Why Do People Buy NFTs?
Lately it seems like everyone is throwing around the term “NFT” as if it’s some sort of industry holy grail. But what exactly does it mean? And why is everyone and their mother diving into NFT marketplaces? Let’s give mom a safe landing by answering the question on everyone’s lips right now: why do people buy NFTs?
NFTs explained: What are NFTs and how do they work?
NFT is an acronym for “non-fungible token”. But what is a non-fungible token, exactly? The term has sparked a fair bit of confusion both online and offline. Is it a financial instrument or part of the art world? Or both? The truth is that NFTs can be a bit of everything at the same time. Confused? Don’t worry. Let’s break it down.
As we mentioned, the NF in NFT stands for “non-fungible”, which essentially means that it’s entirely unique. Nothing can replace a non-fungible piece of work. On the other hand, Bitcoin, the mother of all cryptocurrencies, is entirely fungible. You can trade one bitcoin for another and the two will be the exact same thing. NFTs? Not so much.
Think of it like trading baseball cards. If you trade a Mickey Mantle for a Honus Wagner, someone’s getting much less than they are giving. To build a little further on this, there are probably thousands of copies of both Mantle and Wagner’s cards – but there is only one first print edition. An NFT is essentially that first print edition.
NFTs, technically speaking, are part of a cryptocurrency group known as the Ethereum blockchain. This blockchain isn’t solely designated to support NFTs, but that is one of its many appealing attributes. NFTs are a little like the cloud in the sense that they store digital data such as music, movies, or artwork. But you can’t tune in to any of it unless you possess the password. And what do you need to do to get that password? Pay up.
Does anyone actually buy NFTs?
Yes, people do buy NFTs. And there are soooo many different things to choose from in NFT marketplaces, if you’ve got some digital cash burning a hole in your, um, digital pocket. Think of it this way: an art collector will scour the ends of the earth to find that special piece of original art – the one that has only one copy and is uber-expensive, even by millionaire standards. Now think of NFTs as a similar thing – only digital. Instead of owning Picasso’s Guernica, you own a digital version of something just as unique.
Why people buy NFTs
There are a million and one reasons why some people buy NFTs. One of the main reasons is to own a part of something that they deem great. For example, some filmmakers have turned to NFTs to finance their films. By making a film an NFT before anyone watches it, filmmakers can auction it off to the highest bidder or to their fanbase as an exclusive ‘first-look’ club.
If a movie studio buys the NFT, they’re going to share it with the world to turn a profit. However, if an individual has a few million dollars lying around, they could buy the film NFT so that they are the only person to ever lay eyes on it. Alternatively, the film could be divided into a set number of NFTs and sold to a collective (i.e. the director’s fanbase) who would form a very exclusive club. Not all NFTs are this expensive, though. People buy reasonably priced NFTs for the same reason they buy anything else: they like it and they want to own it.
Let’s examine how the Star Wars franchise could hypothetically use NFTs. People absolutely love their Star Wars merchandise. From artwork to toys, it’s always flying off the shelves. Now, consider Lucasfilm decided to make a bunch of NFTs full of original and signed artwork. Collectors of Star Wars merch are going to jump all over that in order to add exclusive pieces to their collection. Then, in a galaxy which is pretty similar to our own, those NFTs start accumulating value…
What kind of person buys NFTs?
Does the everyday person buy NFTs? Maybe. Technically, anyone can purchase an NFT if they’ve got the cold hard cryptocurrency to do so. But there are certain types of people who are more likely to jump into the world of NFT purchases.
People with a lot of money, for example, are more likely to purchase NFTs simply because they can afford to take the speculative risk. That means collectors, investors, and celebrities looking to get a piece of the NFT action are able to do so.
However, not all NFTs are going to gouge the digital wallet. ‘Regular’ fans can still get their foot in the door with NFT art, music, or movies without emptying their pockets…they just need to know the right places to buy NFTs.
Where to buy NFTs
This is where it can get a little tricky. You can’t go to a store to buy NFTs, and you can’t use your regular money, either. You need to buy Ethereum cryptocurrency so you have some funds to work with.
To do this, you have to open an exchange account (Coinbase is very popular) and crypto wallet, buy the cryptocurrency, and transfer it into the crypto wallet. Once you have your wallet stacked, you can head to an NFT marketplace such as OpenSea and go shopping.
What’s included in the NFT marketplace?
There are so many things available in NFT marketplaces it would take the rest of your day just to read the first thousand. However, they all fall under one umbrella category: digital assets. Whether it be art, music, movies, or even real estate, they’re all digital.
So, are NFTs going to be the investment frontrunners of the future? As with any new industry, it’s hard to make any solid guarantees – however, right now these tokens are certainly making a splash in the world of digital assets, and if they really are the future then those who get in early are going to be giggling all the way to the digital bank.
Featured image by note thanun on Unsplash
