NFTs have been gaining in popularity and this trend seems like it’s going to continue for some time. Already, some NFTs have had their values increase significantly, making them very expensive.
So, what makes them so valuable?
Some say that NFTs offer a way to store a value that is not subject to the fluctuations of traditional markets and financial systems. For many web 3.0 enthusiasts, this makes NFTs a valuable asset to invest in and collect.
In this article, we’ll take a look at some of the reasons that NFTs have become so impactful and how they create value.
NFTs value summary
As you probably know by now, an NFT = a Non-fungible token.
In simple terms, these are digital assets that are unique, authentic, and traceable. NFTs can be compared to real art pieces, such as paintings. For example, Van Gogh’s paintings are unique pieces of art that are one of a kind (non-fungible). Yes, anyone can create a replica of any painting, but the original piece is priceless.
Similar to artwork, NFTs can be masterpieces too. For example, one of the most expensive NFTs ever sold is a work of art, Everydays: The First 5000 Days by the artist Beeple. This piece was sold for $69 million at Christie’s auction house and caused a major impact on the NFT community.
You might ask why that NFT is so expensive. To give you some perspective, this NFT contains 5000 different images, and each image is unique. In order to create this piece, Beeple set to create and post a new digital picture online every day for five thousand days straight. He started in May 2007 and hadn’t missed a day until the completion of his goal.
This example should provide you with a better idea about why some top NFTs can be so expensive. It’s simply because of the amount of effort that the artist put into creating that digital art.
The subjective theory of value
The subjective theory of value opposes the idea that the value of any good or service is objective and strictly defined by the utility value of the piece. Instead, with this theory, value all comes down to the market and what people are willing to pay for an item.
For NFTs, subjective value means that the value of an NFT is based on someone’s personal opinion or preferences. In other words, what one person values, another person may not.
I believe that the NFT market obeys this theory.
The value of an NFT = how much someone is willing to pay for it. NFTs become more valuable as more people are willing to pay higher prices for them.
For example, let’s say you buy an NFT for $100. However, if someone is willing to pay you $1,000 for that NFT, then the NFT is now worth $1,000 to you.
How you can determine an NFT value
The value of NFTs can be created by the NFT artists. It’s their time, effort, and dedication that imbue the NFTs with value. For example, an NFT can be expensive because it’s the first NFT created by a popular artist.
Also, NFTs can have value because of the story or use behind them.
Here are some factors to consider when you evaluate the value of a single NFT or a whole NFT collection:
- Who is behind the project (creator or team)?
- What might the potential future value be?
- How much are similar NFTs or pieces from the same creator selling for?
- Do you receive any utility out of that NFT?
- What is your personal perception as a buyer?
- What is the rarity of an NFT piece that you are considering buying?
It’s important to remember that NFTs are still a new market. Because of this, the value of NFTs can change quickly. NFTs could become more or less valuable in the future, so always do your research before buy.
How most NFT collections are created
Let’s discuss the creative processes surrounding NFTs.
We can examine different types of NFT collections:
- Limited NFT collections: These are usually collections of NFTs that are custom-made and have a limited number of pieces. For example, the Ghxsts project by artist GxngYxng.
- Larger NFT collections: These are projects with a larger number of NFTs in a single collection. This could be 1000, 3000, 10000, or even more NFTs. One example is the famous BAYC collection with 10,000 pieces.
I’m not going to discuss custom collections, which can vary widely in value. They are unique pieces of digital art created by digital artists.
For me, it has been interesting to learn about how a creator can create a collection of 10,000 NFTs and maintain their uniqueness. I’ll try to explain to you below how it’s done.
Larger NFT collections usually have a theme or character. The NFT creator picks a theme and creates NFTs that represent that theme. In addition, creators design different traits: backgrounds, clothing, and additional attributes. These design elements are usually randomly used and layered on top of each other, then forming the final images of an NFT collection using the software.
These digital traits can have different values or rarity. The NFTs with rarer traits are more unique and can have a different value (price).
For example, the NFT collection CryptoPunks, based on punk characters, is one of the first NFT collections. Each NFT in this collection is a one-of-a-kind Punk and can’t be replicated.
In most cases, people have their own favorite NFT collections because they can relate to the specific theme. Buying or minting an NFT from a preferred collection is a way to show support for the creator.
Examples of expensive NFTs
To prove to you that NFTs can cost a fortune, I want to share some examples of expensive NFTs:
- Crossroad by Beeple sold for $6.6 million. This artist is mentioned previously in this article due to the record-breaking $69 million sale price on another one of their works. He has also sold one other piece for a stunning high six-figure price.
- 3LAU NFTs sold for $11 million. The creator is a DJ and music producer who sold NFTs from his album Ultraviolet in an auction that included the album, concert tickets, and other experiences.
- Clock by Pak sold for $52.7 million. A joint project by WikiLeaks founder Julian Assange and the artist known as Pak, this NFT was created to support his legal defense.
- CryptoPunk #5822 sold for $23.7 million. This NFT by the Larva Labs team was sold for 8,000 ETH on February 12, 2022.
- The Nyan Cat NFT sold for $590,000. Chris Torres is the creator of this 8-bit animated cartoon character that first became popular in 2011.
It’s important to understand that the value of an NFT can change over time. NFTs can increase in value if demand for them increases or they can go down in value if demand decreases.
The future of the NFT industry
NFTs are still a new and emerging market. It is hard to predict what the future will hold for so many NFTs.
Some people believe that NFTs will become more popular and valuable over time. Others believe that NFTs will lose value as the novelty wears off.
Only time will tell what the future holds for NFTs.