Why Do People Buy NFTs?
Every few weeks, there seems to be a viral tale of an NFT being sold for a large sum of money. The NFT market has exploded in popularity and profitability in recent years, whether it's a popular meme selling for hundreds of thousands of dollars or a tweet selling for millions.
Within and outside the blockchain industry, this popularity has caused some division. Some believe NFTs are the next step in content monetization, while others see them as a passing fad. One thing that both groups have in common is their fascination with why individuals would spend so much on essentially immaterial objects.
But why are people willing to pay such a high price for NFTs, and why do we buy them at all?
What is an NFT?
An NFT is a blockchain-based data unit that is permanent and irreversible. These are the data units that are used to represent certain assets, whether they be physical or digital. It is said that an asset or object has been 'minted' as an NFT when an NFT is sold as a representation of it.
They've grown in prominence in recent years, and they're now widely used in the entertainment and media industries. A Christie's auction earlier this year sold an NFT for $69 million, while Twitter CEO Jack Dorsey sold his first tweet for $2.9 million, among other prominent cases.
NFTs were once mostly utilized by smaller independent artists to make a livelihood, but it is now far more normal for NFTs to be sold for millions of dollars, and this trend shows no indications of slowing down anytime soon.
Why are they Valuable?
The answer to the question of why people bother to acquire NFTs, much less spend millions on them, can be found in the technology that underpins them. NFTs are data units that are recorded on blockchains and cannot be erased or modified once they have been imputed. This is especially crucial when purchasing items such as artwork, limited-edition media, and so on.
Because NFTs are difficult to copy, they provide a certain amount of assurance. When a person purchases a non-fungible token (NFT) of a real-world asset, they are assured of sole possession.
Consumers are drawn to NFTs because they offer a unique quality. Artists typically issue a small number of limited edition NFTs for sale, and consumers are willing to pay more for limited edition items.
Furthermore, many of the items coined and sold as NFTs are uncommon in and of themselves. People would be willing to pay extra for these because top painters only mint their exclusive paintings once as NFTs, and Jack Dorsey only had one first-ever tweet. NFTs also give artists more privacy and control, as well as improved fan connection.
Normally, an artist would have to go via a broker or dealer to sell their work, but selling NFTs allows for more direct engagement with fans and greater control over how their work is handled.
It's also worth noting that NFTs are inextricably linked to collectibles, which have been a thriving market for generations. NFTs are a modern way to exchange collectibles, whether it's artwork or an in-game asset, in numerous ways. For a long time, the worth of these objects has been questioned, with many people doubting the wisdom of spending millions on a real-life painting or ancient antiquities.
However, for an art lover or meme fan, these items are valuable, and paying for them, whether directly or through an NFT, is a wise investment. With this in mind, we should expect the NFT sector to thrive in the future, with even more products being minted and sold as NFTs.
In terms of NFTs' worth, as long as the items being minted as NFTs have value to purchasers and NFTs continue to provide an innovative means for them to be purchased, their value will likely last for years.
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The fact that the works of the artists did not cost much while they were alive changes the situation after their death. Many artists sell their work cheaply to make a living, or in some cases use it to pay off debts to local shopkeepers. In this case, people who own original works double their profit margin by 5 or 10 times.
NFT, on the other hand, offers artists a way out. Blockchain, with its decentralized structure, ensures that the works are accessible to everyone, while NFT preserves the originality of the works.
People are influenced by these and turn to NFTs for profit.
Thanks for the article.
How is this not just a fad? I mean, what does one do with a virtual artwork other than to trade it? And what is that "quality" people see in an NFT, do they think that because it is created by an artist it is special? Grab a paintbrush!