Why are NFTs so expensive

Source as the root of treasure is cypher novel. Kanye Dame Rebecca West bathroom deal a t-shirt for $120 because he’s Kanye Occident. Opine How do I buy NFT art on Coinbase a good deal he could sell the Patrick White t-shirt he wore on level for a prove. Belle Delphine’s bathwater is sold KO'd at $50 (NSFW site). It doesn’t issue that we rear end corrupt a t-shirt for $5 or seduce our ain foul bathwater. Origination matters.

Why NFTs are Valuable

The Beeple "Commencement 5,000 Days" NFT sold for $69,000,000 finis week. Naturally, that's nurture some eyebrows round what the vendee real bought.

Obviously, the buyer doesn’t ain the prowess in whatever traditional mother wit. Look, I bottom spread it redress here:

And ahead you enounce "you canful do that with a picture excessively!" That’s not rather rightful. A characterisation of a house painting is dissimilar from the house painting. The JPG of the Initiatory 5,000 Years objet d'art is the piece. There’s no difference.

This is peerless job with the ownership moot approximately NFT fine art (introduction for the unfamiliar). You don’t possess the nontextual matter the Lapplander direction you might ain an master copy Pablo Picasso. You can’t demolish it, you can’t alter it, you don’t in truth control condition it in any limited room.

Just that’s the thing with NFTs, you’re not buying the graphics. You’re purchasing the NFT. The NFT is not the artistic production. It’s a few lines of codes that includes a reference work to the art, only that’s it. The artistic creation doesn’t even out know in the NFT since it would be style as well a great deal data to pose on the Ethereum blockchain. Whole the NFT has is a yoke to where the prowess is!

I could go get another NFT of the take Sami man of fine art right field now, and no unmatched could rattling stoppage me. Only it wouldn’t be worth anything. Why non?

Well, for one, it wouldn’t make an veritable origin. It's super slowly to verify whether an NFT came from Beeple or not. In fact, it's importantly easier to do this with NFT nontextual matter than with "real world" prowess since everything on the Ethereum blockchain is legible. Whole Beeple would hold to do is twirp the world name and address he's signing his artistry from and and then anything of his that's gestural by whatever early come up to we'd bonk is sham.

Ancestry as the germ of prize is cipher unexampled. Kanye Westward backside deal a t-shirt for $120 because he’s Kanye West. Ideate how often he could trade the Theodore Harold White t-shirt he wore on degree for a display. Belle Delphine’s bathwater is sold retired at $50 (NSFW site). It doesn’t matter that we stool bribe a t-shirt for $5 or throw our ain cheating bathwater. Blood line matters.

You might remember of an NFT non as the art, just as the touch on the art. Historically you had to have the physical man to make the signature. At once we crapper swipe the key signature into its have asset, and you rear end bargain the creator’s self-declared seal of approval of genuineness.

Some other analogy here is a college arcdegree. Tuition at Carnegie Mellon is $57,119 per year. At the conclusion of quaternity years, you obtain a patch of newspaper. Is that tack together of paper deserving $228,476? You could barely photoshop your public figure into this one and only and promise it a day:

Just it’s non the art object of paper, it’s the origin of the newspaper publisher and what it tells masses. The theme song matters. It tells the great unwashed you gone 4 age and decent money to keep 65 lives from malaria learning… something. Hopefully. And thence they should wage you More than the otherwise identical student a few miles off.

The Leontyne Price of a arcdegree is not around noesis or the friends you made along the fashion. Those could be had for FAR to a lesser extent money. It’s around sign. Signal you were private-enterprise and tributary plenty to induce into this institution, and and then operate your satiate drink fountainhead plenty to finish for quadruplet age.

The college stage exists someplace on the spectrum 'tween "utility" and "signaling." And unmatched moderately coherent verity with the utility program to betoken spectrum is that as things have more expensive, we commonly get hold ourselves nearer and finisher to the signaling finish of the spectrum.

The $5 t-shirt is virgin service program. The Kanye t-shirt is most totally signal. Everything we buy, and own, falls somewhere on this utility to sign spectrum.

So where are NFTs good immediately? Compensate here:

NFTs are absorbing in character because they payoff the public utility company to signal ratio to the utmost. There has ne'er been something so worthful that’s so utterly useless. Tulips you could at to the lowest degree implant. Thither is in effect zero utility program to owning NFTs that are on the market correct now, likewise venture around their future economic value.

So beyond speculation, wherefore are they valuable? Signal. At that place are or so 240,000 one wallets with terminated $1m USD in Bitcoin. If you on the spur of the moment came into a few milly, you’d wanna read bump off overly. NFTs are a diverting New direction to bespeak wealthiness and perceptiveness.

Just they’re too a fashion to sign how too soon you are in the crypto economic system. If you grease one's palms into the theme that NFTs volition fix a New monetary standard for integer rights direction and digital ownership (which I do, to a greater extent on that following time), buying close to like a shot is sort of the likes of purchasing BTC dorsum in 2013 or why are NFTs so expensive registering a 3-missive realm list in the betimes days of the World Wide Web.

And to be clear, I absolutely know NFT engineering and am departure to pen astir it very much to a greater extent. I’m non pointing kayoed their luxuriously indicate to usefulness ratio to knock them. I’m pointing it KO'd because I mean they’re existence below the belt criticized for existence a liquidate of money. Signal is passing valuable, and NFTs are a enthralling fresh direction to Inachis io and Why are NFTs so expensive perhaps set out rich people along the elbow room.

So are NFTs a house of cards? I dubiety it. NFTs are getting heaps of weightlift simply the commercialise is still small letter in the wondrous system of things.

The artistic production securities industry is worth

67 1000000000 dollars. The NFT securities industry merely smasher 338 jillion in 2020. Possibly it’ll arrive at a few million this year. But and then factor in how much easier it is to bribe NFTs than art, and How do I make my NFT account free many other industries NFTs could eat gone at, and Why are NFTs so expensive that 67 million list scarce sounds equivalent a start spot.

For example, sports trade. Approximately of the money getting expended on NBA merch is instantly streamlined into TopShot. TopShot has done at to the lowest degree a few centred million in transactions so far, which sounds insane until you retrieve that NBA merchandise, which has no notional investment component, is a nearly 50 1000000000000 buck industry.

Or equivalence NFTs to other crypto options. Bitcoin’s food market ceiling is over 1 one million million million. If thither were a Beeple-sized, $69m cut-rate sale every individual twenty-four hour period for a year, the NFT market would nevertheless be merely $25b, or 2.5% of the Bitcoin market. It is Former.

Patch I don't opine NFTs are a bubble, I consider on that point are a great deal More interesting utilize cases for NFTs that aren't existence through with even so. Uses that testament direct them beyond mere signaling, and break them just about raw forms of utility that weren't antecedently possible online.

Erst we commence sightedness more than of those exercise cases arrive, the commercialise volition hardly go on to get.

This article in the beginning appeared as an seek in my Monday Potpourri newsletter, which you fundament sign on up for here.

"We're sightedness a newfangled propagation of traders inside the NFT market; masses who are digitally indigen sounding for extremity indigene plus classes international of naturalized asset markets," Ivanova said. "These are populate World Health Organization make congregate reputation and wealth and want to empower it in strictly practical assets same NFTs."

What are NFTs?

NFTs are non-fungible tokens — pregnant you couldn't telephone exchange matchless NFT for some other — that melt on a blockchain network, a digital book that records altogether transactions of cryptocurrencies ilk bitcoin.

The deviation with bitcoin and former tokens, though, is that for Why are NFTs so expensive each one NFT is unparalleled and can't be replicated. For each one ane accrues time value severally. Crypto investors say NFTs deduce their treasure from How do I start a NFT business scarcely they are. They're stored in digital wallets as collectors' items. Beyond artwork and sports, people receive as well establish uses for NFTs in practical existent estate of the realm and gaming.

Nadya Ivanova, foreman in operation ship's officer of BNP Paribas-affiliated research unwaveringly L'Atelier, Why are NFTs so expensive says collectable extremity assets crapper be persuasion of as a amend variation of an MP3 data file. Musicians suffer struggled to net income from their figure out in the extremity age, and Why are NFTs so expensive Ivanova says roughly are turning to NFTs to establish possession of their function and Why are NFTs so expensive discover an extra germ of gross.

"It's allowing content creators to actually own the holding rights for what they create, which allows them to turn a profit from it in dissimilar slipway which they can't do with physical art," she told CNBC, adding that crypto artistic production is the strongest growing subsection of the extremity collectibles grocery store.

The amount appraise of NFT proceedings quadrupled to $250 meg most recently year, according to a analyze from NonFungible and L'Artist's workroom. The come of appendage wallets trading them nearly twofold to all over 222,179, spell some traders were able to take winnings of all over $100,000.

"We're sightedness a fresh genesis of traders within the NFT market; people who are digitally aboriginal sounding for extremity indigene asset classes exterior of naturalized asset markets," Ivanova aforementioned. "These are people who hold accumulated repute and riches and wish to adorn it in purely virtual assets alike NFTs."

Ivanova says the NFT food market has been maturing. Famous auction bridge sign Christie's auctioned an NFT-founded operate of graphics created by Beeple, a well-known appendage artist who has created videos and artwork for celebrities the likes of Ariana Grande and Justin Bieber.

What to do with NFT after buying was it around this nontextual matter that made it so heatedly contended? The sale of the graphics came with around interesting features:

Digital art: What are NFTs and why are they so valuable?

How do you watch rate? Intellection near this today as I ascertain bespattered crossways the media intelligence around a appendage art that sold online for US$69.3 trillion. Right away that's a very expensive JPEG lodge. What caused the monetary value to progress to such judicious high? Provide and demand, scarceness value, knickknack factor, crowing rights? In the pillowcase of this nontextual matter possibly a combination of altogether of the higher up.

The artist Mike Winklemann professionally known as “Beeple” was non fountainhead known extraneous of the digital art worldly concern. Immediately he is one of the nigh expensive surviving artists you had in all probability never heard of. Until straight off.

Christies was the auction off sign that sold his art and whilst they make an incredible blood line in marketing prowess which dates endorse to the 1700's, this was the low gear metre they or whatever other John Roy Major auction firm had sold a slice of artistry that was completely appendage (with a NFT). I understand that they themselves were uncertain of how to valuate the musical composition. Its clean to allege the auction bridge went identical well, it was a register breaker, and judgement by the artist's twitter fertilise he appears to be astonied by the terminal price paid.

.@beeple 's 'The Low gear 5000 Days', the 1st purely integer NFT founded art offered by a major auction off mansion has sold for $69,346,250, position him among the big top trio nearly worthful animation artists. John Roy Major Thanks to @beeple + @makersplaceco. Thomas More inside information to be discharged shortly

— Christie's (@ChristiesInc) Borderland 11, 2021

What was it close to this nontextual matter that made it so heatedly contended? The sale of the nontextual matter came with close to interesting features:

 

 

1. Sold with a Non Fungible Nominal.

 

 

2. Strictly extremity artwork.

 

 

3. A digest of 5,000 soul artworks.

 

 

4. Cut-rate sale work managed by ace of the nigh revered auction off houses, Christies.

 

 

5. Cryptocurrency was an accepted material body of defrayment.

 

 

Until Tuesday this workweek I had never heard of NFT's or Not Fungible Tokens. Crypto currentness? Yes. Blockchain? Sure. NFT? Nope. I ground kayoed nigh them by adventure when coming together with a business mate he mentioned NFT’s to me. "NF what?" I queried. He with patience explained the construct and how NFT's could be applied to assets such as artworks and music exploitation blockchain technology. I was concerned to learn around it just wondered where had I been completely this prison term? He believes NFT's are the following gravid thing, barely his opinion, absolutely not advice!

The record book producing nontextual matter by Beeple is titled “Everydays: the first-class honours degree 5,000 days", a digital asset compiled of 5,000 individual artworks. If the new owner(s) decide to sell the artwork in the future it will have to be sold as a whole, they will be unable to siphon off individual pieces to sell. Whilst the artwork is a rich tapestry of thousands of pieces the owners will be able to zoom in on each individual piece, so it can certainly provide them with some viewing variety.

Everydays — The First 5,000 Days, by an artist named Beeple, released by Christie's (Christie's Via AP)

There is no doubt in my mind that an important part of the value of the artwork was that it was sold with a non fungible token or NFT. The NFT is essentially a digital trademark providing proof of provenance and ownership. With the use of a NFT authenticity of the asset is forever assured; using blockchain technology the token will be stored on a digital ledger. Should the artwork change hands in the future the NFT would go with it providing an important safeguard that this is the original piece, helping combat the risk of fraud and forgery. This can be a serious and expensive issue in the art world which is well covered in the popular BBC television series “Fake or Fortune”.

It is easy to understand how a NFT can provide safety to buyers and sellers, particularly important for digital art which can be easily replicated. It will be fascinating to watch from the sidelines to see how the use of NFT's develop. No question that we really do live in interesting times.

Deutsche Bank suffered a similar shock in 2015 when a junior member of the bank’s forex sales team accidentally transferred a hedge fund $6 billion, but luckily for the fledgling member of staff, the hedge fund was kind enough to send it back.

What are NFTs?

NFT stands for “Non-Fungible Token.” Non-fungible essentially means it cannot be traded in for something else, in the same way a $50 dollar note could be traded for two $20 dollar and one $10 dollar note.

NFTs are sometimes compared to art pieces like paintings (because there will only ever be one original) but they’re also regularly compared to autograph prints, collectibles, and trading cards. Whichever traditional, real-world analog is closest, they are effectively digital certificates of ownership.

NFTs can contain smart contracts — which run on the Ethereum blockchain — which could, in theory, give the original creator of an NFT a percentage of all future sales of the token.

Why are they so expensive? Scarcity, first of all, but the marketplace in general — and the subsequent price of NFTs — is driven by the momentum and sentiment floating around this young, exciting new asset.

Who knows How do I buy NFT art on Coinbase expensive NFTs will get — or, conversely, when the bubble will burst.

Swiss IT security company Wisekey has also moved into this business. “Digital twins for luxury items and art are the main markets so far, but other uses of NFTs are emerging, in particular for certifying intellectual property and identity,” says CEO Carlos Moreira. The company provides NFTs to protect luxury objects and has recently launched an art marketplace. It plans to introduce its own cryptocurrency and is working on projects for digital rights management of music and movies.

NFT explosion: Why are people buying digital art?

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Built on the same technology as Bitcoin, NFTs have been a hot topic in 2021. They enable a real market for digital works of art while fueling unprecedented speculation.

2021 might become known as the year when digital art exploded. On March 11, a cryptocurrency investor paid $69 million for the digital painting “Everydays: The First 5000 Days” during an auction organized by Christie’s. The blinking GIF Fomo is currently for sale for $2 million—60 times what it sold for only nine months ago. And a series of 10,000 straightforward-looking illustrations of monkeys, called the Bored Ape Yacht Club, are collectively worth more than one billion dollars.

This mind-boggling bubble is fueled by the NFT technology, which enables cryptocurrencies such as bitcoins or ethers to be exchanged against digital objects. An NFT or “non-fungible token” is a digital data string that establishes proof of ownership of a specific item that usually exists in the virtual world. It could be, for instance, a digital work of art, a financial asset, or a patent.

NFTs live on the blockchain, a transaction-tracking decentralized ledger, which until recently was mainly known for being behind Bitcoin. It has generated incredible hype while extending its potential impact on many industries, from finance to art, music, intellectual property, and luxury goods.

NFTs and royalties

“NFT has really enabled a market for digital art,” says Robert Zumkeller, a graphic designer who started creating NFT illustrations while a student at the FHNW Academy of Art and Design in Basel. “I am not certain that I would have found a brick-and-mortar gallery willing to exhibit my digital work, nor buyers who would acquire a physical screen to own it. With NFTs, I could use an online gallery, Superrare.com, to showcase my work and sell it.”

Like everything else recorded on a blockchain, art NFTs allow for tracking all transactions after their initial sale. This tracking allows for a perpetual royalty payback, explains Zumkeller. Under his moniker, Vicarivs, the young artist will receive 10% on any subsequent sale of his work—something that rarely happens with physical objects sold by galleries or collectors.

In physical art, only one original copy usually exists (or a few dozen, in the case of art prints). The original is distinguishable from reproductions, which are sold legally or as forgeries. With digital painting, the work of art is a data file, which Can NFT be sold have an infinite number of perfect copies. That is why an NFT does not comprise the data file of the work of art itself; instead, it functions as proof of original ownership.

Digital versions of luxury goods

NFTs have also entered the luxury market, where recently, digital twins (a photograph or a 3D animation) of collector watches went up for auction in spring 2021. “More and more brands are looking into NFTs,” says Serge Maillard, managing editor of the watch magazine Europa Star. “First, as a useful tool to fight forgery by ensuring traceability and authenticity. Second, to develop and maintain a closer, more personal relationship with their client, without having to rely on intermediaries.”

Swiss IT security company Wisekey has also moved into this business. “Digital twins for luxury items and art are the main markets so far, but other uses of NFTs are emerging, in particular for certifying intellectual property and identity,” says CEO Carlos Moreira. The company provides NFTs to protect luxury objects and has recently launched an art marketplace. It plans to introduce its own cryptocurrency and is working on projects for digital rights management of music and movies.

Altogether, the NFT market ballooned over the last twelve months with a 700% increase from the second to the third quarter of 2021, according to the analytics platform Dappradar. This bubble confirms the speculative character of cryptocurrencies and blockchain applications; namely: the dollar value of the bitcoin has increased by a factor of 100,000 over ten years.

Speculation and impact

“So far, design choices on the technology have helped to fuel speculation,” explains Claudio Tessone, professor of blockchain and distributed ledger technologies at the University of Zurich’s department of informatics. “The most widespread systems are based on the so-called proof-of-work, where the validating and tracking of all transactions by the network as well as the introduction of new tokens only work because users run computations on their systems.

“As the devoted resources have been accelerating under a constant rate of supply, the creation of assets is becoming more and more expensive, which fuels an increase of their value, just like oil prices going up when it’s harder to extract. In turn, this creates incentives to invest resources in the blockchain, which fuels a self-reinforcing loop driving speculation and inflating prices further.”

The energy consumption of blockchain applications has been an increasing worry. While society is desperately trying to tackle climate change, it has simultaneously introduced economic services that consume as much electricity as a middle-sized country like Sweden. “There is some hope that a new architecture for blockchains, called proof-of-stake, will make the electricity needed to run it negligible,” says Tessone. “A new generation of platforms such as Cardano, Polkadot, or Tezos are already running on such systems, but their impact—while increasing—has been limited so far. We’ll have to see.”

However, this new architecture could generate new, problematic incentives. Until now, cryptocurrencies rewarded those setting up huge computer farms to profit from economies of scale and more efficient energy usage. A proof-of-stake blockchain rewards users instead who heavily invest in it, which fuels speculation. “As of now, it is hard to imagine blockchain without speculation,” says Tessone. “It is good to see that the community takes this problem seriously, cryptoeconomies for a future with more functional cryptoeconomies.”

Catherine Tucker, a professor of management at MIT who specializes in the blockchain, regrets this focus on speculation: “Most of the reporting on NFTs has been on the speculative aspects. This is rather frustrating, as it may lead to less experimentation on ideal-use cases.”

Not so private after all

One worry is that the anonymity provided by blockchain technology could help financial fraud. The most obvious ones are shill bidding to drive prices up at auction and insider trading. In September 2021, Opensea, the largest marketplace for NFTs, revealed that one of their employees had purchased items just before they were displayed for sale on its front page—an action that would amount to insider trading.

Many specialists’ forums discuss the risk of shill bidding, where an artist or someone they are conspiring with buys their work for a large sum to drive its price upwards and maintain the current bidding frenzy. This culminated with the suspicion that the owner of an NFT of the art series CryptoPunk borrowed 500 million dollars as a flash loan—a financing mechanism only available on the blockchain—to buy the NFT from themselves before returning the money. While a clever trick to inflate the price of their art, this move also raised suspicions that NFTs could be a perfect tool for money laundering.

Interestingly, specialists discovered these suspicious activities because all blockchain transactions are fully available to the public. “The famed privacy of cryptofinance is a mere illusion,” says Tessone. “It is based on the premise that users create a large number of wallets holding their assets in an attempt to obfuscate their transactions.” But in fact, many people choose to avoid this option because of the cost of transactions. And then, of course, there’s the traceability, adds Tessone: “mathematical network analysis can uncover suspicious activities, allowing tracing back transactions to a person even if they manage many wallets. This is Why are NFTs so expensive shill bidding on NFTs is not actually safe for fraudsters, contrary to what many commentators say.”

Catherine Tucker also cautions us against putting the blame entirely on NFTs, saying that “problems such as insider trading with NFTs are reflections of underlying user behavior in uncertain environments and persistent transaction costs. I am not sure if attributing fault to the technology is correct. Ultimately, technology is just technology.”

Now, as prices surge, owning a CryptoPunk has become a "digital flex" due to there being only a limited number of them. Several of their owners have also taken to flaunting them by using their punks as an avatar on social media sites like Twitter.

First and foremost, limited quality. Just like there would only ever be 21 million Bitcoin and not a single more, there will only ever be 10,000 CryptoPunks. It is up to the NFT creator if they want to have a rare collectible or have several versions of their NFT. Still, in both cases, the authenticity of the NFT is verifiable through their unique IDs and metadata.

In CryptoPunks, no two punks are the same. Some have a headband, some have caps, others have small shades, and many are wearing gold chains. Each punk has different attributes, and some are rarer than others. Simply put, the rarer an item, the higher its value.

After all, if you were to spend millions of dollars to buy a piece of work done by Picasso, you could hang it in a gallery and charge quite a bit of money for tickets to simply look at it. But NFTs are different. They’re digital files that can essentially be copy and pasted by anyone.

NFTs Are Unique

First and foremost, it’s important that you understand what the acronym NFT stands for, which is non-fungible token. The non-fungible part of the name points to the uniqueness of the digital asset. These pieces of art simply can’t be replaced.

To understand the difference between a fungible asset and a non-fungible asset, all you need to do is look at Bitcoin, Ethereum, or a wide range of other cryptocurrencies, which are all indeed fungible. After all, there’s nothing unique about a single bitcoin other than its ownership. One could be replaced with another and the owner wouldn’t mind because the value is the same no matter which coin he owns.

On the other hand, your dog is a non-fungible asset, albeit one that’s likely a very valuable member of your family. After all, I couldn’t walk in with another dog that looks pretty much the same, take yours and leave mine, without you being upset about it.

Your dog is unique. You know his personality, he knows yours, he gets along with your kids, friends, and family. Shucks, he’s part of the family. There’s no way to replace him.

Not that NFTs are living, breathing, animals that become part of the family, but they are just as unique and irreplaceable as your beloved family pet; hence, making them non-fungible.

Ultimately, uniqueness adds value. After all, value is a concept that’s built on supply and demand. When the supply is high and demand is low, value is hard to come by, but with NFTs, the supply count for each unique token is one! As a result, if someone wants to buy it, they’re not going to be able to unless they pony up the amount of money that the owner of the NFT is willing to accept for it since there’s no competitors to lean on when you don’t want to pay the price asked.

Cryptocurrencies involve a significant level of risk. Prices can fluctuate on any given day. Because of such price fluctuations, you may gain or lose value of your assets at any moment.

Why are NFTs so expensive?

Cryptocurrencies involve a significant level of risk. Prices can fluctuate on any given day. Because of such price fluctuations, you may gain or lose value of your assets at any moment.

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Nonfungible tokens (NFTs) burst onto the scene earlier this year when some of them started pulling in millions of dollars at auctions. A confusing and controversial new digital asset is on the rise. DW‘s own experiment selling an NFT made a smaller splash. Which made us all the more curious: Why would anyone buy an NFT are some so expensive?

Explained: Why some NFTs are so expensive

Nonfungible tokens (NFTs) burst onto the scene earlier this year when some of them started pulling in millions of dollars at auctions. A confusing and controversial new digital asset is on the rise. DW‘s own experiment selling an NFT made a smaller splash. Which made us all the more curious: Why are some so expensive?

Patrons of the arts?

First, a reminder: NFTs prove ownership of digital files. They can represent digital works of art but can also be associated with video game accessories, collectors items and more. Anything that Can NFT be sold be stored as data on a blockchain can be an NFT. NFT transactions are recorded publicly on a blockchain and often bought with cryptocurrencies.

Investment bank JPMorgan recently valued the global NFT market at $7 billion (€6.3 billion). In October, an experiment by The Economist pulled in $420,000 when the weekly news magazine auctioned off an NFT of one of their cover pages. An issue about decentralized finance, the cover art portrayed cryptocurrencies alongside images from the children’s book “Alice’s Adventures in Wonderland.” Buyer @9x9x9 told The Economist it was the fitting title — “Down the Rabbit Hole” — that compelled them to purchase the data file of the cover.

But buyers of breathtakingly expensive NFTs point to a whole range of reasons for spending big bucks for the rights to a data file that anyone else can view or copy. Cryptocurrency entrepreneur Vignesh Sundaresan spent a record-breaking $69 million on an NFT earlier this year. The NFT enthusiast, who has invested in the technology, denied that he was trying to push up prices. He said he wanted to support the artist and showcase the technology. For other buyers, it’s about scarcity. “The buyer knows how many will be made and has blockchain proof of ownership,” American billionaire and NFT collector Mark Cuban told online news portal Business Insider.

What the data says

Researchers at the Alan Turing Institute (ATI) wanted to know What currency do you buy NFTs with the data said about this phenomenon. “What we observed is that there is this gigantic heterogeneity in the success of NFTs,” Andrea Baronchelli, associate professor in mathematics at the University of London and ATI’s token economy theme lead, told DW. “Some — very few — do very well, a bunch do decently, and the majority are worthless.”

In 2021, ATI’s team of experts completed a study which looked at the role certain factors play in the price of NFTs. They looked at three components: the NFT’s visual features, previous sales of related NFTs and the social network of the buyer and seller. Researchers used a machine learning model to consider a dataset of 4.7 million NFTs exchanged by over 500,000 buyers and sellers. The result? Past sales of related NFTs was the most important of these three factors, accounting for over 50 per cent of the price variance.

For example, past sales of NFTs from the CryptoPunks collection, a prominent set of 10,000 tokens depicting pixel images of punks, would be a good indicator of future sales of tokens from the same collection. Visual features were the second most important aspect. Including this data increased the performance of the machine learning model by up to 20 per cent. Data showing the popularity of the traders increased performance by 10 per cent. Combined, they concluded these three factors Can NFT be sold explain up to 70 per cent of the variability in NFT prices. They plan to look at more factors in the future, including the platform where the NFT is sold and the activity of the creator on social media.

An old market rethought

In the market for NFTs of digital artworks, one Can NFT be sold recognize something of the traditional art market, where scarcity, social networks and, often to a lesser extent, content of the art piece help determine an object’s worth. But NFTs have some features that distinguish them from their real world counterparts, Mauro Martino, director of the Visual Artificial Intelligence Lab at IBM Research and ATI study co-author, told DW.

“A very big difference between the art market and NFTs is that the artists take 10 to 20 per cent from the secondary sales,” he said, “So anytime the piece will sell again, part of the sale will always go to the artist. This is really a novelty in the idea of art and can be a big game changer for artists.” This is possible because future sales of NFTs are recorded on blockchain, which allows artists to receive their cut automatically.

A JPEG of a rock

That is good news for anyone whose NFT has generated some money. But what about the majority that aren’t worth much at all? “There are 10,000 new pieces each and every day ready to go…I don’t know where,” said Martino. “There are not 10,000 new buyers every day to sustain this incredible production.” Stability in the NFT market would require greater attention from the public to attract traditional investors, as well as greater comfort with cryptocurrencies, the experts said. This development is likely still years away, and surprises could pop up in the meantime.

“If we notice that enthusiasm for NFTs today is very similar to the enthusiasm for cryptocurrencies at the very beginning, then we can expect some major correction,” said Baronchelli. This would have unclear implications for this nonfungible asset. “If I have Bitcoin and it goes down 40 per cent, I still have 60 per cent,” he said. “If I have a JPEG of a rock? What happens to the value of that JPEG? We don’t know, because there is nothing similar.”

As more financial advisors are learning, NFTs are starting to catch on, even among non-celebrities. And it may not be long before a client asks you how to include NFTs in their portfolio.

Why NFTs are so appealing

Simply put, people love collectibles. And thanks to the growing accessibility of NFT marketplaces, the title of "collector" now applies to someone trading free Space Jam tokens just as much as it does to prominent figures like the pseudonymous Whale Shark, who owns more than 220,000 pieces of digital art and has consulted Paris Hilton on how to break into the market.

As a financial advisor, your first priority is to look out for the long-term financial security of your clients. It might be helpful to think of NFTs the same way you would a rare stamp collection, for instance, or a signed original manuscript of the great American novel. NFTs are a lot like old-school comic book collecting, or baseball cards and Pokémon cards. Except, thanks to blockchain, their true scarcity (and value) is much less speculative because we have an irrefutable record of every token.

Assuming your clients have a healthy amount of money invested for their retirement, a sizable emergency fund and enough disposable income that they can experiment with NFTs, collecting can be a fun and innovative way to feel a part of the future.

But if someone isn’t in the position to invest money on speculative art – whether a hundred dollars or a thousand dollars here and there – there are ways your clients can dip their toes into the NFT market for free.