Why are NFTs valuable? A guide to non-fungal qualities

If you’re wondering how NFTs — basically tokenized JPEGs — have sold for millions of dollars over the past few years, here’s the short answer most people will give you: it’s because they’re art, and art is inherently valuable.

Really. It’s as simple as many think.

However, we’ve also seen digital collectibles like NBA Top Shot and Cryptopunks and Bored Ape Yacht Club, and PFP NFT projects that fetch eye-watering prices on the open market. None of the above can be properly characterized as art and art only. So the question remains: what right What makes an NFT valuable?

Equation of scarcity

Whether it’s art or a digital collectible, one thing will definitely increase the price of an NFT. What does the NFT deficiency have to do with Monkey JPEG?

To answer this question, let’s do a quick round of Economics 101. Stay with me — we’ll keep it simple. A key problem that the field of economics hopes to crack and understand is how to efficiently deal with the virtually unlimited needs and wants of humans in a world with limited resources. In simple terms – balance of forces of supply and demand.

Generally speaking—how these forces interact usually affects one metric that is ultimately perceived by consumers: price. If the demand for a particular product is greater than the supply in a particular market, this will result in a relatively low price in that particular market.

However, the opposite is also true. When the demand for a particular commodity exceeds its supply, it becomes a scarce commodity – fetching a much higher price in its respective market.

For a real-world example of this concept, let’s look at why fruits are widely considered a luxury in Japan. The mountainous topography of the island nation leaves little room for large-scale agricultural operations. As such, most fruit farms there are “family-run or run by small businesses,” as Paku noted in one. Wa-shoku Report However, what the Japanese fruit industry may lack in quantity, it makes up for in quality. Often, the picture-perfect strawberries, grapes and watermelons you’d find lining the aisles of a typical Japanese supermarket are “given as thank-you gifts to relatives, business partners and clients who have taken care of you,” Paku said.

All right. so, What makes NFTs so valuable??

NFT and scarcity

NFTs can be very expensive (or valuable, depending on who you ask) because they’ve somehow managed to do the impossible: introduce scarcity into the global digital market. An NFT isn’t just an exorbitantly expensive way to buy an image—it’s a way to own it

When you buy an NFT, you’re not just buying the image itself. You are buying a permanent token engraved on a blockchain that points to that particular image or digital asset. Anything goes, really. In addition to art, music, in-game assets, virtual lands, and all sorts of other digital goods are commonly bought and sold on NFT marketplaces.

So how does turning something into an NFT potentially affect its price? Whenever you mint a digital commodity as an NFT, it effectively allows you to limit its supply, thus “inflating” its price. While this may seem like an easy way to artificially inflate the price of a digital product, it is not entirely about NFTs.

So, what other things about NFTs make them valuable?

A note on art

For starters, there’s art. In the art world, the works of master artists have fetched millions of dollars on the open market. The sheer value of fine art is similarly hard to grasp for the average Joe or Jane. Take the many works by Mark Rothko that have sold for millions of dollars on the art market. At face value, it can be a little hard to process why the orange, red and yellow painted on a canvas is worth around $87 million. Simply put, the price is high because it is the only painting of its kind in existence, and because it was created by one of the most brilliant artists of the 20th century.

This is why we have seen a large majority of the most expensive NFT sales to date. Like Rothko Orange, red and yellow, these particular NFTs are the only ones of their kind. In the case of Beeple’s Everydays — which sold for nearly $70 million in 2021 — those works are really Unique Every Day showcases 5,000 unique works by Beeple created over 14 years, where the digital artist strives to create a new piece every day.

And then there are utilities

Sometimes, NFTs fetch higher prices than art or because they are associated with a collection. Thanks to the built-in security found in blockchain-based transactions, NFTs have been widely used as a means of fundraising.

This can be seen as one of the most expensive NFT sales we have ever seen. In early 2022, AssangeDAO successfully arranged a multi-million dollar purchase of Pak’s Clock NFT, which stands as the second-most expensive NFT sale of all time. The NFT sold for 16,953 ETH to be exact, which was worth about $52.7 million at the time. Proceeds from the sale are expected to go toward the fund Wikileaks Legal defense of founder Julian Assange.

NFT solution

Finally, NFTs can provide non-monetary value to Internet users worldwide. While limiting the supply of digital goods has helped NFT artists and project leaders reconcile their virtual goods with scarcity, blockchain can play a role in ensuring these items remain available indefinitely.

Traditionally, digital products were virtually limitless in supply. Digital copies of games, books, music and movies can theoretically be purchased an infinite number of times. You’ll never see digital products out of stock — but they’ll stop selling at some point. When digital marketplaces are closed, certain digital items become impossible to acquire.

Case in point, look at it Nintendo. The company maintains a notoriously negative stance towards piracy and imitation, and the Japanese gaming giant aims to wipe every site that hosts games it no longer sells from existence. Unfortunately, this has made it extremely difficult to save the company’s countless games and prevent them from being lost over time.

With NFTs, as long as a blockchain exists, so will all the assets stored on it. As blockchain technology continues to grow and evolve, we will also see NFT types moving forward. Maybe one day, you’ll be able to own the digital masters of your favorite films — certainly not for cheap.

https://ift.tt/9lJKyh3

Baca juga

• Upcoming Drops: October 24-30
• Abbott and Costello have immortalized their legacy as NFTs
• Telegram gears up to launch its on-board Web3 marketplace