What Makes an NFT an Asset?

What Makes an NFT an Asset

NFTs are all the rage in the crypto world–some are even fetching millions of dollars. But what are the benefits of minting and owning NFTs?

Anyone who has heard about NFTs will marvel at the astonishing prices people are willing to pay for them. Recently, the “Side-Eye Chloe” meme sold as an NFT for US$76,377.50, joining many other legendary meme NFTs. But what are NFTs? And why are people willing to bear such an expense to own them?

What are NFTs?

NFTs, short for Non-Fungible Tokens, are digitally unique assets that exist on a blockchain.  

An NFT is akin to a certificate of authenticity (COA) that accompanies the sale of a piece of traditional art. However, in the token’s case, the item itself is the COA. This means that at any given time, an NFT can only have a single owner. This makes NFTs very desirable as new age collectibles.

What is the “value” of an NFT?

NFTs are minted for scarcity, with very few tokens created from an individual art piece. While all NFTs are digitally unique, some of them are the only ones of their kind. The fewer tokens minted of an art piece the more value the collection tends to have. The rarity of an asset is one of the aspects lending to its great value. However, rarity alone cannot do much without a demand.

Let’s take the NBA Top Shots as an example. This platform allows fans to buy, sell and trade what are essentially virtual trading cards of their favorite player’s best shots in the form of NFTs. The appeal lies in the fact that fans can claim partial ownership of a great moment in NBA history.

Image Courtesy of Wikimedia commons

Another example can be Italian artist Maurizio Cattelan’s 2019 art installation known as “The Comedian” or, as it is better known on the internet, “The banana taped to the wall”.

There is nothing particularly special about the banana in Cattelan’s installation; in fact, the original was eaten and then promptly replaced by another banana from a nearby grocery store. This is the very idea behind fungibility– one banana can be easily replaced by another. And yet, the piece sold for US$120,000. 

The cause for these massive numbers, of course, was its immense potential as a meme that went viral globally. It was the demand created by the hype around the piece and the fact that Cattelan is a well-recognized artist that gave it value, and not the actual materials of the installation. 

Similarly, the value of an NFT is determined by the concept that it represents, not its physical attributes or lack thereof. 

The issue of ownership 

Purchasing an NFT does not give the buyer complete ownership of the creation. Buying an NFT makes that particular digital code the buyer’s property. This partial ownership does not, however, give one the rights of a creator, like copyright and distribution privileges. 

In this regard, NFTs are akin to a piece of merchandise. One may purchase an NFT of Kevin Durant’s dunk shot for US$3,270 from NBA Top Shot, but the clip is still owned by the NBA, and anyone can view or copy it directly from the website free of cost. A copy is as good as the original.

Moreover, a blockchain cannot absolutely ascertain the authenticity of a piece of work. Therefore, it is possible to tokenize a piece of content while infringing upon the creator’s copyright. On top of that, the concept of scarcity is limited to each individual blockchain. If an artist were to mint more tokens of the same piece on a different blockchain, is the piece truly rare enough to be a collectible?

Who benefits from NFTs?

Artists

NFTs have been a saving grace for many artists struggling to monetize their skills. They allow artists to market their work on a global scale, improving the probability of making a sale.

Artists can also add a royalty clause to their NFTs. They will earn a certain percentage of the profit every time one of their NFTs is purchased by someone else, allowing the artists to profit from their work, even long after they have sold it. The greater popularity of the NFTs will then lend to the higher reputation of the artist, which in turn adds more value to the rest of their pieces as well.  

Buyers 

Individuals in possession of cryptocurrencies can use them on NFTs to support their favorite artists financially. It also gives the buyer some basic usage rights like posting the image online or using it as a profile icon. Then there are the bragging rights of owning a piece of art with an immutable receipt in the form of a blockchain entry as proof of ownership.

Those looking to monetize the trend can also purchase NFTs to sell them for a profit later.

Investors

Currently, NFTs do not offer much in the way of investment value. One can purchase an NFT and hold on to it in the hopes that it would gain value one day. However, the crypto market is currently too volatile to guarantee any profit.  

Banner image courtesy of Flickr

SHARE THIS STORY

Share on facebook
Share on twitter
Share on linkedin
Share on email

RELATED POSTS

5 Companies That Have Already Announced Job Cuts This Year

Layoffs in 2023: 5 Companies That Have Already Announced Job Cuts This Year

The layoff spree at tech giants is bleeding into a new year. It has been just three weeks since we entered 2023, yet the media is buzzing with disturbing numbers about people being laid off by tech companies: At least 104 tech companies let go more than 26,000 employees. This means, more than 1,600 tech employees were dismissed per day in the past couple of weeks. Let’s take a look at the top tech companies that are laying off aggressively.

Goblin Mode

Decoding the World’s Obsession with “Goblin Mode”

Do you find yourself struggling to maintain a positive and productive attitude at work? Are you becoming increasingly irritable or disengaged from constantly feeling overwhelmed and stressed? If so, you’re not alone. Many people experience this state of mind, and some turn on their ‌ “goblin mode” to cope with it. The term “goblin mode” gained popularity in February 2022

Instagram vs YouTube—Which Is Better for Your Business?

Instagram vs YouTubeWhich Is Better for Your Business?

With the rise of social media platforms, like Instagram, TikTok and YouTube, businesses have gained new opportunities to reach their potential customers. It’s important to note that Instagram and YouTube are not just for entertainment; they can be used as powerful tools for marketing and creating brand awareness. Many individuals already use YouTube, TikTok and more to earn money.

What Is Ambient Computing? How Does It Affect Our Lives?

What Is Ambient Computing? How Does It Affect Our Lives?

Picture this: it’s five degrees Celsius outside, and you are freezing, but instead of you adjusting your thermostat, your house automatically realizes that it needs to be warmed up and changes the temperature accordingly. That is what ambient computing is all about. Ambient computing (also called ambient intelligence) refers to technology immersed into your environment. You don’t have to consciously interact with it using screens or keyboards.

How Can AI Be Used in Governance?

How Can AI Be Used in Governance?

One of the many things that artificial intelligence (AI) is capable of doing is helping governments function smoothly. In a previous article, we discussed that, over time, AI would be responsible for more decision-making. As such, it can help governments worldwide make tough decisions by ridding the decision-making process of human biases.

Top 3 Cheapest Tesla Alternatives to Consider Buying

Top 3 Cheapest Tesla Alternatives to Consider Buying

Those who care about the environment have progressively shifted to electric cars. In December 2022, electric car sales reached 11% of the car market worldwide. These cars not only have significantly fewer carbon emissions but are also cheaper to maintain. Some countries, such as New Zealand, the U.K.