Introduction to NFTs
Why Are NFTs so Valuable?
On a daily basis, we see news and updates of NFTs being sold for hundreds of thousands of dollars. Beeple’s “The First 5000 Days” NFT collage, which was purchased for $69.3 million, is a nice example of some of the value floating around in the space. So why are NFTs so valuable, and who is buying these high-priced tokens in the first place?
Why Would Someone Buy an NFT?
The technology that underlies NFTs holds the key to understanding why people feel the need to buy them, much less spend millions on them. NFTs are data units that are stored on blockchains and can’t be deleted or changed after they’ve been “minted” or created. This is particularly important when buying artwork, limited-edition media, and other such products.
As NFTs are impossible to duplicate, they provide a high level of confidence and provenance. When a person buys a non-fungible token of a real-world asset, they can be confident that the NFT that represents it is the only one in existence. Because of this unique one-of-a-kind functionality, digital assets can now have a way to offer verifiable rarity.
Some of the main reasons why people buy NFTs include:
– Collectibles: NFTs are basically digital collectibles that still have their roots in a market dominated by other collectibles. The value of these NFTs is affected by a wide range of factors like scarcity, collectability, and set value. These collectible NFTs give owners a sense of belonging to a cause or shows support for an artist/collectible.
– Gaming: Non-fungible tokens are a terrific method to represent, transfer, and trade things in-game and outside of a game. These types of NFTs allow players to have actual ownership of certain items and currencies within the gaming world. However, player characters and avatars can also be associated with NFTs.
NFTs can also be utilized to trade and own specific characters, items, land, and avatars within a game. So all of that progress and hard work you put into your character can be saved and taken with you or monetized if you choose to. You could then sell the character on a marketplace or potentially take the character to another game in the future.
– Utility: An NFT’s utility refers to the functionality it can provide beyond just being valuable as a collectible. A major NFT category with considerable utility value is ticketing NFTs. Ticket NFTs are a way for people to purchase virtual tickets to an event they’d like to attend virtually or in person. It ensures the tickets are authentic and legitimately purchased or traded.
NFTs can provide a wide variety of utilities, including access to additional features, gamification functionality such as breeding more NFTs, and much more; For example, you can buy Castle Crush NFTs to play their mobile, real-time strategy game developed by Wildlife Studios. In fact, the sky is the limit when it comes to what NFTs can be used for and programmed to do.
– Speculation: Like other cryptocurrencies, NFTs can be bought and sold purely based on their value and the belief they will increase in the future. In fact, most NFTs’ future worth is determined by what others think of them and if it’s an asset that may appreciate in the future. Speculation is based on a wide variety of different things, including potential demand, usefulness, utility, scarcity, and more. So if you’re speculating on the price of an NFT, ask yourself, “Why do I think this will go up in value?”
Who Buys NFTs?
Backers, fans, collectors, and pretty much anyone with access to cryptocurrency looking to diversify some money may purchase NFTs. This includes everyone from celebrities to ordinary working-class people. People buy NFTs for many different reasons; some will buy them to flip and try to make a profit, others will purchase them to support the creator, and others might want to own the token purely for bragging rights.
Non-fungible tokens aren’t just for crypto-enthusiasts; they provide an excellent way to support your favorite artist by owning a unique piece of their work. Gamers can also benefit by purchasing NFTs because it allows them to easily purchase in-game items to upgrade their character or even own an entirely new character. There are plenty of different uses for NFTs, which means anyone can benefit from owning one!
Why Are Some NFTs Valuable and Some Not?
Things tend to cost more in general when they are scarce. The Mona Lisa is so expensive and valuable because only one exists. Only 59 copies of LeBron James NBA Top Shots are available in existence, and each one may be worth hundreds of thousands of dollars.
However, the ugly truth is that people are printing millions upon millions of NFTs, which are flooding markets and causing speculative purchasing sprees. So be sure to do your research before just buying any random NFT. If you’re buying to try and flip for a profit, be sure to check if other people want to buy it as well and check to see how rare it actually is. This can be harder than it seems, and many have lost money when speculating.
NFT value is based entirely on what people think it’s worth, making it a very speculative market. It’s also highly based on hype and community. If an NFT creator can create a community around their NFT collections, then they can significantly increase the value of the NFTs overall because they have built demand for them.