Why Are NFT So Expensive and What Technology Stands Behind It
Before simply answering the questions ‘Why are NFT expensive?’ and ‘What makes NFT art cost so much?’, we need you to know the underlying principles and technology of NFTs. This will save a lot of time for explanations and let you understand what you will be buying.
NFTs are non-fungible tokens. ‘Fungibility’ in the economics vocabulary is the property of the object to be traded for other items of a similar type, so non-fungible tokens are the ones that are impossible to exchange for other items. This idea is easier to understand if you look at currencies: bills worth $100 can be exchanged for other bills worth $100 with no changes in net value because 1 dollar equals another 1 dollar.
With NFTs, it’s all different. They are referred to as artworks, and, as we know, a painting existing only in the original is impossible to trade for another canvas. If you buy it, it is only yours, and you can only sell it for the desired price. Even though NFTs are digital, it doesn’t mean they can be saved by right-clicking. Why exactly?
This partially answers the question ‘Why is NFT art so expensive?’ Whenever an NFT is bought, there is a new record on the blockchain, and this record remains there forever. Plus, it can’t be changed. So this proves that you are the one who bought the token and has the ownership rights.
More About Reasons for High NFTs’ Cost: Why Is NFT Art So Expensive?
History has known a lot of cases when NFTs have been sold for unbelievable prices: the Twitter CEO’s first tweet ($3 million), ‘The Merge’ ($91.8 million), CryptoPunk #3100 ($7.67 million), etc. But why would someone spend this much, and why are NFT so expensive? A part of the answer is already given but let’s explore each value-forming factor one by one.
Why Do NFT Sell for So Much Nowadays? #1. Rarity and Uniqueness of Items
#1. Owning a rare and unique piece of art.
The first and simplest reason for the great cost of NFTs is a rarity. But, just like art lovers have been obsessed with unique canvases like ‘Starry Night’ or ‘Mona Lisa,’ we now pursue the same idea in the digital sphere.
However, it’s all subjective, and the price of an NFT often is determined by how much a person is willing to pay for it. Originally, many tokens are not expensive at all. But if a token is rare and the supply is very limited, it gains even a bigger value.
Okay, but is it the only reason? Far from it. Why are NFT so expensive then?
What Makes NFT Art Cost So Much? #2. Perks, Memberships, and Benefits
#2. Benefits and real-life use.
Every NFT linked to real-world value and opportunities goes higher in the ratings because people usually want to own something that goes beyond the screen and on-the-blockchain value.
Gary Vaynerhcuk is a bright example of how a utility adds so much value to a digital token. Into each item of his famous collection ‘Vee Friends,’ he incorporated the function to act as a ticket to the conference (which, if bought separately, was pricey enough).
A special set of his NFTs even included tete-a-tete meetings with Gary. So, these NFTs reached their peak popularity and prices since they offered real-life use and exclusive experience. That is what makes NFT art cost so much – including buyers in a circle of ‘closer fans’ and allowing them to touch something inaccessible to others yet.
Why Are NFT Expensive in the Last Place? #3. Ownership History and Its Hype
A big part of ‘Why do NFT sell for so much?’ has to do with famous people and those who shape contemporary culture worldwide.
#3. The ownership history is transparent and easy to track.
People have always liked the idea of owning a unique item, not just a cute image, haven’t they? Since the buyer’s name is written on the blockchain in the ‘owner’ section, it is easy to prove that the item is yours.
In addition, this is a great plus for those who repurchase NFTs from celebrities or makers: the simple ownership tracking on the digital ledger makes it easy to see if the famous person really owned the token. This plays a huge role in driving the item’s price up.
In the NFT market, this happens all the time. One of the ‘Bored Ape’ NFTs, previously bought by Justin Bieber, has grown in price just because a star held it. That is another factor answering the big question ‘Why is NFT art so expensive?’
In the end, we would like to tell you that there’s no 100% assurance of which factor plays a bigger role in forming the answer to ‘Why are NFT expensive right now?’. This is a combination of a few reasons mixed with the current cultural and geopolitical events that make certain themes relevant or irrelevant.
Moreover, there might be another cause for NFTs’ high prices. Economists like to call it ‘a bubble’. This term shows up whenever a new technology is introduced, and many investors start to pool their money. The wave of investments then drives the demand, and the demand determines the price growth. This doesn’t necessarily mean that NFTs are just a short-term trend. That’s just how it is with new areas to invest in.
The Final Say
To crown it all, NFTs are going to stay with us for quite a long time, judging from their steady course toward development and fast expansion. They are a new reality that we can either ignore or attempt to use while we can.
We hope you found the answers to ‘Why do NFT sell for so much?’ and now can operate with the given knowledge when facing some attractive non-fungible tokens.