What Determines The value of NFT? Really.
With iconic internet moments, popular memes, and captivating artwork turned into high-value digital assets, you may have heard a lot of buzz about NFTs (Non-Fungible Tokens). How could you not? From reputable news outlets to famous celebrities, everyone talks about these assets or actively treats them.
But this sudden exposure to these assets also opens the door to a multitude of questions. What exactly is an NFT? How does it work? How do you buy it? And above all, what gives The value of NFT?
Fortunately, the answers are not hard to find. With just a few key points, you can learn everything you need about these fast-growing digital assets.
What types of assets can be converted into The value of NFTs?
When you think of fungible assets, you can refer to cryptocurrency such as Bitcoin, which can be replaced by another such unit. But when you look at non-fungible assets, a property stands out as a good example of something quite unique in its status.
For this reason, NFTs may be allocated to several non-fungible or distinct assets that include, but are not limited to, the following.
- Works of art such as oil paintings and digital sketches.
- Online content such as social media posts and opinion pieces.
- Musical content such as songs, remixes, symphonies, and background music.
- Video content such as short and long videos.
- Real estate such as residential and commercial properties.
Practically anything that is unique in its form can be turned into NFT and retain its status on the blockchain. Since an NFT is a representation of the real asset and its ownership, this gives people great flexibility as to the type of assets they want to convert into NFT.
The value of NFTs are not limited to sole proprietor agreements
NFTs are generally perceived as a sole proprietor agreement, where anyone with an NFT is considered the full owner of the associated asset. Although this notion is true to some extent, it is not always applicable. In many cases, shared properties can be successfully transformed into multiple NFTs.
In these arrangements, one can create multiple NFTs for a collection of items or offers of shared ownership. This means that an apartment building can create separate NFTs for each of its residential units and sell them to different buyers. But flexibility is not limited to unique property segments within a property. For example, a single piece of jewelry or a rare collector’s item may be assigned multiple NFTs, each sharing a fraction of The value of NFT and ownership.
Also read: All about the NFT Marketplace | Creatibuzz
This particular mechanism turns NFTs into more than a single token arrangement and gives them immense adaptability. It also opens the doors to the use of NFTs in multiple forms, such as private equity agreements, shareholder agreements, and the distribution of commercial assets.
Lead Question: What Determines The Value of NFT?
After learning the basics of NFTs and their features, the next question that comes to mind is The value of NFT, price, or cost. Who exactly sets this price is a common question for those who have never dealt with NFT or blockchain technologies before?
To be fair, this is a completely natural investigation as NFTs are not limited to typical assets such as conventional paints to which real value is attached. They also extend to digital content such as social media posts that are usually priceless.
This means that an The value of NFT depends on the type of asset it represents on the blockchain. If the asset in question is tangible property such as a residential building, its actual price is reflected by its NFT on the blockchain. But suppose the asset is an item of digital content that is not accompanied by a price tag, then The value of NFT is purely speculative. In essence, its value depends on the market, supply and demand.
You can think of this as a specific type of artwork, where the value of each piece is determined based on market sentiment and what potential buyers are willing to pay for it. This means that the seller can set the price of their specific artwork at the level they want. That the buyer will pay this cost to become the owner of the asset is a completely different thing.
But when these two factors in terms of a seller’s asking price and a buyer’s deliberate costs or desire to pay align, it decides the speculative The value of NFT. This covers all types of assets to which no actual price tag is attached. This includes content such as social media posts, digital trading cards, and digital illustrations.
Speculative The value of NFTs can sell at huge prices
Perhaps one of the most famous examples of NFT digital content sold at significant value is a 2006 tweet by Twitter CEO Jack Dorsey.
As Dorsey’s first tweet, the post is considered one of the most iconic content on the web. When this digital element was turned into a digital asset on the Ethereum blockchain, it allowed the corresponding NFT of the tweet to be sold for more than $2.9 million on March 22, 2021. For reference, bidding for the tweet started at $1 back on December 15, 2020.
This transaction mechanism around Dorsey’s tweet-turned-NFT highlights that an NFT value can indeed start from the lowest possible amount. But if interested buyers are willing to pay higher amounts, you can expect wonderful things to happen. As long as the market shows strong demand for the asset or NFT in question, the bids can go as high as you can imagine.
This means that the sky is the limit for NFTs whose prices are not tied to a real-world asset. Since their value is determined by how much buyers are willing to shell out, these NFTs can exceed the wildest expectations of original sellers.
Crypto is another example of the values of NFTs that are beyond anyone’s imagination, which are collectible digital cartoon cats that reside on the Ethereum blockchain. These exchangeable digital cats were once labeled as “digital beanie babies” for the excitement that surrounded them. They are still considered a popular form of NFT along with other types of digital art like NBA Top Shot trading cards for what they are worth.
In addition to uniqueness, other attributes such as the signature of content creators or other distinct details in the metadata can also go a long way in determining The value of NFT for the better.
But above all, what really drives up The value of NFT is the importance of its associated asset. The higher the intensity surrounding the corresponding asset or its separate ownership, the more likely the seller is to trade their NFT at a higher price. This is especially true for NFTs that do not have a starting value in the real world. Some examples in this regard include, but are not limited to, social media posts, unreleased music, and digital illustrations.
The value of NFT depends mainly on the type of asset sold
As a rule, The value of NFT depends either on its actual price or on speculation. This gives you very fluctuating values for tangible assets and digital content for different types of NFTs.
While real value is the benchmark for tangible assets and speculative value plays a major role in digital properties, this is not always the case. In many cases, both factors can contribute to the value of the respective asset.
For example, when trading real estate via an NFT, the price of the NFT is determined by the actual value of the asset, but the actual cost of the asset depends on a plethora of market factors. Once assembled, it gives you the main The value of NFT that is represented on the blockchain.
Conversely, when it comes to a DTV based on digital content or media, its value does not start from its tangible ownership price. Note that there is no starting value, to begin with. As a result, the value of NFTs is purely speculative and depends on the respective market sentiment. This is also why many tweet-based NFTs are considered to start their offer from $1 USD.
Whether you’re buying or selling a DTV, you need to keep these points in mind. Otherwise, you can buy an NFT at too high a price or sell your NFT at too low a price. By taking these factors into account, you can make an informed decision that helps you get the most out of your respective NFT.
Where do NFT values go?
As more and more types of assets are transformed into NFTs or traded via blockchain, we can expect to see transactions complete for regular amounts and exceptionally high value. This applies to collectibles purchased for pleasure rather than functional use, as well as to real estate units or equity offers related to commercial or actual use.
For example, some digital artworks may sell at regular costs, while some tweets may sell for a higher and higher value. Similarly, some real estate properties would make their mark because of their massive transaction amounts, while the cost of some actual paintings may exceed the imagination of their sellers. It all depends on the type of asset sold on the blockchain and the demand that surrounds it.
In both cases, NFTs are there to make their mark, especially for those who see digital collectibles or online transactions as the next big thing. By harnessing the trade-in real-world rarities, artwork, and properties, blockchain technology may have just found the next big thing for its survival and expansion into mainstream media.
Understanding the true value of NFT
Many believe that many NFTs are currently undervalued because the market is still young. “My prediction is that over the years, the consensus on digital objects will shift from ‘this stuff isn’t even real and worthless’ to ‘this is the best way to verify ownership, rarity, and authenticity,'” investor Jonathan Bales, founder of Fantasy Labs – an esports analytics platform – wrote in early January, in what is considered the reference text. on the subject. “I am convinced that NFTs are the future of collectors,” he said. Before concluding: “The most exciting thing is that the party is just beginning.”
To conclude, the value of an NFT is determined by how valuable some people find it. If someone really wants it, they’ll buy it at any cost. So the value depends on what people are willing to do for it.