This 2021, the NFT market will continue to shine. Here’s why
Editor’s Note: This article has been published on cyberfinance.cn, and has been translated into English.
Non-fungible tokens (NFT) are digital assets representing various tangible and intangible items, ranging from game collectibles and sports cards to virtual real estate. The NFT market had grown so much from when it was first introduced, hitting $100 million in sales last July 2020. But this is just the beginning, especially now that the DeFi market reached $4 billion in locked value and leading cryptocurrencies have started their rally.
The main benefit of owning a digital collectible versus a physical one is that each NFT created has distinguishing information that makes it unique from any other NFT, making it easily verifiable. That’s why it’s rare to find fake NFTs because they can be traced back to the creator. Unlike cryptocurrencies, NFTs cannot be directly traded with one another since no two NFTs are the same, even if they exist on the same game, platform, or even collection.
Through blockchain technology, non-fungible tokens have been possible. It has also paved the way for the growth of decentralized finance. “The main promise of DeFi is that it’s truly global and borderless. Once you wrap an illiquid digital or physical asset into a synthetic asset, it becomes accessible from anywhere in the world, by anyone,” says Alex Salnikov, CPO and co-founder at Rarible, an NFT marketplace with RARI governance token.
With the DeFi market continually booming, we can expect that the NFT market will continue to shine. Here are the reasons why we would see more non-fungible tokens this year.
NFTs are simple and exciting.
Collecting digital assets, whether art, in-game collectibles, cards, and even kittens, is an exciting process and easy concept to learn. It does not need any advanced technical knowledge and financial skills. NFTs are usually obtain through playing fun games, and users can experience emotional reward by gaining ownership of unique objects.
“NFTs are increasingly capturing interest because the digital items you own today are actually not yours. Your Fortnite item, your game character, your digital artwork live in a database somewhere that can be shutdown. NFTs live on a blockchain like Ethereum; where its existence, its uniqueness is secured and verifiable by a decentralized network of computers that ensures no one is cheating,” shares Jason Chew, Ambassador for Aavegotchi, a DeFi powered game platform.
Each NFT is unique and can be a good investment.
“As each NFT is unique, the price of each will also be different for each one, and this uniqueness is what distinguishes NFTs from non-blockchain-based collectibles because makes them both distinct from any other NFT and easily verifiable. This makes the creation and circulation of fake collectibles pointless because each item can be traced back to the original issuer,” explains Lucas Vogelsang, Co-Founder & CEO of Centrifuge, a protocol for decentralized asset finance.
Even if users do not truly own the digital collectibles since they only exist on the blockchain, they are good investments. However, NFTs pricing is a zero-sum game. Users choose which objects will be in demand and hold the most value, growing their value.
“Unlike other industries that do not capitalize on unique items, if an item gets more expensive, more stores will produce this particular item and leverage its expensive pricing. This is not the case with the NFT market, where their value comes from the psychological attraction, making its economic cycles more distinct,” says Yuen Wong, CEO of LABS Group, an end-to-end real estate technology firm.
NFT allows users to enjoy and potentially grow their money.
Growing money is not an easy and enjoyable process. Most of the time, it requires advanced knowledge of the market before gaining returns. But with NFTs, users can both enjoy and profit from them. These digital assets are attached to gameplay and artwork, making them a better experience than other trading and investments. This is why artists, gamers, and collectors are drawn to NFTs.
Digital collectibles play an integral role in many video games today. NFTs have now impacted the gaming industry. “In a long-term perspective, the ultimate goal is to interconnect all games together in a single giant Metaverse. That’s what ownership of transferable digital items — lands, wearables, and other in-game assets — can do,” explains Salnikov.
The future of the NFT market
Because of the growing demand for non-fungible tokens, more and more gaming companies are entering the NFT market, gaining popularity to investors looking for the hottest assets. No wonder the NFT market has reached $100 million in total sales and is expected to grow significantly within the next years, given the factors mentioned above.
The NFT market is driven by deep psychological patterns, unlike DeFi, where demand and value are operated by its practical applications and promise of returns. As we continue with global digital transformation, many items will emerge as digital-native only, and the answer to the ownership question has already been solved by the NFT market.
Image credit: Pixabay
