In recent years, non-fungible tokens (NFTs) have gained widespread popularity in digital art and assets. And if you’ve ever wondered why people buy NFTs, well, we have too. That’s why we’ve prepared this article to make it easy for you to understand why people buy NFTs.
And we make no exception, mentioning both reasonable or good reasons why people buy NFTs and less good ones.
What Does NFT Stand For? What is an NFT?
NFTs are a new type of digital asset that stands for “non-fungible token.” Theoretically, this means they are unique and can’t be duplicated or replaced. Unlike physical money or cryptocurrencies, which can be exchanged for one another, NFTs are one-of-a-kind and have a special digital signature that distinguishes them from all other tokens.
In other words, NFTs allow people to own and trade unique digital assets that were previously impossible to own in a tangible way.
Although the NFT sector is continuously evolving, the most common applications of NFTs at present are:
- Art;
- Collectibles;
- Virtual land in the metaverse;
- Music;
- Gaming items;
- Photography.
Let’s take an example of an NFT use case in the music industry. With NFTs, musicians can release special edition songs, albums, and other digital content that are one-of-a-kind and cannot be duplicated. Fans can purchase these NFTs and own a piece of the artist’s work, which can then appreciate in value over time, like an art painting, such as Monalisa.
For example, Grammy-winning DJ 3LAU released an album as an NFT in 2021, with each song being a unique token that fans could buy and trade. The album sold for $11.6 million, making it one of the largest NFT sales in history.
The Benefits of NFTs
Here are some benefits of NFTs that you should know about:
Ownership and Authenticity
One of the main benefits of NFTs is that they allow creators to prove ownership and authenticity of their digital assets. With traditional digital files, such as JPEG or MP3, anyone can easily copy and distribute them without the creator’s permission. But with NFTs, blockchain technology ensures a single, unique copy belongs to the rightful owner. This allows creators to monetize their work and collectors to invest in rare and unique digital assets.
Transparency and Traceability
NFTs are built on blockchain technology, which means that every transaction is recorded on a public ledger that is transparent and immutable. This creates a level of transparency and traceability that is not possible with traditional assets. With NFTs, you can track a digital asset’s ownership and transaction history, making it easier to verify its authenticity and value.
Flexibility and Interoperability
NFTs are not limited to a specific platform or application. They are interoperable, which means they can be used across multiple platforms and applications. This allows creators to reach a wider audience and collectors to trade and sell their NFTs on different marketplaces.
Revenue and Royalties
NFTs provide creators with a new way to monetize their digital assets. With traditional digital files, creators often struggle to monetize their work because of issues with copyright and piracy. But with NFTs, creators can set up smart contracts that allow them to earn royalties every time their digital asset is sold or traded. This creates a new revenue stream for creators and allows them to earn passive income from their work.
Community and Engagement
NFTs have created a new community of creators, collectors, and enthusiasts who are passionate about digital art and assets. This community provides a platform for creators to connect with their audience and collectors to discover and invest in new and exciting digital assets. This creates a sense of engagement and excitement that is not possible with traditional digital files.
Reasons Why People Buy NFTs
The world of NFTs has experienced a rollercoaster ride of highs and lows. DEXterlab, a platform that discovers digital assets, conducted a poll to understand why people participate in this volatile market.
Below are the results from which we will deduce the main reasons why people buy NFTs:
Data Source: DEXterlab
The Main Reason: It’s All About The Benjamins
The primary reason people buy NFTs is to make a profit. NFTs have become a popular investment choice due to their potential for high returns.
According to the data presented above, most people who have invested or want to invest in NFTs do so for profit, breaking their Piggy Bank for higher gains. Simply put, most people just want to turn a profit.
Trading NFTs have been the catalyst for numerous success stories, with individuals like Brittany Pierre exemplifying the lucrative potential of this emerging market. The young woman, who at the time was 36 years old, not only managed to break the cycle of living paycheck to paycheck but also generated a remarkable $109,000 in profits through NFT sales with an initial investment of only $10.
Through astute trading decisions and a willingness to take risks, Pierre navigated the NFT market and found success relatively quickly. Her story serves as an inspiration for those looking to enter the world of NFT trading. It demonstrates the potential rewards that come with diligent research, strategic decision-making, and a bit of luck.
However, in the pursuit of maximizing profits, it is possible to lose all of the hard-earned money that you have accumulated throughout your life. This is due to the unfortunate reality that the market is saturated with bad actors who use the crypto market or NFTs to legitimize their wealth from illegal activities. The art market, like NFTs, is also a common medium for laundering money. Money laundering through NFTs involves purchasing a high-value NFT with illegal funds and then reselling it to legitimate buyers. The transaction creates the appearance of a legitimate sale, but in reality, it is a way to launder the proceeds of criminal activity. The anonymity and lack of regulation in the NFT market have made it an attractive target for money launderers.
So people also buy NFTs to launder money or justify illegal activities.
Although this is not the sole purpose of investing in art or NFTs, it is crucial to be aware of these types of activities and individuals who may be involved in the market.
The Secondary Reason: Being Part of the Community or Flexing
Another possibility why people buy NFTs is because they are huge fans of the technology that NFTs come with, understand the benefits of NFTs, and want to be part of the community of NFT HODLers. Or they just want to flex.
While profit may be the primary reason many investors buy NFTs, it is not the only motivation. There is also a growing community of NFT enthusiasts who are interested in the technology and want to be part of the culture of NFT HODLers.
Some are drawn to the technology behind NFTs and want to be part of the community of developers, creators, and collectors who are pushing the boundaries of what is possible in the digital realm. These enthusiasts see NFTs as a new frontier of creativity and innovation, where artists and technologists can collaborate to create unique and valuable digital assets.
Other people buy NFTs simply to show off their status and wealth, using their digital assets to flex on social media or in online communities. For them, owning rare and valuable NFTs is a way to assert their place in the digital world and stand out from the crowd.
The Third Reason: Maybe People Simply Love NFTs, Art, or Collectibles
While many people view NFTs as a means of investment, another group of buyers is purchasing NFTs simply because they love art or collectibles.
For these buyers, the value of an NFT lies not just in its profit potential but in the intrinsic value that it holds. Whether it’s a one-of-a-kind piece of digital art or a rare sports trading card, these buyers appreciate the creativity and uniqueness that NFTs offer.
For some, collecting NFTs is a hobby, like collecting stamps or coins. They enjoy the thrill of the hunt, searching for new and exciting pieces to add to their collections. And with NFTs, there is always something new to discover as artists and creators continue to push the boundaries of what is possible in digital art.
Others purchase NFTs simply because they appreciate the art itself. They may be fans of a particular artist or musician and want to own a piece of their work digitally. Or they may be drawn to the creativity and innovation that NFTs represent.
The Fourth Reason: Just Want Access to Certain Benefits
Last but not least, another reason why people buy NFTs is the unique perks and benefits they offer. These special NFTs, also known as “utility NFTs,” provide access to communities, games, and real-life perks that are exclusive to NFT HODLers.
One popular example of a utility NFT is Gary Vee’s VeeFriends, which provides access to both virtual and in-person meetups with like-minded individuals. Other NFTs, like those for the game Axie Infinity, are required to access the game and participate in gameplay. Crypto Baristas, a coffee project, offers discounts to NFT HODLers at their future cafes.
These benefits aren’t limited to virtual or gaming communities; some NFTs offer real-life perks too. For example, the digital artist Mad Dog Jones sold an NFT that entitled the buyer to a private tour of his studio and the opportunity to collaborate on future projects.
NFTs Buyer Persona
Based on the statistical information provided, the buyer persona for NFTs buyers can be described as a young, tech-savvy audience with disposable income whose primary purpose in trading NFTs is to make a profit.
Geographically, based on Google Trends data, they are likely to be located in Iran, Turkey, Hong Kong, South Korea, or Taiwan. Regarding the United States, they are likely to be located in the following states: Virginia, Maryland, Hawaii, the District of Columbia, and Washington.
In terms of age, the majority of people interested in NFTs are between 18-24 years old, with 8.6% answering that they have bought or sold NFTs in the past.
When it comes to gender, recent studies show that men in the U.S. are twice as likely as women to buy or sell NFTs, with 15.5% of men expressing interest in trading compared to only 8.3% of women, while men are also more likely to plan to trade NFTs than women, with 9.9% of men planning to trade compared to 6.1% of women.
Income-wise, lower-income earners and upper-income earners ($25,000 or less and $150,000 or more) are equally interested in investing in NFTs. However, middle-income earners are the least interested, with up to 94% of respondents not interested in NFTs at all.
This buyer persona was based on statistical data from 2021 to 2023.
To NFT or not to NFT
Now that you’ve learned some of the reasons why people buy NFTs, and after you’ve seen their benefits, all that’s left to do is think it through, do some research of your own, and make a decision that suits you about buying (or not buying) NFTs.
