You’ve probably heard the former US president endorsing Bitcoin and other cryptocurrencies. There’s no doubt also that you’ve heard or read that Donald Trump has a collection of digital trading cards.
These cards depict him as a NASCAR driver, Mr. Superman, or an astronaut. These cards are referred to as “non-fungible tokens” or NFTs. They are a unique way of owning original digital images.
They have many uses online, including making payments at online casinos such as Mr Bet, storing value, etc. In this detailed article, we take a look at what NFTs are. Why are they so expensive? Is it worth owning an NFT yourself?
What Is an NFT?
NFT is an acronym for a non-fungible token. This is a certificate showing you own a digital good, which is recorded in a blockchain.
Any virtual asset you can think of can be converted into an NFT: a ticket, song, photograph, title deed to your house, a passport, or anything you can imagine.
Regardless of the number of NFTs online, no two can have similar features. In fact, the word “non-fungible” is a boujee way of saying ‘unique.’
What Is a Token?
Tokens and NFTs are occasionally used interchangeably but are two different assets. Like gold and traditional currencies, tokens can be acquired, traded, and sold. However, unlike assets and traditional currencies, tokens don’t have any physical form.
They are sometimes referred to as cryptocurrencies. So, basically, tokens are long strings of numbers owned by the wallet. The information is recorded in a public ledger referred to as a blockchain. Therefore, whenever you are trading NFTs or tokens, you are essentially moving numbers from one address to another.
Why Are NFTs Valuable?
Why are NFTs so valuable? It all comes down to rarity, scarcity, and its connection with the Metaverse. These are all described below:
- The rarity of an NFT is the rare feature of the asset that distinguishes it from others in the same category. Consider it the Monalisa of art. A good example is BAYC #8817, the 17th most unique and rare in its collection.
- Just like in economics, the scarcity of an NFT makes it an expensive and valuable asset to hold. Popular examples of scarce NFTs include World of Women, Bored Ape Yacht Club, and CryptoPunks.
- Connection with the Metaverse. Another common reason why NFTs are valuable is their interconnection with Metaverse. This is a virtual world where people can own and create physical goods as well as offer services just like you would in your day-to-day life. However, the spaces in the Metaverse are quite rare. Therefore, holding an NFT in the Metaverse makes it quite expensive.
History of NFTs
NFTs came into existence around 2014, but they only exploded in popularity between late 2017 and early 2021. The first boom started in late 2017 when OpenSea, Cryptopunks, and CryptoKitties were unveiled.
CryptoKitties significantly helped popularize NFTs by almost shutting down the ETH network due to its demand and popularity. For the next couple of years, the NFT market decreased and took a backseat as other apps, including DeFi, gained popularity.
Things changed again in 2021 when three events happened: the launch of the Bored Ape Yacht Club, the sale of Everyday for a whopping $69 million, and a spike in the popularity of NBA Top Shot (which sold for a massive $200 million).
These three events were enough to reignite the popularity of the NFT market, which saw the market price peak at $38.6 billion in January 2022. This was roughly 700x the value in the previous year.