Have you heard of the 22-year-old Indonesian who sold
his expressionless selfies as a joke but turned into an overnight millionaire?
Yes, the man who made millions selling NFTs If you are tech literate, most
likely you have heard everything and seen the hype about NFTs. 10 years ago, no
one ever thought art, collectibles, memberships, tickets, or even games could
become something so valuable today.
So, what is an NFT?
NFTs, or non-fungible
tokens, are a type of digital asset that exists on the blockchain. Each NFT
contains a unique identification code that cannot be replaced or exchanged for
the same value as the others, making them a valuable tool for creators to sell
and monetize their digital assets. NFTs allow digital art, music, videos, and
other media to be bought and sold with an immutable proof of ownership recorded
on the blockchain. This creates a new market for digital assets and more
opportunity for artists.
How does it differ from cryptocurrency?
Cryptocurrencies and NFTs are two types of digital
assets, but they vary in functionality.
Let’s use Bitcoin as an example. Think of it like fiat
currencies (dollars, euros, yen, etc.); they are fungible as they are easily
replaceable with any other Bitcoin available in the market. They can be
purchased or converted into other cryptocurrencies as well, like ETH, SOL,
etc., through crypto exchanges.
Cryptocurrencies are the digital money used
to purchase NFTs; they were made to be used like regular money to buy, invest,
or trade.
The value of
cryptocurrencies is typically determined by market demand and supply, with
prices fluctuating based on how much people want to buy or sell them. On the
other hand, the value of NFTs is often subjective, as it is determined by how
rare or unique, they are and also due to their cultural significance. NFTs are
often used for collecting and trading digital
assets, with buyers willing to pay a price only for items that they believe
are valuable or desirable. For example, a rare NFT might be worth millions of
dollars to a collector.
As we can see, although both assets are designed on the
same blockchain network, they have quite significant differences. So, do you
need to own NFTs?
Why own NFTs?
Only in recent years has there been an explosive demand
for NFT art. Like most things, there is plenty of scepticism towards these
digital assets. So, what is ‘proof of ownership’? Why is an NFT so valuable
compared to, say, a screenshot of a photo? To give you an idea, here are a few
reasons for the NFT craze:
I) Artists are credited the right way.
Many artists work under publishers or producers; it’s
like a fast track to getting their work recognised. However, these
establishments are usually for their own profit and do not have the artist's
interests in mind. With the help of NFTs, artists can now mint and sell their
work independently, where they retain the IP and creative control. Any
secondary sales from their work also pay them royalties. In short, NFTs are
built to create a fair environment and provide opportunity in the creative
industry, and people who buy them have a means of financially supporting the
artists they love.
II) Collectibility
NFTs have brought collectibles to a whole other level.
According to Rarity Tools, Bored Ape #3739, the 27th rarest asset on Bored Ape
Yacht Club (BAYC), was sold for $2.9 million in September 2021. Yes, you heard
that right—an avatar of a monkey sold for millions of dollars. This is why NFTs
have created a very unique market that hasn’t existed outside of traditional
collectibles and art markets ever before.
III) Investment
As mentioned before, NFTs can only have one owner, and
strange as it may seem, some people still invest in them. They believe that
these assets will increase in value. For example, Mike Winkelmann, known as
Beeple, is a digital artist who sold his piece "Everydays: The First 5000
Days" for $69 million! NFTs are for those who take high risks and expect
the potential for major losses due to market volatility. Therefore, do adequate
research and understand the value of the asset before purchasing it. It is not
advisable to invest in an asset solely because it has been converted into an
NFT.
IV) Community
In addition to the financial benefits, owning an NFT also
brings social benefits, as some creators have transformed their NFT projects
into active communities. The Bored Ape Yacht Club is the best example of how a
project can foster community building. By owning any Bored Ape NFTs, collectors
can obtain access to a members-only discord, exclusive merchandise, a vote on
the future of the project, tickets to virtual meetups, and more. Consequently,
for many collectors, possessing an NFT is not only a way to express their
identity but also how they socialise with their peers.
Are NFTs for you?
Now that you have a brief understanding of what NFTs are
and how they operate in the market, the next question is: are NFTs actually
right for you?
This is difficult to answer because it boils down to the
personal reason for owning them. Here are a few things to consider:
·
NFTs are perfect for
collectors to support certain artists.
·
If you have a good
eye for art, have the means to invest, and don’t mind the NFT market
volatility,
·
Know that NFTs are
only worth what people are willing to pay.
·
NFTs can open new
doors to a different community and lifestyle.
·
Despite the hype in
the past few years, it is still in its early stages.
All in all, cryptocurrencies and NFTs have had a
significant impact on various aspects of our society, such as altering our
perception and valuation of art, modifying the process of art creation and
distribution, and transforming our basic understanding of economy, value, and
currency. It is good to have a clear understanding so that we don’t fall behind
in this digital age.
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