You’ve probably noticed a lot of hype surrounding NFTs lately on social media, the news, and even celebrities jumping on the bandwagon. Still, you’re puzzled about what it is and why they’re so valuable? Especially when you realize people are spending millions of pounds on these tiny avatars. If your mind is blown and you can’t comprehend how they work, look no further, as this article will help give you a clear understanding of what they are and the craze behind them.
What are NFTs, and how do they work?
NFT stands for Non-Fungible Tokens, which are interchangeable digital assets such as audio clips, GIFs, and other digital items secured on the blockchain, which are available to trade online through various marketplaces, including OpenSea, Ethereum, and more. These unique digital identifiers are generated and sold in cryptocurrency, a virtual wallet encrypted with a digital key that forms a series of numbers. Many NFTs contain individual information like ownership and transactional details stored under a smart contract. NFTs allow users to store, manage and protect the data related to their identity. Furthermore, NFT designers can receive royalties off their work and receive a percentage of future sales of their NFTs, which is a huge benefit.
Why are NFTs so valuable?
NFTs are valuable because they prove the authenticity of a non-fungible asset. Assets such as diamonds, land, cars, and trading cards are non-fungible because each unit has unique qualities that can add or depreciate its value. The value of non-fungible assets will depend on a few factors: utility, ownership history, future value, and liquidity premium. For example, diamonds have different cuts, colours, sizes, and grades that aren’t exchangeable, making them unique. NFTs make digital content irreplaceable and hence valuable.
NFTs are taking over the digital landscape by storm, with some selling for millions of pounds, including high profile memes such as Nyan Cat, which sold for nearly £5m, and the “Deal with it” sunglasses which sold for £17,871 at auction. Brands including Balmain, Dolce & Gabbana, Adidas, and U.K fashion retailer Selfridges have made NFTs a part of their marketing mix by linking them to their loyalty schemes, offering consumers VIP perks and full access to exclusive physical products.
What makes NFT art valuable?
There are a few vital aspects of determining what makes an NFT valuable. So how do you know if an NFT holds value?
Below is a list of factors to consider when determining the value of a non-fungible token (NFT).
- Underlying value (the value behind the creator)
- Potential value (future value, i.e., upcoming artists and creators, celebrities, future projects, and collaborations)
- Perception of the buyer (is based on what the NFT means to you)
- Similar market value (Check how much other pieces are going for from the same creator)
An NFT example
High-profile celebrities are no strangers to splashing thousands of pounds on luxury items, especially rappers who enjoy collecting one-off pieces such as sports cars, jewellery, sneakers, or rare memorabilia, which can be considered a low-key flex. Even NFTs! Famous Detroit Rapper Eminem is no stranger to the metaverse whereby purchasing a highly fashioned EminApe NFT from Bored Ape Yacht Club for a whopping £3334,000! The EminApe NFT resembles the Lose Yourself rapper in the form of a subdued ape sporting an urban military peaked cap accompanied by a bomber jacket and a heavy gold chain around its neck.
So, you must be wondering what Eminem received after paying over a quarter of a million pounds on a nifty NFT? This is far from the highest anyone has paid for one of these quirky apes. Eminem now owns a unique data unit documented in the blockchain, which permanently records its origin or sales history. It’s a secure way of preserving the “original” one-of artwork. There’s no doubt that people will copy and paste the image off the internet for personal use. However, Eminem owns the original artwork and has blockchain provenance to prove it. Besides owning a digital showpiece, Eminem is also a member of the Bored Ape Yacht Club, a social space for high ballers who fork out heaps of cryptocurrency on animated apes.
Do you think the NFT craze will fizzle out, or do you reckon it’s here to stay for the long run? Please keep your eyes peeled as we will uncover more NFT news shortly. If you like the idea of owning your personalised NFT, but you require some assistance in developing one, then get in contact with us so we can help.