Wisebitcoin has already approached the NFT topic and tried to explain how it works and where people can trade it. You can look through that blog by following this link.
However, the key to understanding the NFT lies a bit deeper. In the light of recent events, the NFT market has dipped a little and continues to work without bright informational reasons. That is why traders and investors worldwide doubt whether this game is worth the candle. We decided to dig deeper and understand what NFTs mean for the market and what the future of this digital asset can hold.
Please note that our blog is for informational purposes only. We do not encourage you to buy certain assets without due attention and a deep study. Be careful – crypto-assets can carry significant risks if approached without preparation.
Let’s remember the meaning of this abbreviation. NFT, or non-fungible token – is a type of crypto token. It is recorded with information that is entered into the blockchain. Every participant in the chain can see it, so it cannot be changed or deleted. In addition, the content of the NFT object is available to publicity, which makes this digital tool an excellent technology for capturing ownership of an object.
Let’s dig deeper into the “non-fungible” meaning through the “fungible.” Fungible – is a characteristic of the good that means it’s interchangeable with a good or asset of the same type. Simply saying, it is not unique. You can change one Bitcoin to dollars – these assets will be fungible. Unfungible, on the contrary, is a good or asset that is unique and can’t be changed on the same type. The goods of art often can be considered non-fungible assets.
NFT is always about creation and represents two forms: cryptocurrency and art. It firstly appeared in 2012 as Colored Coins. Those were to use blockchain for digital collectibles, property, coupons, shares of different companies, etc.
The next big step for NFT was 2014 – enthusiasts created a Counterparty. This p2p financial open-source platform lets people make their own tradable currency or assets. Like NFT now allows us to develop and trade original memes and pictures. It was tremendous progress because it could create unique assets that were impossible to counterfeit. It, of course, got people excited.
In the next few years, people created characters like Cryptopunks, based on the Ethereum blockchain. Initially, Larva Labs, who created them, released those items almost for free: you only had to pay the cost of a transaction on the Ethereum blockchain; it’s about 11 cents. These collections were unique, non-destroyable, and allowed their owners to make long investments.
The cheapest Cryptopunk out of 10 thousand characters cost $195 000 and has changed several hundred owners. Last year the most expensive character cost $267 000. The creators didn’t lose – they received royalties from each sale.
Thus, 2021 was the year of resurrection or the next significant coming of NFT. It went mainstream when in March of 2021 American band Kings of Leon announced that their latest album would be released on NFT. They were the first band to do something like that, so the NFT trend again got people excited. Afterward, Jack Dorsey, CO-founder, and former CEO of Twitter, whom we mentioned in the latest blog about Elon Musk, decided to sell his first tweet (“just setting up my twttr”) as NFT via the Valuables platform. Justin Sun, the tech entrepreneur, offered Dorsey almost $2.5 million!
NFT became the new Bitcoin during the last year thanks to its fresh look at art and property law in general. In general, art was already something inaccessible and difficult to understand. Still, when people started selling original memes and pictures from childhood with the prospect of personal possession of the original, it became clear that NFT received a new boom among connoisseurs and crypto enthusiasts.
You can ask: “Why are NFTs so important nowadays?”. Before the appearance of these tokens, digital creation or content could be copied as much as needed. Afterward, creators were in the wrong position – they needed more time to monetize their art content, primarily digital. Nowadays, digital paintings or other goods can be linked to a unique token. This led to more interested and solvent buyers since the number of goods can be limited or even equal. Here the story with art objects in life is repeated – the more unique the work, the more money people want to pay for it.
Thus, the unique works in one exemplary could be sold by well-known artists in most cases. Other creators produce a limited amount of items. This amount could be different% from 10 to 1 000 items. Resale of these creations could be done unlimited times to bring money for the sellers and owners.
In light of the vast popularity of NFT, it is pretty curious to note a couple of the essential deals with objects of digital art.
The first expensive NFT was a digital collage by artist Beeple named “Everydays: The First 5 000 Days”. On the 11th of March in 2021, this work was sold at Christie’s for $69.3 million. This picture consists of 5 000 images painted each day for 13 years. Beeple started to paint it on the 1st of May in 2007.
Yes, no one would buy a no-name collage of images for that money. Beeple was a different case – he already had almost 2 million subscribers on Instagram, collaborated with Louis Vuitton and Nike, and created scripts for Katty Perry and Childish Gambino performances.
Everydays: The First 5 000 Days
However, not only well-known individuals could become millionaires on the NFT market. Anonymity also can become the key to success. Of course, when you have popularity in the art society.
Thus, the most expensive up-to-date digital NFT was sold by digital artist Pak. Nobody knows his name, and many people think it could be even a group of artists. His artwork “The Merge,” made from different pieces that create the one picture together, was sold in December of 2021 on the Nifty Gateway marketplace for almost $92 million. The method of ownership is curious: 28 000 people collectively own this work of digital art. The pieces ranged from $299 for those who already had the Pak paintings to $575 for new obtainers. These people can “collect” the picture and sell it as a whole art object; however, they need to find a buyer for this one.
These enormous amounts of money show people's interest in something new, unique, and untouchable. Digital paintings, celebrity tweets, and even the first draft of the code for the Internet – all of these items could be sold for large amounts of money. Their cost is determined only by how many potential buyers are willing to pay.
NFT are pretty popular; why are people interested in these digital works?
We can use the analogy with Van Gogh. His artworks are often replicated. However, simultaneously they become even more valuable. The more noise around the work – the higher the artwork costs.
Of course, there exist some disfigurements. Firstly, Van Gogh's artworks are genuine, and you can touch them. In addition – they are unique for real. Crypto art can be sold dozens and thousands of times to name just as a limited collection of something. It can't be touched but can be resold; it's not unique and not a mass product either.
Secondly, no copy of Van Gogh has such a value as the original one. Even through the centuries, the creator's presence is felt, but do you feel anything when buying digital assets? The presence of the creator is absent, one way or another.
However, people who buy NFT for dozens, hundreds, or thousands of dollars have the same motivation as people who buy expensive shoes or watches – they want to have something unique, to feel special. Their desire also could be to handle some superiority or peculiarity. Psychologists say these are the trays of a selfish person.
Another psychological picture consists of collecting stamps, books, cars, dolls, etc. Our mind gives us emotional encouragement for achieving the goal; it attracts us and makes us want it more. However, it's a kind of drug – the strong desire to collect everything.
Those who buy NFT pay for exclusivity, for status, in other words. It is cool and brings inner calmness and self-confidence. In cases with a healthy psychological state, of course. In addition, it is pretty straightforward: there is no need for transportation, safety, and other measures. You buy it – you have it. That's it.
Not as virtual and meaningless as it might seem at first glance. Firstly, it is a means of confirming the ownership of digital art. These tokens can verify your identity if to speak simpler. It is a kind of legal possession and confirmation of the object's owner.
Secondly, NFT can be used as a "ticket" for a private event or party. There has been an example already – you could buy a specific unique token and get access to a private party in the metaverse of The Sandbox project. Snoop Dogg, the famous rapper, became an active supporter of this event, and the prices got even higher.
Finally, NFT can help with the fake issue. For example, it could be used for tracking goods through the chain. A record of the goods you want to buy from an expensive brand or a celebrity could be written in NFT form inside the blockchain. Thus, using the unique QR code on the package would solve the fake issue immediately.
People were always interested in goods or things that did not have analogs. NFT can be put in that group. However, on the other hand, it is not a bar of gold or gem. The concept of uniqueness exists only in the digital space. But these trends are changing quite fast. Also, NFT's value is justified entirely by demand from a potential buyer.
You can remember the example with Bitcoin, which trend was forming almost in a similar way. Then, why could NFT be worse than the main cryptocurrency? Bitcoin is a fungible asset, so you can sell it and get back your money to use it in everyday life. With NFTs, it won't work. Not every NFT can be sold with a 100% guarantee.
Today, NFTs cause a lot of controversy among traders and investors. Can a new trend turn out to be a soap bubble? Let's imagine that the skeptics are right and NFTs are unnecessary. What to do if you have NFTs and can't sell them to anyone because they are non-fungible?
There are a couple of areas where you will be able to use even non-fungible tokens:
- Gaming industry
- Gamers create and own game items, so their safety will no longer depend on their creators. Participants will have the opportunity to transfer or sell the items if they see fit.
- Security of the personal assets
- NFT, as we claimed before, can be a "proof of ownership" for any real asset that a person possesses. There is no opportunity to forge this digital document, so it becomes a perfect and safe personal information keeping. Access, of course, is regulated only by the owner of the asset.
NFT repeats a great conviction of an old age truth: let the object be functional or let it be not; its value depends only on the purpose for which it is used.
Before NFTs, there was no affordable and straightforward way to identify the original file, image, artwork, meme, or computer file from its copy. Non-fungible tokens are pretty reliable means for spotting the proof of ownership of any digital object. Blockchain systems help keep them safe and transparent at the same time, excluding the possibility of forging.
NFTs fit the concept of art; they also are unique, indivisible, and inimitable. Even their values are pretty similar. This is what helps the NFT earn points in the field of the crypto market. As in the case of art, rich people want to have unique tokens, and token holders are ready to sell their creations to these wealthy people for fabulous money.
However, there are the same risks with NFTs as with all other digital assets, but they are also not fungible. There are more risks. Of course, we have already mentioned a couple of ways that will help you avoid the worst fate of the NFT; however, in any case, you should not be relaxed. Investments and trading always border on risks – your job is to secure the minimum loss for yourself.
We remind you that the Wisebitcoin cryptocurrency exchange trading platform helps diversify risks, so assets work for you. NFTs are sold for cryptocurrencies, but we are professionals in this market. Wisebitcoin provides a large selection of cryptocurrencies used to sell and purchase NFTs and offers helpful information on our website.
Follow the link and get acquainted with all the services that Wisebitcoin provides you. We are glad to help with your beginnings, so if you want to know in detail and don't be shy!