NFTs, or non-fungible tokens, initially came out of this world, just as with cryptocurrencies. But as people began to get more educated in this matter, things started to make sense. This played a key role in piquing public interest in the potential of blockchain technology that supports cryptos and NFTs.
If you are familiar with the development in the NFT sphere, you might have wondered why people often purchase the most expensive NFT. Of course, there can be many reasons behind this, yet most people presume that since NFTs are artworks, people prefer buying the most expensive art.
However, the reality is more complex. So let’s dive into the details and dissect this matter to understand better.
Creating NFTs: What’s The Process About?
NFTs are created with a unique process called minting. Gamers, artists, brands, musicians, and more can create NFTs and showcase them for selling in the market. Then, post their creation, they can showcase the item on a digital marketplace and wait for people to buy them. In general, the creator will attach a certain percentage of commission for their work. This will ensure they are paid anytime someone purchases the NFT.
Furthermore, the buyer pays for the energy or gas fees needed to facilitate the transaction. While these energy prices can fluctuate based on different factors, the seller need not worry about these changing prices.
Numerous platforms for trading NFTs, including Ethereum, Rarible, and SuperRare. People can use these platforms to create and sell their NFTs with blockchain technology, ensuring no one can copy or change these NFTs. Furthermore, once you have created your NFT, there is no way you can change its ownership or even recreate the NFT for any other purpose.
But people can still view these NFTs once uploaded on a platform. Similar to conventional stocks being listed in an exchange, people can buy and sell these NFTs to amplify revenue generation. So it is fair to consider NFTs as rare collectibles with the potential to increase in value in the future.
What Makes These Digital Art Pieces Expensive?
Different motivators push people to pay exuberantly high prices for NFTs. These motivators can vary based on the specific circumstances of every individual.
Another important thing here is that people pay more for NFTs, similar to why people pay more for conventional art. That said, let’s dive into the factors that can increase the prices of an NFT.
a) Appealing Profile Picture: NFTs have many benefits over conventional artworks. One of the best-known of these perks is that one can use NFTs as appealing profile pictures. Crypto influencers get together through platforms such as Telegram, Discord, and Twitter while sporting unique avatars. In these cases, an employer often has to employ different employees as a symbol to the community. Given the digital world’s perspective, this is like owning a high-end car in the real world.
On the contrary, most people with expensive NFTs mostly remain anonymous. Similarly, most crypto influencers tend to maintain a low-key personality in the real world while boasting their expensive NFTs in the virtual world. They do so to remain much safer. For instance, the Twitter profile picture of CryptoPunk is anonymous, but the owner might have a regular job driving a usual Toyota daily.
b) Potential Price Multiplier: Increasing prices is another critical factor driving high NFT prices. Most NFT artworks are projected to grow in time, increasing the asset’s value. The value of NFT increases as more people are willing to pay more for the NFT. This is also what increases the price of an NFT collection. Every NFT artwork also relies on this simple concept to increase its prices.
Besides that, NFTs are an integral component of history in a blockchain network. So when you own an NFT, you automatically own a piece of history. Unsurprisingly, the value of this piece of history has an exuberant potential to increase in vurralue with time. This phenomenon leads many to believe that the prices of their NFTs will increase in the future and the same is the justification for even the most expensive NFT sold.
c) Potential To Touch Billions: There is no denying that many have made significant wealth with cryptocurrencies. Even a simple look around the market will give you a peek into thousands of people who became millionaires with their crypto investments. One noteworthy trait is that these people became millionaires in just days or weeks. This is not something that can happen to people with regular jobs.
Besides, most IT billionaires do not wish to show off their wealth with high-end clothing or expensive cars. Mark Zuckerberg and Bill Gates are excellent examples of this, and NFTs are a boon for people like them. These NFTs allow these people to demonstrate how well off they are and stand out in the crowd. With so much money to spend, these individuals are okay with paying exuberant amounts for NFTs.
d) Acknowledged In The Metaverse: Metaverse, formerly known as Facebook, has much to do with the increasing prices of NFTs. Many brands are now leveraging the potential of this innovation to transform marketing and advertising, driving much better results. Metaverse is delivering people an enhanced virtual 3D experience where people can interact with each other.
This is contradictory because there still needs to be a consensus about what goes on in the metaverse. Nonetheless, many new NFTs are being developed in the metaverse with 3D avatars of owners. One can use their 2D avatars from Discord or Twitter while using the 3D avatars in virtual environments such as Sandbox and Decentraland to distinguish oneself from others.
Whether NFTs or any other asset, people will never mind paying high amounts as long as they are certain about getting a good deal. This is the primary reason people buy the most expensive NFT ever sold since they wish to amplify their returns in the future. So make sure you are mindful of these factors and invest in NFTs that promise better returns.