In July of 2021, OpenSea, one of the most popular NFT marketplaces in the world, was valued at $1.5 billion. That staggering number had grown to $13.3 billion in January 2022. And despite the drops that we’ve seen in the market, the demand for NFTs is clearly high. But even though the appetite for crypto art has exploded in the past year and new buyers are entering the ecosystem at an unrelenting pace, the market is rife with skepticism.
In many cases of NFT ownership, we’re talking about digital files, after all. How is owning such an NFT any different than capturing a screenshot of an image? Does the “proof of ownership” that buyers are hungry for actually mean anything in the long run? With all of this in mind, should you buy an NFT?
To help you decide, here’s a closer look at the main reasons why people own NFTs.
1) NFTs empower artists
Artists have long suffered at the hands of publishers, producers, and auction houses that usher them into contracts that don’t serve their interests. The primary problems are that:
- Many contracts require creators to give up the rights to their intellectual property (IP). As a result, they don’t have a say in how their work is adapted or where and when it is displayed.
- Many artists only receive a pittance for their work, and they miss out on profits that are made when their work is subsequently sold on secondary markets. As a result, a lion’s share of the wealth goes to the multinational corporations they sign with.
NFTs have the potential to usher in more equitable models by bypassing the gatekeepers that currently control creative industries. With NFTs, artists can mint their creations on a blockchain and sell their work independently. This allows them to retain their IP and creative control. Additionally, thanks to mechanisms built into the blockchain, artists can earn royalties (which they can set themselves) from all secondary sales of their work. So when you buy an NFT even on secondary markets, you are generally ultimately supporting the creator.
NFTs also lower the barriers to entry in many industries. They allow artists to avoid the hassle, monetary investment, and many of the middlemen that are necessary when distributing physical works.
Simply put, many individuals buy NFTs because it’s a way of empowering and financially supporting the creators that they love.
Our society has long accepted that rare baseball cards have value. Despite costing less than 5 cents to make, a 1952 Mickey Mantle rookie card sold for $5.2 million. Why? It’s not about the physical cardstock. It’s about what it represents – history, rarity, cultural relevance, and fandom. NFTs are, in many ways, the digital version of this.
Just like rare baseball cards or one-of-a-kind works of art, part of the demand for NFTs comes from the uniqueness of a digital item. Because every NFT is different, the desirability to own the NFT as a collectible significantly increases their appeal to some. For individuals who want to build a collection of digital assets, NFTs offer a unique opportunity that hasn’t existed outside of traditional collectibles and art markets ever before.
As such, artists across disciplines have tried to increase the scarcity of their NFTs to make them more appealing collectibles.
For example, many of the most popular NFT generative avatar projects, like Bored Ape Yacht Club (BAYC) or Azuki, have a fixed supply of tokens. Each token also has its own algorithmically generated rarity traits. Thus, the creators engineered a level of scarcity that helps increase collectability, particularly for NFTs featuring the rarest traits. Other artists have used similar tactics – only minting one NFT of an album, for example – to dramatically increase financial interest.
Some NFT owners are less interested in having an exclusive item to add to their collection and are more interested in having an asset that will increase in value. In this respect, some collectors treat NFTs as an investment — much like traditional art.
In 2013, Jeff Koons sold his sculpture Balloon Dog (Orange) at Christie’s for $58 million. Mike Winkelmann, a prominent American digital artist known professionally as Beeple, sold his Everydays: The First 5000 Days composite at Christie’s for $69 million in March of 2021.
At roughly the same time, a group of financial traders torched a $95,000 Banksy painting in an attempt to drive up the value of the artwork by selling it as an exclusive NFT.
The concept of digital scarcity may seem counterintuitive to some. Everyone can see and interact with the image or animated GIF being sold as an NFT. However, as noted, there can only be one NFT owner. For many, this is enough.
Of course, the perceived value of an NFT can fluctuate wildly based on popularity and market appetite, and this has led to individual NFTs being bought and sold for thousands or millions (or tens of millions!) of dollars. But market volatility makes NFT investment a high-risk, high-reward scenario with the potential for major losses if the market turns or public interest wanes.
One of the most interesting aspects of NFT ownership is the sense of community and camaraderie that comes along with it. For many collectors, buying an NFT isn’t really about owning a unique digital file or making a quick profit. It’s a matter of identity.
Many creators have turned their NFT projects into vibrant communities. And because blockchain allows individuals to see who’s collecting their NFTs, creators are able to create exclusive offerings accessible only to NFT owners.
The Bored Ape Yacht Club is, perhaps, the best example of community building in relation to an NFT project. Here’s just a small sample of what BAYC NFT owners get…
- Access to a members-only discord
- Commercial usage rights to their NFTs
- Exclusive merchandise
- Tickets to virtual meetups
- Access to exclusive live events
- Airdrops (i.e. digital assets distributed directly to their wallets free of charge)
- A vote in fund allocations, governance rules, projects, partnerships, and more via the ApeCoin
So, should you buy an NFT?
Are NFTs right for you? Or is it better for you to stay away? Honestly, it’s a hard question to answer. In the end, it really just comes down to your personal preference and why you want to get involved in the first place. But there are a few things that can help you decide.
- NFTs are great if you want to support a creator, are interested in owning a part of something, or find the community aspects compelling.
- As an investment? NFTs are volatile and risky. The market is speculative. If you are okay with this, wonderful. But be careful, and never spend more than you can afford to lose.
- Despite the explosive popularity we’ve seen in the past few years, NFTs are still in their early stages, and it’s never too late to get started. You definitely didn’t miss the boat.
If you do decide to get into the NFT ecosystem, we hope you enjoy the ride – we know that we certainly have.
Reposted from: nftnow.com