Non-fungible tokens (NFTs) are creating new millionaires, as per data from CryptoSlam. More people are finding NFTs a haven to store value in the backdrop of weakening trust in the US dollar and other fiat currencies, increased real-economy use cases, and tech-enabled mass-market access is driving interests in NFTs.
When Jack Dorsey, the billionaire co-founder of Twitter, put up his first-ever tweet for sale as a non-fungible token, many got stunned. Not many people had known what NFTs are, and how they work, let alone what drives people to get into the NFT frenzy. It’s indeed true that NFTs have been flying over our crypto headlines following some record-breaking transactions involving millions of dollars in recent times. So why are people hooked into NFTs? According to some art investors, a combination of factors has contributed to the rise of NFTs and made the digitized artworks draw attention from all quarters.
The general consensus among crypto analysts is that the pandemic is an important contributing factor driving people into finding alternative ways to save money. In this quest, NFTs tend to offer opportunities for people to not only save money but also trade NFTs to generate more income. This is partly driven by the fading faith in the US dollar and other fiat currencies. Historically, the use of art to store value is not a new phenomenon, and cryptocurrencies extend this trend into digital art. People can now invest in art and use it just like they have done with gold in the past.
The technology boom has also led to the rise in the creator economy as the younger generations work to drive tech innovations. More artists, including musicians, are looking to increase their income too by selling their creative pieces of artwork to the masses. For artists, especially in the music industry, it’s the opportunity to expand their sources of income in the depressed economy following the pandemic that had live performances as one of the hardest-hit sectors. This has created some sort of gold rush to directly connect with the fans in the absence of traditional middlemen in the form of record labels and promoters. For example, early this year, 3LAU captured the world’s imagination when they sold NFTs worth millions of dollars.
What makes NFTs valuable?
To understand what makes NFTs valuable, it’s important that we understand what it is and how it works.
In a simple definition, an NFT is a collectible digital asset with the value presented as a cryptocurrency. While cryptocurrencies such as Bitcoin can be exchanged like-for-like, you cannot do the same with NFTs as they are a unique piece of art represented digitally in a decentralized platform. You may look at NFT as a value–holding investment, storing some extra information that elevates it above other ordinary tokens.
The uniqueness and ownership of NFTs can be verified, hence eliminating the counterfeit fears that have gripped the digital art industry for years. Entities that want to use a specific NFT will have to pay the market value, as per the owner’s and community’s valuation, to give them either full or part copyright ownership over the digital asset. This feature opens up more possibilities for creators, who strive to make some of the most unique NFTs to increase value.
Lastly, NFTs can be traded easily through secondary markets such as OpenSea, Axie Marketplace, VIV3, and Foundation among others. The ease of accessibility by the wider global community of potential users adds value to NFTs.
