Non-fungible tokens (NFTs), you can no longer ignore them. They have become incredibly popular in the past year and everyone who is involved with crypto or blockchain has already heard of them.
This has also made more and more people want to invest in NFTs. However, there is also another camp. Namely the camp of people who absolutely cannot understand that such large amounts are being paid for digital files. That is of course not very surprising because especially if you have no experience with it yet, it sounds very unreal that tens of millions are paid for an image.
Still, it might not be as crazy as you might think. At least, in some cases. The popularity and high prices can in some cases certainly be explained. But how? How is it possible that NFTs have become so popular in such a short time? And how is it possible that tens of millions are deposited for digital files? That’s what we’re going to look at today!
Why are NFTs worth so much?
The answer to the question: ‘Why are NFTs worth so much?’, can be divided into 4 parts, namely: art, utility, community, and hype. But what exactly do we mean by these 3 parts? Now let’s take a look at that.
Art
The first reason why NFTs are worth so much money is the art. Most NFTs, until now, are works of art made into NFTs. While this is by no means the only purpose for which non-fungible tokens can be used, it is the most widely used and most popular form of NFTs to date.
The physical art market is also very large. It is currently worth about $50 billion. If you believe that the world will gradually become more and more digital, for example, because the metaverse is becoming increasingly popular, it is not unlikely that a comparable art market will develop in this digital world. There is therefore a chance that the current NFT market will develop into the physical art market of the digital world.
Another way in which art can make the NFTs worth a lot is because people simply think the art is beautiful. With NFT art there are many different possibilities and there are certainly people who buy NFTs because they like them.
Utility
Another reason is the utility some NFTs have. Utility freely translated means ‘usability’ and when you talk about the utility of an NFT you are talking about what you can actually do with the NFT.
A good example of NFT utility can be found in Gary Vee’s NFT collection, called ‘VeeFriends’. These VeeFriends NFTs serve as a ticket to the next 3 events that Gary Vee organizes. At these events, various inspiring people will come to speak, and the other NFT holders will be present. This is certainly good for your network! Once you could mint these VeeFriends NFTs for between 0.5 ETH and 2.5 ETH. So you could definitely say it was worth it. In addition, the NFTs have appreciated a lot in the meantime.
Another example of utility in NFTs is the NFTs used in blockchain gaming. Blockchain gaming is a new branch of gaming, in which games are developed that use blockchain technology, and therefore also tokens and NFTs. These games are also called play-to-earn games and users can actually earn money playing the games. You often need NFTs to get started with these games because the characters used in the games are NFTs. In this way, NFTs can actually apply and become more valuable as a result.
The utility possibilities with NFTs are theoretically endless. In principle, an NFT is simply a property right. A nice example of a project that we might see in the future was suggested by the guys from the My First Million podcast. They saw that Michael Jordan’s house was for sale and thought it was a great idea to buy it with a large group of investors, by using NFTs. Each investor would then buy an NFT, which represented a particular piece of the house. They are then, as it were, joint owners of the house. For example, they can share it for their own enjoyment, but they could also rent it out, with all owners receiving their share of the rent. A very creative way of investing!
It certainly happens that there are NFTs with utility, but there are still a lot of possibilities that we have not seen until now. However, utility certainly already plays an important role in the price of NFTs. A JPEG might not sound like something worth tens of thousands of dollars to you, but tickets to 3 exclusive Gary Vee events will!
Community
Another reason NFTs are worth so much is the community. By the community of an NFT, we mean in this case the group of people who own the NFT. You have the CryptoPunks community, but also the Bored Ape Yacht Club community. For this example, let’s take a look at the Bored Ape Yacht Club community.
This is a very valuable community. Many celebrities, such as Jimmy Fallon, Post Malone, and Stephen Curry, but also Dutch celebrities such as Martin Garrix, have already joined. When you own a Bored Ape, you gain access to an exclusive Discord community, which includes all Bored Ape holders.
By buying a Bored Ape Yacht Club NFT, you actually get access to all holders, in this case for example Post Malone or Jimmy Fallon. With this, you buy a large network, as it were, which can be very valuable.
Besides the exclusive Discord server, Bored Ape Parties are also organized. Only holders of the NFTs are welcome on this. By buying a Bored Ape you can suddenly be at a party with all kinds of celebrities and other interesting people.
The network that you actually buy in the case of the Bored Ape Yacht Club is worth a lot of money to many people, for example, because it can also offer them other opportunities in the future.
However, such a valuable community as the Bored Ape Yacht Club, unfortunately, has few NFT projects, but they certainly exist. A lot of NFT projects these days have their own exclusive Discord server and this can lead to interesting connections.
Hype
The last reason we have hype. You can’t get around that at the moment either. There is simply a lot of hype surrounding NFTs and this certainly drives prices up.
Everyone is looking for the new CryptoPunks or the new Bored Ape Yacht Club, and because of that, some projects are in more demand than there would be if there were less hype. There is also a lot of suggestion at this point that we are currently in an NFT bubble.
Even big NFT fanatics like Gary Vee believe that the NFT market as it is today is showing signs of a bubble. This doesn’t take away from the confidence he has in NFTs in the long term, but he thinks the market is going to take some serious blows. He has already indicated on several podcasts that 98% of current projects will go to $0.
Statements like these are certainly interesting, but they are very difficult to deal with. They are all predictions and only time can tell what will actually happen. We could certainly be in an NFT bubble right now, but the market as it is today could also be left intact for another 3 years. It’s impossible to predict exactly right, but it’s very important that you always do your research before investing!
Does this actually justify the prices of NFTs?
That all sounds great, of course, but does it actually justify the pricing of NFTs? Besides the fact that the answer to this question is subjective, it is also very early to make a statement about this.
NFTs are, of course, still a fairly young industry. This means that we have little historical data, so we can’t really say anything about what will happen in the long term.
In addition, the answer to this question is subjective. The answer is different for everyone. For one person, a certain NFT, with the utility, art, or community in mind, is simply worth the amount, while another thinks this is too much. Of course, this applies to all industries.
Some find a trip abroad too expensive and choose to stay in their own country, while others think the memories and experiences gained abroad are worth the amount and choose to travel abroad.
For example, look at the aforementioned example from Gary Vee’s NFT collection ‘VeeFriends’. Its floor price at the time of writing (January 31, 2022) is 11.9 ETH ($30,356.90). So for just over $30,000 you get access to 3 exclusive events, where you will meet lots of people and hear interesting guests speak. But anything over $10,000 per event is still a lot! Is it worth this to you? Only you can answer that question yourself.
What we don’t include here, however, is that Gary Vee indicates that these 3 events will not be the only utility for the VeeFriends NFTs. So it could just be that after these 3 events a new utility will be announced for the NFTs, which according to people is so valuable that the price of the NFTs will remain the same or even go up. Then you actually went to these events for free, and in the best case, you even received the money. This, of course, remains speculation at this point.
Conclusion
NFTs have become extremely popular in no time. Almost everyone has heard of it by now and more and more people decide to invest in it. However, many people cannot understand that such amounts are deposited for NFTs. The most expensive NFT to date was sold for $69,000,000.
Certainly, when you are a newcomer to the crypto world, it also sounds really absurd that these kinds of amounts are deposited for digital files. However, it might be easier to explain than you might think. Some NFTs are not ‘just’ a digital file.
Some NFTs bring other things with them, such as utility or an interesting community. So the value of NFTs, at the moment, seems more justifiable than some think. However, there is much speculation that we are currently in an NFT bubble, even by the biggest NFT fanatics. Time will tell whether this is actually the case.
Until then, you can only determine for yourself whether you find the value of NFTs justifiable, with the side effects they have in mind. Do you think NFTs are worth the money? Then you can choose to invest in it. Our blogs ‘How do you buy an NFT?’ and ‘How do you find a good NFT?’ could already help you on your way!
In any case, it is important at all times that you do your own research well, and only invest based on your own findings!
