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Technology - May 11, 2022

Why Are People Paying Millions for NFTs?

It’s time to get past all the hype around NFTs and start leveraging real opportunities to earn big in the emerging technology. December 2, 2021, saw the biggest NFT sale amount of $91.8 million. Will more people continue paying millions of dollars for some JPEG or digital art, all in the name of NFTs?

The answer to this question is should be shrouded in what NFTs actually are. Let’s have a look

What are NFTs?

You must read countless definitions of the term. However, only a few capture how NFTs generate their monetary value. Non Fungible Tokens – NFTs are a technical way of saying ‘non-replaceable’. They are a digital asset that signifies the right to own digital property such as a work of art or music, GIFs, collectables, video clips, and so on. This highly valuable advantage is a major draw for people who are paying millions for NFTs.


NFT and its Place in the Nigerian Economy

NFTs and cryptocurrencies are both linked to a blockchain. An NFT differs from a cryptocurrency in that it is non-fungible, making it irreplaceable and unique. For example, one Ether is always equivalent to another and can be interchanged, but a non-fungible token is unique, has a digital signature, and cannot be swapped for another.

Where do NFTs Derive their Monetary Value

NFTs have digitised the art marketplace. And artworks get their value or high prices from scarcity or shortage of supply. This is where NFTs have attracted a lot of buyers from across the world. It is essentially licensed digital art that appreciates in value as its traditional counterpart. 

Generally, things are valuable when they are scarce. There is only one Mona Lisa. There are only 59 Le Bron James dunking NBA Top Shots (one of which sold for $US387,000).

But the truth is, people are minting millions and millions of NFTs that are flooding onto marketplaces and leading to speculative buying frenzies.

Things are generally valued when they are scarce. There’s only one Mona Lisa in the world. Only 59 LeBron James dunking NBA Top Shots exist – one of which sold for $US387,000.

But the fact is that individuals are creating millions and millions of NFTs, which are flooding the market and causing a speculative purchasing frenzy. This is only possible because NFT markets are yet to mature. 

They are speculative in nature, fueled by momentum and mood rather than price discovery.

the Financial Review likens it to a gold rush, when people pay thousands of dollars for pans and shovels and then millions for every rock discovered, whether or not it’s gold.

However, these markets are expected to settle down at some point and, like the current primary and secondary divide in the art markets, prices will come to represent realistic demand.


How Artists in Africa are Leveraging NFTs for a New Kind of Monetization

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