NFTs (Non-Fungible Tokens) are experiencing a reasonably intense renaissance as of late. With the market souring, especially in the sports and media sectors, many non-fungible tokens are being sold by the second, making it possible for their creators to pull in millions of dollars. As a result, NFTs have quite a bit of potential for creating new revenue streams for digital property.
Are non-fungible tokens really worth the excitement and potential earnings? To get a grasp on how worthwhile NFTs are, it helps to have a comprehensive definition.
NFTs, or non-fungible tokens, are a type of digital asset. This type of asset represents actual digital items that exist in the world, such as songs, paintings, special videogame items, and films. These items are purchased and sold on the internet, often against different cryptocurrencies, and encoded with the same technology as most cryptos, namely blockchain technology.
Non-fungible tokens aren’t actually new, either. They have existed since around 2014. However, in 2021, non-fungible tokens are becoming very popular as a way to buy and sell different types of digital media and art. Since 2017, millions of euros have been spent on non-fungible tokens. In the first few months of 2021, over EUR 1.7 billion (USD 1.17 billion circa) was spent on non-fungible tokens.
Why are NFTs so popular?
Many people say they’re worthless, or they’ll soon be, as the hash you own, although unique, it’s still a string, after all. The thing about NFTs, though, is that you can ignore them, but you can’t deny that they moved the needle both in the art and the fintech industry.
That being said, why are they so popular?
Even if they are scarce in nature, non-fungible tokens have mostly been digital items that have already existed on the internet for some time. These include things like basketball game clips, music videos, etc. that have been shared around the internet for quite some time.
Moreover, even non-fungible tokens that are extremely rare items can be viewed online for free. So, what exactly is the point of spending thousands if not millions of euros on something that everyone could download in less than a second or screenshot with ease?
The answer is simple: a non-fungible token makes it possible for the purchaser to own the original piece of digital content. In addition to that notion, non-fungible tokens contain engrained authentication that is essentially proof of ownership. Collectors of special or rare items find much value in this.
First of all, just like any other goods on the market, they acquire value from their scarcity. What NFTs are doing is giving value to something that could be easily copied or modified in any possible way. In other words, NFTs create scarcity.
The fact that a unique digital record can be created to authenticate the ownership of a specific version of a digital artwork is what changes the game.
For example, the artwork Everydays: The First 5000 Days made by Michael J. Winkelmann was sold via NFT for millions of dollars. Although anyone could see the work and download it on their phone, they’ll never own the original version of it. Only one person does: the owner of its NFT.
Why are they an investment opportunity?
It all depends on what you think they’ll be worth in the future. We could say times have changed and new kinds of work should be considered art. In the era of social media people love photography more than ever: everybody can take a photo, but only a talented photographer can make art out of it. Digital art is the next big thing.
For now, we can only tell that NFTs are an everyday trading activity that is generating income and potential legal issues, so although with its risks, it’s definitely an investment opportunity worth considering.