Why a Picture You Can’t Touch, Smell, Hear, or Taste Sold For Millions
The advent of Non-Fungible Tokens (NFTs) raised numerous questions about why someone would spend millions of dollars on pixels. There are three main reasons for consumers to buy NFTs, social status, collections, and profit. For starters, we need to understand what Non-Fungible Tokens really mean. Fungible means “able to replace or be replaced by another identical item” (Webster Dictionary). This can be easiest seen in terms of cash; if I hand someone $100 and they give me 5 $20 bills, there is no money loss on either side because cash is interchangeable. However, if I give someone a bed and they give me a chair, someone is losing money and comfortability because they are not interchangeable. This is the case for NFTs, no matter how similar two NFTs may look in appearance, they are not interchangeable. Furthermore, “Token,” in the case of NFTs, basically means a digital certificate stored on a blockchain for verifiability.
NFTs date back to 2017, when various artists, like Mike Winkelmann, popularly known as Beeple, began to produce digital art that is now worth millions of dollars. Beeple’s most recent NFT sold for $69 million via Christie's at an online auction, making him wealthier than most painters, some of whom have works in museums. The fundamental supply-demand pattern is to blame for such a high price. Because NFTs are so new to the market, few artists have enough NFTs to meet the requirements of their consumers. This brings us to the most important problem, the pricing.
For a straightforward pixelated piece of art, the consumer could pay costs around one hundred ETH ($380,000). There's no fixing the high worth for such art, and plenty of critics say it'll be the main explanation for NFTs’ downfall since not many people would be able to purchase the art inflicting it to lose popularity. However, this is often not the case in many Crypto lovers’ eyes; they see the NFT market booming and never stopping until ensuing generation’s technology outdoes ours (just like how paintings are being replaced by NFTs right now). This confidence comes from the power to relate the NFT market and merchandise to designer products equivalent to Supreme and Gucci. If people are willing to pay a whole lot on a jersey for the name of it, people are going to be willing to spend hundreds on digital art, some that have a deeper meaning than what meets the eye (women’s rights movement: Violence against ladies and Crypto Queens). Additionally, the common creature won’t be able to purchase Gucci products and live a financially stable life, in agreement with NFTs, however, some people obtain these costly commodities to enhance their social rank.
Since the begging of time, social ranks and social classes have controlled our societies. They separate us and bring us together at the same time. One social rank system that has an effect on the NFT market is wealthiness: the wealthier are at the top and the poor at the bottom. For some, taking a screenshot of someone’s NFT satisfies their needs, the same as buying a fake designer product; however, for others, they want the real designer product and the real NFT. As the world turns into an online-based world, many wealthy people would like to expand their social rank from real life to the online world in order to satisfy their wants; this can be seen when people turn their online profile pictures into NFT that they own to increase their social status.
Additionally, the simpler reason for NFTs’ rise is collections. Alike pokemon cards, rocks, or quarters, some people enjoy collecting NFTs to satisfy their wants. Most collectors don’t purchase the most expensive NFTs, but they have numerous amount of NFTs that they hold on to since they find pleasure in them. Although there are many collectors who collect for enjoyment, some people collect NFTs to make a profit.
To end it all, the most basic reason for someone to purchase an NFT is to make some side money. This is not just the case for NFTs, it can be seen everywhere: whether in stocks, real estate, or regular commodities. Although some people who seek to make a profit off of NFTs do believe in the growth of NFTs, they still buy pieces of digital art to make some change on the side. Also, many celebrities and companies have taken a liking to profit off of NFTs and collecting them as well such as Logan Paul, Jimmy Donaldson (MrBeast), Gary Vaynerchuk, and Adidas who have had a major impact on the growth of NFTs which many have mixed opinions on.
With this being said, hopefully you have taken an interest in the online world and NFTs and plan on exploring deeper into NFTs and cryptocurrencies.