How did NFT happen to have such an impact today?
NFT tokens have virtually endless use possibilities in real-world applications, despite being most often thought of as digital collectibles. Some NFTs sell for millions of dollars, but what affects their worth? In short, the intrinsic value of an NFT is constituted by such factors as rarity, tangibility, and utility. Of course, an important part is also what kind of asset the NFT pertains to and what type of ownership it assumes — long-term or short-term.
The 3 key factors affecting the value are rarity, utility, and tangibility.
The more scarce and harder it to find a particular NFT is, the higher the chances it will be priced high. Good examples of rare NFTs are those issued by famous digital artists, celebrities, or popular brands. NFTs granting some kind of in-game ability or an attribute are also often highly valued. Such tokens attract people with their intrinsic value because owning an NFT is like owning a certain object and can be proved by a crypto-asset on a blockchain. This makes uncommon tokens somewhat of a premium and gives a sense of distinction from other users. (Notable rarity effect cases are the first CryptoKitties, Everydays — The First 5000 Days by Beeple, etc.)
NFT’s price is positively affected by the potential for its actual use in the physical or digital world, i.e. how useful it is. NFTs are more than just collectibles. Often game items come as NFT — virtual land plots, avatars, weapons, skills, etc. And the more popular such a project, the more valuable the tokens used within it. For instance, as a decentralized game community grows, users are willing to pay increasingly higher prices for unique cards. (Think of soccer game tickets, land plots in Decentraland, collectible cards for card games (i.e., Geralt of Rivia for the Witcher Card Game).
Although less common, there are NFTs bound to real-world objects that can be “touched”, with the token as a proof of ownership. The object can be absolutely anything, and not necessarily rare. It may simply give pleasure or life benefits. The price in this case depends on the satisfaction degree. From a trading point of view, “tangible” NFTs are the best fit for short-term trading. In many cases, assets (like tickets) have an expiration date. There are, however, objects that can grow in value in the long run such as limited edition clothing or books.
Reshaping the Art Industry
As an example of how NFTs started playing a bigger role in today’s business, let’s look at one particular industry and try to grasp the changes it is undergoing.
The art market is rapidly transforming under the influence of digital technology. According to NonFungible, the global NFT market turnover amounted to $18 billion, with the number of unique buyers having reached 2 million people in 2021. CoinDesk analysts claim that by 2025 the NFT market will grow fivefold.
Some Resonant NFT Deals To Recap
Jack Dorsey’s First Tweet sold for $2.9 million; Beeple’s (real name Mike Winkelmann) “Everydays: The First 5000 Days” reached the $69.3 million mark at Christie’s auction in March 2021; an NFT from the Bored Ape Yacht Club collection set a sort of “capitalization” record being sold for 4,337 times its minting price.
NFT’s started off in image format, followed by the appearance of short animated NFT movies, thus starting to change the nature of things in the art world. Now, instead of buying paintings and sculptures, art collectors are giving away $millions for the rights to digital memes that any other user can see for free. Now pixels have as much value as artists’ brushstrokes. This is an entirely new form of art perception.
In 2022, the global market dipped — according to CruptoSlam, the global NFT-market trading volume has fallen by 32% since the end of February. Yet, the market is expected to grow due to the uniqueness of NFT as a tool of interest to digital artists and collectors alike. 2021 was a hype success, while 2022 is making NFT a habitual art object: buyers are watching trends, following artists’ work, and considering NFT more of an investment. Hence, we anticipate the arrival of the secondary NFT market in the visible future.
NFT Art and the Significance of Blockchain
While it is important to recognize the need for physical NFT galleries, blockchain technology indeed plays an integral role in the overall ecosystem as it helps recognize and reward hard work by various members of the community. Blockchain has created an entirely new financial model for these assets. This allows authors to make most of their profits, as value is exchanged directly through the blockchain network. Not to mention proof of ownership as all transactions are done and recorded on the blockchain.
Will NFT Art Galleries Be A Permanent Trend?
While the benefits of physical NFT galleries are obvious, it’s unclear whether these dedicated spaces will continue to appear around the world — or disappear as the NFT art hype fades. Carrie Eldridge of ATO Platform says that NFT art is rather an evolution of an old existing art form — digital art — not a revolution, also speculating that digital art didn’t catch on in earlier decades simply due to the impossibility of keeping track of it and that NFT is simply a “pointer” to where an illustration is stored. He also added that NFTs need to be explored, and there are many enthusiasts who embrace this innovation.