Why can an NFT be worth so much, or nothing ?
Three letters, an acronym, have become one of the terms that has burst in with more force in recent times. It is NFT, Non-Fungible Tokens, which is a digital certificate of authenticity that, through blockchain technology, is associated with a single digital file.
With these premises, these assets have caused a kind of new gold rush in the form of crypto art. The sale of NFTs is a new way of make money in the online world, but the truth is that there are many artists that are riding a wave that, in 2021, generated more than 3 billion dollars. It remains to be resolved whether NFTs have become the new bubble or whether they have established themselves as one of the main agents in the art world. Right now, huge amounts of money are being paid for just about anything that can be recorded digitally.
First, let’s consider how NFTs accumulate value. Many of the variables that affect its value go beyond the art itself. For the first time, NFTs provide proof of ownership of digital assets through the
use of the blockchain. Each NFT contract contains a token identification number and subsequently an address belonging to the owner. In the Web2 world, it has historically been difficult to determine ownership of digital assets such as photographies or music; for example, someone could right-click and save an image and claim ownership of it.
Since blockchains are a decentralized and trustless technology, the psychological trust involved in any of the interactions or transactions is not required; no one owns or commands them. And because their records are public, anyone can find out who owns the NFT, its sales history, and when it was first minted.
As a result, we can easily determine what is genuine and what is fake, and then we can add value. Another key property of NFTs is their metadata, which allows information to be entered into the NFT, such as descriptions, images, and names.
These properties are probably another factor by which value can be determined.
In short: NFTs are stored on a blockchain, have clearly defined owners, and point to metadata files, which are linked to the creations themselves.
The value of NFTs is determined by the community. The market decides how much they’re worth, based on factors including why their previous work sold, their portfolio of previous work, how long they’ve been creating, and who collected their work.
By comparing it to other forms of art, we can make well-informed decisions about whether the art is valuable or not. It can be worth millions in the future, but also it can be worth nothing.
But for the first time, digital artworks can be linked to scarcity; that limited supply can increase the value of an NFT. Collectors find beauty in the number or size of a collection, since there will always be only a few who owns them.
And, most important, NFTs provides a steady stream of income for artists, as well as the promise of rewards for sales made once they have established themselves in the art world, should they later become more famous and their early work rise in value.
It is the culmination of factors such as ownership, belonging, identity, rarity, scarcity, utility, and aesthetics that brings light to the NFT space.
They make NFT more meaningful and help ground feelings and attachment, both of which make NFT much more than a financial investment.