Take a look at the image below, it’s one of the first-ever NFTs created, a part of the Crypto Punks collection released back in 2017. What if someone told you that digital images like these could be sold for millions of dollars? Would you want to buy one? Maybe even make one?
CryptoPunk #6046 (Source: OpenSea)
Projects like the Bored Ape Yacht Club (BAYC) see non-fungible artwork sold for over a million dollars each. BAYC is a collection of 10,000 ape-shaped NFTs with different traits, some rarer than others, but even those bearing the more common traits have been sold for upwards of $200,000.
When you can simply right-click and save a JPEG, or better yet, take a screenshot, why should anyone spend money on them? This article will explore why people buy NFTs, and why they might not be as bogus as they sound.
Are NFTs Just Glorified JPEGs? What Sets Them Apart?
The blockchain enables NFTs to be publicly authenticated without a centralized authority, and serve as a digital signature to certify ownership and originality. However, much of the hype surrounding NFTs has come from the ability to flip them for profits. An art collector, Pablo Rodriguez Fraile, bought a 10-second video clip from an artist for $67,000 before quickly selling it for $6.6 million.
However, this isn’t the only utility of NFTs – they’re also used as digital collectibles, and for important digital mementos. The New York Stock Exchange announced last year that they would be handing out NFTs representing the first trade of a few notable listings on the exchange to respective companies. In another example, Twitter founder Jack Dorsey sold his first-ever tweet from 15 years ago as an NFT.
While JPEGs can be replicated infinitely, NFTs cannot, since they often represent more than just an image. This makes them ideal for representing digital artwork, rare collectibles, or in-game items. When you take a screenshot of a picture online, you don’t own that image, and while NFT rights management is still in its infancy, the technology could set the stage for an entire era of digital ownership.
Why Do People Buy NFTs?
1 To Access Exclusive Perks
The key benefit of NFTs is that they confer exclusive ownership to their holders. This means that users can own digital assets that are not available to anyone else, and this can be used to provide them with exclusive access to certain perks, such as entry into exclusive online forums and early access to upcoming NFT collections.
2 To Profit
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. 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.
3 To Preserve Value
NFTs can be seen as a digital store of capital due to their ability to preserve value. Because they’re not subject to inflation like traditional currencies, certain NFTs offer a safe and stable investment option. This isn’t always the case, however, with some experts claiming that most current NFT offerings could lose up to 90% of their value in the years to come.
4 To Secure Digital Ownership & Rights
NFTs are a secure way to verify digital ownership. Each individual NFT is tracked and verified on a decentralized blockchain, making it practically impossible to forge or steal. This makes them ideal for safeguarding digital rights, especially in the case of physical assets like real estate.
How Many People Are Buying NFTs?
The trading activity of NFTs globally hit $10.7 billion in the last quarter of 2021. Audiences within the NFT market are evolving and are no longer limited to a niche group of speculators. Here’s what the numbers say:
- A survey by Morning Consultant found that 23% of Millennials in the US collect NFTs while one in three American adults collect them as an investment or a hobby.
- A poll by Finder found that out of 28,000 responders from 20 countries, the top five countries with the largest share of NFT adoption are in Asia.
- Research by CivicScience reveals that people who earn less than $25,000 per year invest in NFTs at a similar rate as those earning over $150,000.
A Token of Appreciation
While some believe that people who buy NFTs are stupid, in reality, it depends on what purpose buying them serves. Some people invest in them because they believe that they’ll hold value in the future, offering what they consider a safe investment option. Others invest in NFTs to secure digital ownership of physical assets and collectibles, as well as access to exclusive perks, since they are difficult to forge or steal.
The NFT market is growing and evolving, with new audiences being drawn in consistently over the last two years. Some experts claim NFTs will create new ownership opportunities and evolve into a more valuable asset class over time. However, like any investment, make sure to do your own research to see if they’re the right fit for you before investing any money.