the $416,984 lost by the 152 unprofitable traders.

"Even worse, that $8.9 million is most likely derived from sales to unsuspecting buyers who believe the NFT they're purchasing has been growing in value, sold from one distinct collector to another," said Chainalysis.

"NFTs offer potential for abuse. It's important that as our industry considers all the ways this new asset class can change how we link the blockchain to the physical world," said the report.

(With inputs from agencies)

In the wake of serious concerns raised about cryptocurrencies and the misuse of them for money laundering and hawala transactions by terrorists and criminals, a new report indicates that money laundering via non-fungible tokens (NFTs) is becoming a growing sector.

In the wake of serious concerns raised about cryptocurrencies and the misuse of them for money laundering and hawala transactions by terrorists and criminals, a new report indicates that money laundering via non-fungible tokens (NFTs) is becoming a growing sector. A report by Blockchain data platform Chainalysis indicates that money laundering is a small, but growing, part of the activity on NFT marketplaces. Also read | Explainer: What is the hype behind pricey pixels, why people spend fortunes on NFTs or digital art? "While money laundering in physical art is difficult to quantify, we can make more reliable estimates of NFT-based money laundering thanks to the inherent transparency of the Blockchain," the report said late on Wednesday. During the third quarter of 2021, illicit addresses sent over $1 million worth of cryptocurrency to NFT marketplaces. Again, the figure grew in the fourth quarter, capped at just under $1.4 million. "In both quarters, the vast majority of this activity came from scam-associated addresses sending funds to NFT marketplaces to make purchases," the report informed. Also read | In Pics: In Seattle, a NFT museum opens its door to public Additionally, both quarters saw a significant amount of stolen funds being transferred to marketplaces. "Perhaps most concerningly, in the fourth quarter, we saw roughly $284,000 worth of cryptocurrency sent to NFT marketplaces from addresses with sanctions risk," said the researchers. With NFTs, data can be stored on blockchains and those data can be paired with images, videos, audio, physical objects, memberships, etc. The popularity of NFTs skyrocketed in 2021. According to Chainalysis, at least $44.2 billion worth of cryptocurrency is now being sent to ERC-721 and ERC-1155 smart contracts associated with NFT marketplaces and collections, up from just $106 million in 2020. "Wash trading" is another way some NFT sellers make money. Another area of concern for NFTs, Wash trading has a single person/party on both sides of the transaction, i.e. the same person acts as both the seller and the buyer, creating a false impression about an asset's value and liquidity. Based on Blockchain analysis, the researchers identified 262 users who sold NFTs to self-financed addresses more than 25 times. Watch | Non-Fungible token sales hit $25 Billion dollars in 2021 A total of nearly $8.9 million in profit was made by the 110 profitable wash traders, dwarfing the $416,984 lost by the 152 unprofitable traders. "Even worse, that $8.9 million is most likely derived from sales to unsuspecting buyers who believe the NFT they're purchasing has been growing in value, sold from one distinct collector to another," said Chainalysis. "NFTs offer potential for abuse. It's important that as our industry considers all the ways this new asset class can change how we link the blockchain to the physical world," said the report. (With inputs from agencies)

After cryptocurrencies, money laundering via NFTs is next big worry

Animations to video clips sales of NFTs reached some 25 billion dollars in 2021, as the cumulative crypto-asset exploded in popularity. However, reports say there are signs of growth slowing towards the end of the year.

Non-Fungible token sales hit $25 Billion dollars in 2021