The Reason behind Unreasonable NFT Price Tag
In the first quarter of last year, we got to witness history as Christie’s auction house held its first digital-only art auction where it netted Beeple’s jpeg NFT at $69 million, making it the most expensive NFT ever sold.
The tone of 2021 was set, a jpeg sold for $69 million and why is everyone changing their Twitter PFP to random colorful avatar all of the sudden?
TV broadcasters and mass media put out coverage on the matter and we get to see everyone’s confused face as a new crypto technology that boasts a global market value of more than $7 billion (JPMorgan) rises onto the scene.
But what-gives? Why would anyone buy a $69 million jpeg that’s easily saveable with a click of a button?? Well, before excusing its high price tag it helps understand what NFT is first and what it’s not.
NFTs are digital assets that are unique and can be verified with undeniable proof of ownership because they live within a digital ledger called a blockchain. In a blockchain, all transactions are permanently recorded making them reliable proof to authenticate ownership. NFTs themselves can come in many forms or any digital files.
NFT can’t stop people from right-clicking the file to save, but it gives the owner the power to legitimately show that it’s theirs, this is what we call ‘provenance’.
Why is it so expensive?
Well, to state all NFTs as expensive is not really true as the average price of NFTs is actually quite cheap. There are projects that dominate the scene, where the prices can be more expensive than one can imagine and have artists achieve that seemingly “overnight success”.
Since NFT is a technology that doesn’t allow duplication, people assign value to NFTs because it’s inherently unique. So far it acts as a collector’s items that are scarce, making them go up in value day by day, but since it’s digitized if creators choose to expand their NFTs function it can serve a whole range of use-cases other than just serving as collectibles.
Behind the success: The Importance of Community
A dedicated and active community is what makes some NFT projects stand out from the rest. When celebrities and big brands try to sell NFTs, it’d be more likely to be a hit because they have built that community surrounding them from the start. While people that invest early on an artistic project expect to be rewarded and receive extra benefits, so fundamentally human emotions and culture drive the relevancy and hype surrounding a project.
If you think about that, NFTs have become the world’s first digital Veblen goods, and NFT communities play a significant role in propagating its value. Economist Torsten Veblen describes Veblen goods as a type of commodity whose price rises as demand rises. Veblen goods give value as a form of social recognition to its owner. A Rolex watch, which theoretically has less functionality than a smartwatch falls into this category and its value is appraised based on rarity. People are not buying Rolex watches to tell time, but to get society acknowledgment, right?
That’s also the case for NFT! By owning an NFT, owners will get first-class recognition around the community. NFT investors and enthusiasts would eagerly discuss in their own community channels on Discord or Telegram and trade among themselves. Having their own language and inside jokes, the community is what makes the wheels turn and is a driving force behind many NFT projects’ success. They play such a role in the sector’s growth, increasing the sales volumes to $10.7 billion in the third quarter of 2021.
While Twitter is a central hub for big influencers who’re in the community, the largest communities of NFT enthusiasts reside on Reddit. Having several dedicated subreddit such as r/NFT, r/NFTsMarketplace, r/NFTMarket, r/CryptoArt, and many more, Redditors share news, discuss prospects and even communicate directly with developers, artists, creators, and collectors via Reddit’s AMA threads.
Identifying NFT Utility: Real Price Beyond Community!
Ultimately NFTs are here to stay. Not only will they shake up the art industry but with expanding features and functionality it will be useful for many existing and upcoming industries. Scarcity is necessary for the current NFT markets, but it isn’t enough to produce value on its own. Therefore in order to prolong NFTs relevancy, there should be additional factors in determining its value:
NFT Value = Scarcity + Utility + Reputation + Liquidity
In this formula Utility refers to how the NFT can be utilized and what you can do with it, Reputation refers to the value provided by the original creator’s and Liquidity refers to how simple it is to acquire and sell the NFT. That’s why Enevti is creating redeemable NFT that connects fans with their favorite creators.
Enevti as the world’s first social media NFT platform with CreaFi protocol is ready to be at the forefront of this #NextEvolutionofNFT. Bringing and educating NFT to the masses and expanding its use-cases while building an unprecedented community-first NFT blockchain ecosystem.
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Official Website: https://enevti.com/