First off, if you are not familiar with this form of digital asset that has conquered the financial world, being now more popularized than classic cryptocurrencies, then arm yourself with patience and attention because it is time for you to learn something new.
Maybe, the best way to understand why do people buy NFTs is by finding out what the abbreviation “NFT” means.
What is an NFT?
“NFT” or “Non-Fungible Token” is a series of cryptographic assets created using the same type of programming used for cryptocurrencies and based on blockchain technology. And I guess you are now more confused than before.
Let’s take the terms step by step and make the worktable clearer.
“Non-fungible” is the principal characteristic of all NFTs and the trait that distinguishes them from a normal JEPG you could just save or screenshot from the internet. It means that these digital pieces of artwork are unique, and they can’t be replaced with anything or interchanged (unlike bitcoins which are fungible, meaning they can be changed one for another).
Why do people buy NFTs?
Considering that NFTs are a form of digital art (drawings, stickers, music, even your brain converted into artificial intelligence), they operate like normal pieces of art (paintings, sculptures, unique designer pieces of clothing), so people, to be more specific around like 64% of people, are buying them in the hope of making more money.
How is that possible? Mostly because, with time, they increase in value as an investment option, but another good reason would be that NFTs are often seen as an investment opportunity due to their unique characteristics.
Because they cannot be divided, each individual NFT can be worth more than any of the cryptocurrencies they’re bought with initially. This makes them a desirable investment for those looking to make a profit since their value depends heavily on demand and how much someone is willing to pay for it.
Some may say that NFTs are the future of fine art and are paying thousands of dollars for a piece of art, or they may be just creators who exploit their talent for extra money (I am saying “extra” like it’s a little add up to their bank account when in fact some make enough money to travel to the Bahamas monthly).
If they are such a good investment, why aren’t we all buying and creating NFTs?
You might wonder why, if they are such a wonderful blessing, why there still is not every human on the planet willing to participate in this trend. The answer is more complex than it appears. First, the established ones are very expensive, and even their current holders may have a hard time finding buyers. Secondly, there are tons of rubbish NFT collections that will never be worth anything, so it is quite hard to find the gems.
Third, there is a rising stigma around NFT assets that they are even worse speculative assets than regular crypto. And on final reason is that the bear market has constricted the money flow within the market.
Are they risky?
If the idea of this utopic society does not brainwash you, evolved and based on technology’s benefits, you might be able to notice that even this “oasis” of digital money is riskier than a woman in a short skirt in Brooklyn at night.
But what makes them questionable for buyers? (NFTs creators can sleep tight at night because this is not so bad for them).
It is the fact that this phenomenon is still quite new, and it makes the market for NFTs highly volatile (Over the course of 2020, the value of some of the most popular types of NFTs spiked by around 2,000%, L’Atelier’s report found. On Top Shot, some highlights that initially sold for a few dollars are now worth tens of thousands) with a chance to crash anytime.
Who would want to lose all their money?! Another risk that is quite known among the buyers is that many of them are getting scammed by fake creators and fake marketplaces.
Another risk is that this community is exposed to liquidity shortages. Also, every seller needs to find someone willing to pay the price for a one-of-a-kind item- which might be a hard pill (or a bit more).
A little history class?
Who doesn’t just love to learn more about the origins of…anything. Well, today, it is time to discover some facts from the past.
The first NFT was a result of a collaboration between Kevin McCoy and Anil Dash in May 2014 – “Quantum” is a colorful animated image of an octagon filled with different shapes. It was originally a clip created by Kevin McCoy’s wife (Jennifer) that was registered on top of the Namecoin Blockchain Technology and was first called monetized graphics. It was sold for $1.4 million and was auctioned in June 2021.
In the end, the answer to why do people buy NFTs vary because that just depends on how passionate you are about this form of art, how much you want to support this community, and how willing to risk you are for owning an original instead of a copy.
And keep in mind that some eccentric people pay a lot of money to have popular artworks stolen from the museum just so they can hang them in their hallways.
Who knows, maybe this really is the future.