What you think you know about why NFTs are so hyped right now is all wrong
How much are you willing to splurge on a piece of art? Now, think of that art piece as a common Jpeg file that you can easily store on your iCloud, would you spend the same amount on it? Well NFT bidders appear to care less about this. Earlier in March 2021, Sina Estavi bought the NFT of the first tweet ever made and it was by Jack Dorsey for nearly $3 million. In simple terms, Estavi is now the owner of the tweet, that NFT cannot be duplicated or stolen from him.
But why exactly are people so pumped up about NFTs? For starters, NFT refers to Non-fungible tokens unlike other digital assets that are fungible, NFTs cannot be replaced with another item. A better way of explaining this will be lending Mr. A $100 worth of ETH, upon refund Mr. A can decide to pay with $100 worth of DOT. However, with NFTs, you have to return the exact NFT as it cannot be duplicated nor divided. In other words, the non-fungibility characteristics of NFTs make each unique and scarce, therefore adding to the hype we see today.
NFTs play different roles for different people amidst their inherent uniqueness and the concept of digital scarcity they promote. For someone like Estavi, NFTs could be a form of a social symbol, for creators, a way of getting the right ROI on their creation and for others, the world of NFTs is yet to be explored.
What differentiates NFTs Hype from regular digital currencies hype
While a larger population of people view NFTs from the perspective of art, they have a wider range of functions beyond art and gaming characters. As far back as 2012, Colored Coins were launched and they could be used in multiple ways. From representing properties, coupons, digital collectibles, and even the shares of a company, with Colored Coins, for the first time, the world was seeing a use case of NFTs built on the Bitcoin network. The growth in NFTs today is nothing short of a Cambrian explosion. A report by no fungible.com gives a better understanding of how much the NFT market has grown. In Q2 of 2021, there were just 203719 active NFT wallets. Also, the number of active global NFT wallets moved from 30,000 from the end of July 2021 to almost 140,000 weekly Active Wallets, 4 times the number of Q2. For volume trade, NFT traders transacted over $5.9 billion as compared to $782 million of the previous quarter. But the question is what drives the price of NFT and how is it different from crypto hype?
It took bitcoin about 8 years from the time of its launch in 2009 to December of 2017 for Bitcoin to hit an all-time high of $20,000. In fact, the term ‘Lambo’ was coined because lots of early bitcoin investors who built wealth with bitcoin started buying Lamborghinis. But if you ask what drives the crypto hype market, the answer will fall on the shoulders of two culprits — fear and greed! When it comes to crypto hype, a larger portion of the human emotion is always at play. For instance, when more people began to see how the price of Bitcoin increased in December 2017, More users trooped in to use the coin in a FOMO (fear of missing out attempt.
However, cryptocurrencies are built on the blockchain and tied to certain use cases that aim to solve a particular problem and can be used as a store of value or medium of exchange. But what do NFTs offer their holders? NFTs like we explained earlier can take the form of collectibles, digital art, or even music. They could also represent digital identities, real estate, or even shares. For most creators in the NFT community, it presents a wide range where they can test their creative boundaries and everyone wants to have a taste of this new industry.
The Social Mechanism backing NFT Hype
But wait a minute! If NFTs are digital arts worth up to millions of dollars, why can’t I just take a screenshot and own a piece of this art? Well, it doesn’t work that way. First, NFT arts have to be created and minted by the creator on the blockchain with smart contracts proving that the art is one of a kind and every transaction is verifiable on the blockchain. So you see, a simple screenshot of the NFT does not make you its owner. Owners of blockchain seem to have attained certain social status likened to owning a one-of-a-kind Birkin bag. Just like fashion items, there is always a community of people who have attached certain values to these items and are willing to battle to buy them. For instance, the MET collection has to compete with some private individuals to lay hands on some of the collections from American fashion historian Sandy Schreier.
In addition, NFTs are backed by strong communities and marketplaces that act as auction houses for the NFTs to be sold. Considering the amount that most NFTs get sold for, it could be making room for only a select few to participate while leaving others out. For instance, in March 2021 digital artist Beeple via Christie’s auction sold his “Everydays” piece for $69.5 million. With sales like this catering for only a limited few, NFTs are growing to be more of a social symbol within the metaverse than just Jpegs on the blockchain.
The growth of the NFT marketplace is a clear indication of the effect the community has on the marketplace.
NFTs hype follows the subjective theory of value
Like every early technology, the adopters exude fanatic enthusiasm towards them, the case with NFTs is not different. And even though the community behind most NFTs success appear strong, the reason why some NFTs price amazingly high can be traced to the subjective theory of value. According to the theory, a product’s value is decided by how scarce or useful it is to the individual. Hence, price or value is independent of the resources or man-hours poured into an economic good. NFTs perfectly mimic this theory with their inherent scarcity and individual uniqueness.
The Present and Future of NFTs
Currently, the NFT space seems laden with art (whether you agree that they are art or not) and gaming solutions. But aside from the fact that you can mint an NFT art for less than $100 and auction it off for thousands of dollars, the NFT space holds countless potentials for the future. The current state of the market may not seem sustainable but then Laszlo Hanyecz spent 10,000 Bitcoins on pizza years ago right?
With NFTs we see the possibilities of evolution into immutable ownership of real estates, licenses, and records. The possibility of simply transferring the ownership of land via the blockchain using an NFT form of real estate. The impact will also affect agreements as they can be minted as immutable records on the blockchain. Identity and records are also areas that NFTs will definitely impact as well as ownership of goods and items. Collectibles or pieces of jewelry can be verified on the blockchain tracing ownership and reducing theft.
Ultimately, the era of NFTs for just Memes and art may slowly draw to a close and the world will see more use cases getting born. For instance, who would have thought in 2010 that the world would see a Bitcoin ETF? Beyond the hype, NFTs have the potential to transform industries and most likely a new era of use cases will be born soon.
Polkacipher, sustaining a movement beyond the hype!
Beyond the hype, Polkacipher is building a privacy-first cross-chain NFT ecosystem in NFTzie. From tracking your pricey NFT collections across different supported chains on a single dashboard or even porting them to another chain and exploring a multi-chain NFT marketplace, NFTzie is your go-to gateway to a growing Metaverse. And NFT mass minting (ERC-1155 inclusive) is finally coming to NFTzie, dare to explore, then check it out!
PolkaCipher is a privacy-preserving oracle network on the Polkadot Blockchain focused on bringing the use case of private NFTs to off-chain businesses and being a bridge for seamless integration to on-chain Defi apps.
PolkaCipher’s unique offerings help push the use-cases of the NFTs in real-world scenarios while still being connected to a cross-chain network that is fair and accurate. PolkaCipher intends to achieve business goals by helping users transact privately and securely using NFTs as a mode of access to different decentralized apps (Dapps) and real-world business rewards.