Non-fungible tokens (NFTs) are blockchain-based cryptographic assets that include unique identifying codes and data that make them apart from one another.
At parity, they cannot be exchanged or swapped for cryptocurrency. Fungible tokens, such as cryptocurrencies, on the other hand, are identical to one another and may thus be used as a method of trade.
- Non-fungible tokens (NFTs) are cryptographic tokens that cannot be copied on the blockchain.
- NFTs can represent physical assets such as artwork and real estate.
- By “tokenizing,” you may make purchasing, selling, and exchanging real-world physical things more efficient while reducing the risk of fraud.
- People’s identities, property rights, and other things can also be represented by NFTs.
- Collectors have rushed to NFTs as their value has fallen after first soaring.
Let us dig into the sights why NFTs are becoming popular.
Table of Contents
WHY NFTs ARE BECOMING POPULAR
The year 2021 was unmistakably the year of bitcoin, with cryptocurrencies dominating the world and Wall Street. But, it was the year that previously unknown non-fungible tokens (NFTs) were publicly available.
NFTs made headlines for the first time in March. “Everydays: The First 5,000 Days,” a piece of digital art made by Mike Winkelmann, a graphic designer known in the online art world as “Beeple,” sold at Christie’s for $69.3 million. Since 2007, Beeple has created a daily collage of 5,000 pieces of digital art.
It was the first time in Christie’s 250-year history that a work was completely digitally listed, and it was one of the early milestones that fueled the meteoric rise of “non-fungible tokens,” or NFTs.
REASONS FOR POPULARITY AMONG BUYER COMMUNITY
Rare baseball cards have long been valued in our society. Despite the fact that it cost less than 5 cents to print, a 1952 Mickey Mantle rookie card sold for $5.2 million. Why? It has nothing to do with publishing.
Everything is determined by what it represents: history, rarity, cultural significance, and fandom. NFTs are the digital counterpart of this in many ways.
The scarcity of digital products, like as rare baseball cards or one-of-a-kind works of art, raises the demand for NFTs. Because each NFT is unique, the urge to acquire one as a collectible adds to its allure for some.
NFTs provide a unique possibility for those who desire to construct a collection of digital goods that have never existed outside of established collectibles and art markets previously.
As a result, artists of all disciplines have attempted to make their NFTs more scarce in order to make them more enticing collections.
Many of the most popular NFT generative avatar projects, such as Bored Ape Yacht Club (BAYC) or Azuki, for example, have a limited amount of tokens. Each token also has its own rarity attributes that are produced by an algorithm.
As a result, the developers built a measure of scarcity that contributes to collectability, particularly for NFTs with the rarest features. Other artists have utilized similar strategies to increase financial interest, such as just printing one NFT of an album.
Some NFT owners choose to have an asset that will increase in value over an exclusive item to add to their collection. Some collectors consider NFTs as investments in the same manner that they do traditional art.
Jeff Koons’ Balloon Dog (Orange) sold for $58 million at Christie’s in 2013. Mike Winkelmann, often known as Beeple, is a well-known American digital artist who sold his Everydays: The First 5000 Days composite for $69 million at Christie’s in March 2021.
Around the same time, a group of financial traders set fire to a $95,000 Banksy painting in an attempt to increase its value by selling it as a one-of-a-kind NFT.
The sense of connection and camaraderie that comes with NFT ownership is one of the most exciting components of it. Many collectors purchase NFTs in order to acquire a one-of-a-kind digital file or to make quick money. It’s a question of identification.
In support of their NFT activities, several artists have developed active communities. Because blockchain enables users to identify who is collecting their NFTs, developers may construct one-of-a-kind services available exclusively to NFT owners.
Perhaps the clearest example of community expansion in regard to an NFT project is the Bored Ape Yacht Club. Here’s a taste of what BAYC NFT owners get…
- Members can only use Discord.
- Their NFTs have a commercial licence.
- Limited edition items
- Virtual meetup tickets
- Exclusive access to live events
- Airdrops are free digital assets that are sent straight to users’ wallets.
- ApeCoin may be used to vote on budgets, governance rules, projects, and partnerships, among other things.
4. BRAGGING RIGHTS
Tokens are value units that are kept on the blockchain. Tokens include cryptocurrencies such as bitcoin, dogecoin, and ether, while not all tokens are intended to be used as money.
They can be linked to physical items. Nike is now experimenting with crypto tokens related to shoe ownership, but they might also represent intangibles such as cloud server storage space or access to a private chat room.
NFTs are similar to cryptocurrencies in that they have unique qualities but are not often used as money.
This is critical to understand since, until recently, there were no non-fungible commodities available on the internet.
The internet, as we know it, functions like a massive copy machine, where any digital file may be reproduced an endless number of times, and each copy is identical to the original.
The internet’s limitless compy-making feature was fantastic since it increased the abundance of digital items. It was, however, problematic for those who wanted to benefit from the scarcity of what they produced. The internet was not the place to be if you were an artist looking to create only 100 first editions of your digital work.
People recognized a few years ago that blockchains might be used to produce unique, uncopyable digital files that were entries in a public database, allowing anybody to verify who owned them or track them as they transferred from one owner to another.
This discovery inspired the development of NFTs and is the foundation of their value. This is where bragging rights collide with a crucial NFT feature: ownership.
5. CREATOR SUPPORT
The most extensively utilized sort of media is digital material. Facebook, Instagram, and Twitter have gained billions by capitalizing on the concept of digital content.
However, there is a disadvantage to this type of content: it is readily replicated, especially on open platforms. People have been caught plagiarising the same information across all major media outlets.
NFTs are currently addressing these difficulties by recognizing the original digital object, recreating it in a limited number of ways, and individually monitoring each copy.
Furthermore, an account or wallet with a certain numbered copy will be aware of how many other similar copies were created, letting it assess the relative rarity. Only 4999 people on the earth have a recorded clone of the material if replica #107 is one of 5000 total manufactured. This improves the content’s integrity.
6. LINK TO METAVERSE
NFTs and virtual property papers can both provide you exclusive access to a specific location in the metaverse. In actuality, they are one of the keys to changing the basic design of the metaverse, upsetting traditional social networks of user engagement, transaction, and socializing.
Because of the marriage of the two, individual users and enterprises may simply represent their real-world assets and solutions in a decentralized digital environment. Because of new models powered by NFTs, the metaverse may be expanded to encompass additional real-world assets.
The blockchain would be in charge of assuring transparency and immutability since the metaverse would be supported by a fair and transparent economy with no chance of artificial value inflation.
7. BLEND DIGITAL & PHYSICAL WORDS
Combining physical and digital elements to improve the customer experience is not a new concept.
Chris Weil, Chairman-CEO of Momentum Worldwide, invented the term in 2007 to explain the relationship between physical and digital ecosystems, where all brand experiences reside.
Phygital was a term used at the time to emphasize the great potential for marketers to engage with clients across both physical and digital channels. Brands and consumers had just recently begun to investigate this novel notion in 2007.
The 2020 pandemic accelerated this fusion of physical and digital realms. We lacked social connection since many of us were isolated from our friends, family, and workplace.
Playing NFT games is not the same as keeping bitcoin in a wallet. NFTs are going to be used in the rules, procedures, and player interactions of the NFT game.
In a game, for example, an NFT may be used to represent your unique character or avatar. NFTs can also be discovered in digital things obtained during gameplay. You may then exchange or trade your NFTs for a profit with other gamers.
You may also profit from NFT games by employing a newer, play-to-earn method, which we’ll go over in greater detail later.
REASONS FOR POPULARITY AMONG ENTERPRISES
Anyone interested in technology and investing has almost certainly heard about NFTs. NFTs, or non-fungible tokens, are unique assets that provide legal proof of digital asset ownership. PFP NFTs, such as the Bored Ape Yacht Club NFTs, are popular because they are affiliated with a certain community.
The value of some NFTs, on the other hand, is presently concentrating attention on the big NFT enterprises.
OpenSea, Rarible, and a slew of other NFT markets and businesses are gaining traction. Several larger corporations are also involved in NFT-related activities.
1. DEEP CUSTOMER ENGAGEMENT
a. Tokens that represent user accounts can help with retention and loyalty.
MMORPGS are typically played for hundreds, if not thousands, of hours. The amount of money and work gamers have spent on their in-game characters has increased as the gaming business has progressed.
When a player’s character dies or is removed from the game, they lose all of the time and resources they put into it; a concept known as “sunk cost.” This has likely led to a significant number of players abandoning games in frustration.
b. Connect in-game purchases to NFTs
Businesses may convert game items into NFTs and let players swap them with other blockchain players. Because in-game things may be exchanged outside of the game, they have real-world worth.
By providing them in-game power, they may even equate real-world purchases with those same things. This incentivizes players to purchase things from their store; for example, if a certain sword has special attributes and you obtain it by purchasing some new shoes from their store, you’re more inclined to play the game that provides such an item.
c. Connect NFTs to real-world objects.
NFTs can connect in-game products and services to real-world goods and services and vice versa. This link is important because it encourages consumers to spend their money on in-game items rather than real-world things.
2. NEW REVENUE STREAMS
Make NFT variants of your items. Offering digital versions of your items allows you to reach new consumers and markets.
Businesses can work together to establish an NFT. For example, Chronicle will collaborate with entertainment firms and celebrities to create one-of-a-kind NFTs that benefit both parties by exposing them to new audiences and modernizing existing goods and services.
Create brand-related GIFs to offer alongside your regular things or services, as Nyan the Cat did.
c. NFTs in limited quantities
Create NFTs for holidays or special events that can only be purchased during a specified time frame to create a sense of urgency and scarcity.
To encourage individuals to purchase, create, and sell NFTs for charitable purposes. This raises awareness of both the charity you’re assisting and your company’s reputation.
NFTs are becoming increasingly popular and widely used as more people become aware of their numerous advantages (such as asset transfer and scalability). We could learn about money creation using NFTs one day.
However, further effort is required. To become more useful, NFTs must overcome regulatory restrictions. The number of asset exchanges on the NFT platform is expected to grow in the coming months.
WHY ARE NFTs SELLING SO HIGH?
Despite the appearance that NFTs appeared out of nowhere, they are a long-awaited innovation:
- NFTs first gained traction in 2017 with the launching of CryptoKitties, a game in which players breed and sell virtual cats.
- Following a brief hype cycle, venture capital-led investments were made, and mechanisms for purchasing, trading, and minting NFTs were developed (like SuperRare, OpenSea, Rarible, and Nifty Gateway).
- In 2019, major companies such as Formula One and Nike joined the industry.
- The NFT market will have tripled in size by 2020, reaching $250 million or more.
NFT, on the other hand, has grown in the first few months of 2021.
In February alone, the 10 most popular NFT collectibles had a 400% average MoM growth, totalling over $400 million in sales volume.
WHY ARE NFTs HYPED?
Non-fungible tokens, or NFTs, are “minted,” or created, on the blockchain, but they vary from cryptocurrencies and other digital assets in that they have their own personality. There are no two NFTs alike, and this difference is what draws investors.
After all, it’s human nature to value ‘rare’ commodities such as gold and oil, which have historically been in high demand owing to scarcity.
NFTs are differentiated by their capacity to authenticate transactions and aid in the prevention of piracy. To put it simply, they act as digital copyrights on objects. Assigning a monetary value to a non-tangible thing, such as digital art, a digital meme, or just a tweet, raises the value of NFTs.
ARE NTFs OVERHYPED?
If JPEGs of bored monkeys buy at least $400k, then sure, it’s expensive and a bubble. However, as our economy shifts to the internet, NFTs are becoming more likely to have a real-world applications. Capitalism necessitates ownership, scarcity, and authenticity. These characteristics are brought to the world of digital assets by NFTs.
- For individuals with a lot of spare capital, NFTs are a defective, high-risk market.
- NFTs are difficult to explain to those who are unfamiliar with the sector.
- Insider ownership, often known as ‘whitelisting,’ encourages insiders to sell when a collection is made public, perpetuating inequity. This would be prohibited on a public stock market, and people would face penalties.
NFTs are a contentious topic. So, let us assess the problem.
NFTs were first fairly popular. Everywhere you turned, there was some gigantic platform or celebrity having a good time.
Coinbase has developed the first-ever NFT market beta functionality. As your Twitter profile image, you may utilize Ethereum-verified NFTs. NFTs are coming to Instagram, according to Mark Zuckerberg. (What precisely does this mean?) Katy Perry, Snoop Dogg, and Tom Brady all purchased or began collecting NFTs.
NFTs had a total of 41 billion in sales/trading activity at the end of 2021.
This figure is higher than the worldwide music recording business ($34 billion), 3D printing ($25 billion), and global cruise ($27 billion).
BUT … Chinks are starting to appear in the armour. The volume of NFT trading is decreasing. Google NFT searches are no longer available. Cryptocurrency, NFT’s brother, has been in remission for about a year. Scams, fraud, and forgeries are unfortunately all too widespread.