The most important thing to consider when investing in a non-fungible token (NFT) is what makes that digital asset valuable. It may be hard, especially in a new, emerging market, to tell gold from glitter or what’s trendy from what has usefulness and longevity. Let’s get into the nitty-gritty of how NFTs gain and maintain value.
Why Do NFTs Have Value?
Before we can get into what makes an NFT valuable, desirable, or popular, we should try to understand where that value comes from in the first place.
Normally, it would be very hard to describe a particular real-worldvaluation for a digital asset. For instance, anybody can save a digital image for free. However, thanks to blockchain technology, now that digital image can be minted as an NFT, giving it a unique link on the blockchain that verifies its ownership authenticity.
By minting a piece of digital art as a token on the blockchain, that piece is given an authentic stamp of originality; in other words, it is made non-fungible. Like any famous work of art, it may be capable of being copied, but only one person can have verified ownership of the actual original work.
The verified ownership of NFT projects as digital items provides the basis for the value of an NFT. All the celebrity partnerships, social media hype, and memes merely add on to that.
What Is Fungibility?
Because NFTs are non-fungible, they cannot be traded or exchanged as regular, fungible tokens can. Cryptocurrencies like Bitcoin or Ethereum are fungible because they can be exchanged for an exact, however fractional, amount of Euro, USD, or any other currency.
Unfortunately, since an NFT is a single asset, it cannot be fractioned off to be exchanged for another currency; it can only be sold for a price.
An NFT doesn’t hold value like a fungible token; an NFT’s value will not follow or correlate with the changing values of various cryptocurrencies. While it may require more or less of a given crypto to buy that asset, depending on that crypto’s market performance that week, the digital asset’s price will not necessarily change in synchronicity with any given crypto’s value.
This is just to say that the NFT space is a market that functions separately from the crypto market. NFTs can thereby maintain their inherent value as art pieces, collectibles, historical preserves, or any other asset without being swung to and from by the crypto exchange.
It is the scarcity created by non-fungibility that generates value.
NFT Art: The Value of Celebrity and Authenticity
In the art world, popularity, acknowledgment, and esteem govern value. A piece may be considered beautiful, innovative, or impressive because of its technical or creative achievement.
However, it will not have value unless it can be verifiably credited to the artist who created it.
The Impact of Creative Innovation on Value
Of course, creative innovation has its place, as many art pieces are valuable just for being technically impressive or novel or by perhaps inventing a new technique. This is no less true for NFT art, as some pieces have sold for upwards of $60 Million.
For example, many of these pieces, like HUMAN ONE by Beeple, were acknowledged for their artistic achievement as digital art pieces and for their statement in tandem with the historical moment or artistic movement they represent.
These NFTs are valuable because they are acknowledged and esteemed by art critics and desired by art collectors and patrons.
Additionally, thanks to the blockchain, NFT artworks are more secure and easier to verify authenticity and ownership than traditional, physical art pieces, which need a thorough examination.
Just like in the physical art world, some NFT art is valuable simply because it is popular, trend-setting, or connected to a celebrity. A person may buy an NFT created by a celebrity not only as a patron of their work but with the idea of investing in the character and growth of that celebrity’s legacy or fame.
The Impact of Celebrity on Value
However much effort or innovation may be achieved in a particular art piece, it is not surprising that the celebrity of the artist also plays a huge role in its value. This is especially true for NFTs since the innovation, technique, or creativity found in a particular piece of digital art may not be as immediately apparent to the average patron or investor.
Suppose the creator of an NFT is an artist who is known and has a growing legacy. In that case, it will be more desirable, not only because of the celebrity of that artist, but because their legacy will help maintain, support, and grow the value of that artwork, making it a safer investment.
Many of the most valuable NFTs in the art world of today are made or promoted by celebrities or known artists. Their legacy and power as influencers guarantees that there will be eyes on the artwork and support from their fanbases. The more familiar or loved the maker is, the more amazing their work can be.
For instance, HUMAN ONE may have a certain value for its artistic achievement. Still, an investor may also continue to collect Beeple’s work because his celebrity and legacy as an artist potentially guarantee interest and a growing value in his future work.
An art piece can be valuable just by being authentically attributed to a valuable, esteemed artist, and NFT art functions no differently.
NFT Property: The Value of Digital Landscapes
A large part of the NFTecosystem today surrounds developing NFT roleplaying video games (RPGs). These virtual worlds are built with the idea of creating a digital social atmosphere where NFTs are exchanged, displayed, and crafted. Players buy houses, socialize, and collect various items.
Some of these NFT games, like Fashion League, even allow players to run their stores while creating and marketing their virtual fashion brands online. These RPGs allow players to manage virtual property and run digital businesses for real monetary gain. As a virtual community, players can effectively foster their virtual economies in-game, giving real value to their digital businesses.
As NFTs in digital property are bought and space decreases, the value of acquiring that property increases due to its scarcity. In this way, buying property in a new RPG becomes a valuable investment if that RPG becomes popular, entertaining, and rewarding.
Also, by developing your digital property by gathering resources or collecting digital assets, you serve to boost its value for players looking to rent or buy a developed piece of virtual land.
NFT games allow players to band together to nurture their own virtual economies for real monetary gain, create opportunities, and generate value for their own NFT assets, property, and businesses.
NFT Gaming: The Value of Virtual Resources
Another aspect of NFT gaming worth looking at is the Fun-To-Earn model. In these games, players complete in-game tasks or responsibilities in return for resources or monetary rewards. These resources and rewards can, in turn, be used to craft items or generate value outside of the digital world.
For instance, players may gather materials to craft clothing, which can then be sold in virtual shops as NFTs for real value. If that player’s clothes become popular enough, the value of their brand will increase.
At the same time, that player needs more resources to grow their business and brand. That’s where resource value comes in: It’s very likely that as NFT games develop and popularize, the demand for the farming of resources to craft those in-game NFT items or maintain a storefront will gradually increase.
Even in traditional RPGs, some players are paid by other gamers to play the game for them; farming resources, doing the so-called ‘grind’ to earn better armor, nicer cosmetics, and more.
Therefore, it is not inconceivable that players will be of value who can spend time farming resources or gathering skill points in an NFT game.
But this time, they’ll be working for a virtual business that generates real income in-game and tangibly increases its value as its size increases.
Once again, players who gather resources will work with NFT business owners or property owners to stimulate and grow their virtual economies.
Participation in Fashion League Is Key!
Fashion League gives players opportunities to grow their virtual brands and stimulate their economies via the blockchain. As the first female-centered Fashion NFT RPG (role-playing game), Fashion League also provides opportunities for women to collaborate and create real investment growth with its Free-To-Play and Fun-To-Earn model.
The key to generating value of any kind is interest, and interest can not be found without participation! So don’t be afraid to look around, get involved, and explore how you can grow a brand voice or an investment portfolio online or in-game through the power of the blockchain.