WHY IS NFT ART EXPENSIVE?
11 October 2021, Monday
NFT or Non-Fungible Tokens have been a relatively new concept in the Blockchain space that has been making waves since their release. Initially, they were released as a solution to a problem of digital asset security and fungibility, with no particular use case. The most well-known NFTs are CryptoKitties, but there have been many other projects releasing tokens for different purposes such as Spells of Genesis, CryptoBots and even Fortnite’s V-Bucks.
While NFTs might have started as an attempt to solve a problem, over time the design of NFTs has become more sophisticated and the use cases for NFTs are expanding. Today, people can create unique tokens that can be used to represent ownership of digital assets. This ownership is uniquely expressed through the token’s metadata. With many thousands of different types of digital assets today, there is no standardised way to represent them inside an Ethereum smart contract.
NFTs are non-fungible in that they are not interchangeable. Each NFT in a blockchain is unique and is represented by its own metadata. As a result, any given token in a blockchain can be used to represent many different assets with different properties. The more unique attributes of each asset, the more value it will have when traded or transferred from one owner to another.
Why are NFTs expensive? Let’s see why.
1. Digital assets are worth more than their tokens
Some people might see the price of an NFT as too high, but you have to consider the value of each asset represented by each token. For example, for CryptoKitties, it is not uncommon to pay tens of thousands of dollars for a single token. This is because the asset represented by that token is valuable; other people will pay that much to own that one item. When comparing NFTs and digital assets like CryptoKitties, one needs to consider the full value of each asset.
2. Some NFTs are more rare than others
One of the incredibly interesting things about NFTs is that they can represent completely different types of digital assets. They can be very similar to each other (e.g., CryptoKitties) or they can be completely different. Each type of asset has its own set of attributes and therefore carries a different amount of value for each asset.
3. NFTs are limited in number
For some projects, NFTs are limited in number; they can’t be created or destroyed. This is one of the most interesting aspects of NFTs because it means that there is a finite supply of each asset represented by an NFT or from an artist / creator. Due to the design, any increase in demand for an NFT will result in higher prices for them. This means that if CryptoKitties suddenly take off and become extremely valuable, the price will increase significantly.
NFTs are not the only digital asset in the Blockchain space, and it’s important to keep in mind that each asset has its own value. To accurately compare NFT prices and values, you must consider all the attributes of each token and its full value when compared to similar assets. As the market for NFTs continues to grow, you can expect to see NFT prices to rise significantly in the coming years.