Unless you’ve been living under a rock, there’s no way you haven’t heard of cryptocurrencies. A decentralized digital currency took the stock currency market by storm and attracted countless investors. However, the crypto market didn’t stop just there.
Back in 2017, The Crypto Punks collection saw the light of day. Those digital images are currently worth millions of dollars. How’s that even possible? And what do those 8-bit images have in common with cryptocurrencies? Make yourself a cup of coffee, and sit comfortably as we will explain why people went crazy about NFT purchases.
What Should I Know About NFT Projects?
Before we explain why some NFTs are so ridiculously expensive, you need to understand what they actually are. For starters, NFT means “non-fungible token.”
Non-fungible means it can’t be easily replaced or traded. One can easily exchange one dollar or euro for another because they share the same value. NFTs, on the other hand, are like fine art. Let’s take Mona Lisa. The painting can’t be traded for another copy because they’ll never be equal in value. The same goes for NFT art.
Token, on the other hand, is a digital asset that can be created and traded using blockchain technology. Bitcoins are such tokens. You can mine, buy or sell them, and every transaction is verified and recorded. That’s how blockchain works, being a decentralized alternative to banks and government institutes.
It also ensures the uniqueness of NFT digital art, so counterfeit can be easily spotted. Let’s say you’re renting a car to someone. You expect him to return the exact same car, not a replacement. Even though he has the same model and type of car, he can’t replace it with yours – the original one. The same goes for NFT.
All digital assets (pictures, music, NFT games, etc.) can be minted into NFT and later sold in the NFT marketplace. Anyone who finds it attractive can purchase it with cryptocurrency. From that point, the NFT artwork belongs to the buyer with certified ownership, and will be stored in his digital wallet.
Why People Went Crazy About NFT World?
Money! Isn’t that simple? People are buying NFTs to make a profit from them in the future. Many people that purchase NFTs are simply looking for a capital investment. However, there are other benefits to consider when purchasing one. If you’re looking to enter the NFT space, knowing how NFTs work doesn’t clarify why they’re so valuable. We’ve listed the perks of owning them right below.
- Access to Exclusive Perks
People who own NFTs are assured of exclusive ownership. No one can steal it from them; some even grant access to certain perks, like VIP memberships. For example, Bored Ape Yacht Club (BAYC) NFT owners get a yacht club membership granting them access to closed community events.
And given that high-profile celebrities like Jimmy Fallon, Paris Hilton, and Post Malone are club members, this trait alone makes people spend thousands of dollars to only join this community.
- Profit
As we said in the introduction, people see NFTs as an investment opportunity. NFT works can’t be divided, which means they can be worth much more than any of the cryptocurrencies they’re bought with. Due to unique characteristics, NFT value depends heavily on demands and how much people are willing to pay for non-fungible tokens.
A Twitter founder, Jack Dorsey, sold his first-ever tweet as an NFT for a whopping $2.9 million. Pablo Rodriguez Fraile, an art collector, bought a 10-second video clip for $67,000 and quickly sold it for $6,6 million. You’ll find dozens of examples like these on the internet, which proves this new phenomenon might last for a while.
- Value
The NFT market is immune to inflation like traditional currencies are. It means that an expensive NFT can stay that way regardless of world events. No wonder investors consider trading NFTs as a safe and stable investment option nowadays. However, don’t expect it to happen with every NFT you buy. Some experts speculate that NFTs may lose even 90% of their value in the upcoming years, but only time will tell.
- Digital Ownership and Rights
Each and every NFT is verified on a decentralized blockchain, making it impossible to steal. You can’t say the same with physical assets, especially expensive ones. You must take some extra precautions like keeping the valuable item closed, under surveillance, or not revealing its whereabouts. This isn’t the case with safeguarding digital rights; you can sleep tight as no one will take them from you.
- Support for Creators
NFT sales became an excellent source of income for music artists. Steve Aoki said he’s making more money from NFT than from 10 years of music advances. An American band, Kings of Leon, released a whole album for $50 as an NFT. Also, artists like Shawn Mendes, Grimes, and Linkin Park’s Mike Shinoda followed the same trend.
This way, artists can earn more without intermediaries. Fans are willing to support their favorite artists, and knowing that 100% of their money is going to them (excluding the transaction fee) is the reason why they will buy their NFTs.
NFT Limitations
Every rose has its thorns, and so does NFT. Despite its great security and indisputable short and long-term investment potential, there are some limitations that all buyers and creators should be aware of.
- NFTs won’t replace physical art. Owning a physical copy of an original painting can’t be replaced by a digital file. Sunflowers by Vincent Van Gogh wouldn’t have the same impact on viewers if it was originally released as an NFT.
- Value uncertainty. If you purchase an NFT for a fixed price or through action, you’ll become the owner of it. However, everyone can use it as a profile picture or upload it anywhere they desire. Also, there’s no guarantee that you will sell that NFT for a profit which puts the value of NFTs in question.
- High expense. Besides paying for an NFT, you’ll also have to cover a fee imposed by a marketplace. The fees vary between markets, but some can charge as much as $10 for each transaction.
NFTs in Business
People are obsessed with digital creations hoping for a potential revenue increase. Businesses are making their own NFTs for the exact same reason. Many companies are popular enough without them, so investing in their creations early means you can sell them for a profit later. How exactly are they used in business?
NFT Games
Making money while playing games? It’s no longer reserved for streamers and e-sport players! Nowadays, gamers can make money by simply playing. Most gamers have heard of The Sandbox, Axie Infinity, and Illuvium. They all represent different genres but have one thing in common: NFT collectibles. Players can mint, collect, and farm them in-game and sell them for a profit later on.
NFT Fashion
With stores closed and fashion shows canceled during the pandemic, fashion brands moved to the gaming industry. A growing interest in virtual fashion can be seen especially in Metaverse – a VR 3D environment.
Over 70 brands participated in the event during the Metaverse Fashion Week, including Tommy Hilfiger, Dolce & Gabbana, Karl Lagerfeld, and many more. Each brand had a featured catwalk presenting its newest collection. And if you want to dress your avatar in one of these clothes, they are available as NFT wearables.
NFT Sports
The NFT boom didn’t miss sports! The prime example is the NBA Top Shot, a blockchain-based virtual trading card platform. It operates like trading cards, combining NBA highlights and digital art. The NBA cooperates with Dapper Laps, creating Moments from a certain match. Those video highlights are then attached to the NFT. And just like with trading cards, the team makes a limited number of NFTs to create scarcity. This, of course, affects the rarity of each Moment and its financial value.
For example, Giannis Antetokounmpo NFT has a Legendary status with an asking price of $4500 at the time of writing. The most expensive NBA Top Shot NFT sale was a LeBron James dunk during the 2020 NBA Finals, which sold for a whopping $387,600 in April of 2021. Unfortunately, the same clip is worth “only” $230,000 at the time of writing.
NFT Art
In short, it’s a digital artwork presented as NFT. However, apart from pictures, they can be found in various formats like video, photography, music, internet memes, etc.
At the time of writing, the most expensive NFT art is Everydays: the First 5000 Days by Beeple. The most expensive NFT to date was sold at Christie’s auction house for $67 million. For a single artwork.
What does it have to do with business? The artwork creator, Mike Winkelmann, is known among digital artists thanks to collaborations with prominent brands such as Nike and Louis Vitton.
NFT PricesWhat Affects NFT Prices?
Many variables come into play when it comes to NFT pricing. When celebrities posts and talks about their NFTs, their price immediately skyrockets. In short, famous people have the biggest chance of making big money on NFTs because, well… they’re famous.
Another factor to consider is background. The aforementioned ‘5000 Days’ is a compilation of 5000 artworks Mike made in a span of 13 years, making it the most expensive NFT in the world. Lastly, the scarcity of certain NFTs raises their price significantly. The best examples here are CryptoPunk, which has 10 000 unique pieces, and MetaWarden NFT, with only 3000.
Every NFT purchase has its purpose. For some, it’s just a symbol of status and a way to feel more appreciated. Others believe they’ll hold value in the future, making them a safe investment option. Lastly, they grant access to exclusive perks like closed parties and communities since they’re so hard to forge or steal.
However, the truth is it’s easier to lose money investing in NFT if you don’t know what you’re doing. NFT scams are a thing, so do your research before investing in any.
SEO enthusiast and digital marketing strategist. My expertise lies in optimizing websites for organic traffic growth and search engine visibility. I carry out, among others, SEO tests, keyword research and analytical activities using Google Analytics. Privately, he is a lover of mountains and bicycle trips.