NFTs or non-fungible tokens are unique numbers and letters on the blockchain. It’s like having your fingerprint on it to signify that you’re the valid owner.
Anything digital with a certain level of rarity and value can be an NFT. Be it digital arts, items, jpegs, videos, music, and so forth. It could even be a photo of your cat, a selfie, a game item, a virtual pet, and even virtual real estate!
This whole commotion about NFTs started a few years back when CryptoKitties and CryptoPunk became popular. Many of their fans found out that the collections they’ve been accumulating could earn them quite a profit, and that’s when it boomed.
The news was spread all over the internet. It gained so much popularity that the people started buying them even more, and the current owners of these “rare” collections started reselling them at a higher value.
Big companies and other groups also heard the news, and they saw it as the big opportunity they’ve been looking for, like a heavy storm or golden goose that would make them earn huge profits. And all they had to do was create and announce that they have a rare, limited edition, collectible NFT.
Now we are seeing more and more companies, organizations, and individuals riding the hype, and people would take the bite in hopes that they too can become millionaires overnight.
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The mentality of people who buy/sell NFTs
These are the group of people who believe in it, and since they believe in it, they buy it, hoping that the NFT they’re holding will make them rich or at least earn them some quick bucks.
Others see it as an investment, taking a more cautious approach when buying NFTs. Like hunters who are always on the lookout for any opportunity that could arise. At the same time, some are just in it because of the FOMO or fear of missing out.
Though I am not saying that NFTs are just fads, I believe that our use of NFTs will evolve in the future. The discovery and development of NFTs on their own is a good thing.
We can get rid of the need to have a middleman when buying and selling or making trades—and not worry about having them shipped across the world and making space for them to be stored safely.
Since NFTs are digital, owning one would only require you to spare a few kilobytes or megabytes of storage on your computer. That’s great and all, but still, we can’t deny that there’s a healthy dose of FOMO involved around it.
The psychology behind NFTs
It’s not just collecting and investing. It goes deeper than we initially thought. Our minds work in such a way that we get influenced and can easily be manipulated. Several factors drive humans to buy NFTs, but the most impactful ones are as follows.
NFT is a great way to support artists and companies that they like, and the marketers know this. In fact, they take advantage of this, knowing that their loyal fans and customers would pick up their product no matter how absurd the idea and no matter how impractical or useless it is.
Collecting is in our human nature. Since the beginning of the human era, our ancestor’s curiosity has helped them evolve and discover new possibilities and solutions around their daily problems.
It was a crucial trait to have back then, to collect stuff and figure out later whether we can use it for something or not. Nowadays, some people wonder if perhaps one day it would be worth millions, so they purchase NFTs, hoping that they could flip it.
This is another factor that drives people to buy NFTs. They get impatient seeing fluctuating prices, limited time offers, and limited supply. They get a sense of urgency that they must have it, and this is a standard marketing tactic that gets people rushing in to buy their product.
People like the pleasure of owning something. To some, it symbolizes status and financial power, and when a person owns something, they innately want to have more of it or have the whole “set” of the item they own.
You can see this kind of trait in people who are well-off and have extra money to burn. So it’s common for them to waste their money on some sort of collection, and they take pride in it.
How many are (actually) making money with NFTs
There are people who have made significant profits with NFTs. Some of them earn hundreds, thousands, and even millions of dollars. One good example is Mike Winkelmann, a digital artist widely known as Beeple, who sold his NFT in March of 2021 for $69.3 million at an auction.
It was titled “Everydays: The First 5000 Days” making him one of the most highly paid artists today.
Many others followed his path, and you don’t have to be an artist or a creator to make money off of NFTs. Many people are just buying and selling them. Some would even hold them for a while and then resell them when the price goes up.
The NFT market right now is bloated, and everyone is in a frenzy to buy the latest and rarest collection they could find. But are they really making a profit? If so, how much?
A recent study shows that 33% percent of transactions and purchases made for NFTs only amounts to $100 or less, 20% of those transactions were for $100 to $200, 11.1% of the sales made were around $200 to $300, 7.7% of the sales made were approximately $300 to $400, only 3.9% are making deals for $400 to $500, 3.3% were making $500 to $600, and so on.
As you can see, only a tiny percentage of people buying and selling NFTs are making a significant amount. The NFT market is so congested that the demand is struggling to keep up.
How (and where) they buy, sell, and store their NFTs
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And speaking of crypto wallets, since Ethereum is the leading blockchain where NFTs are being made, it’s worth mentioning that MetaMask is considered the best wallet for Ethereum NFTs, while some use other alternatives like Coinbase and Exodus.
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Why should you buy NFTs?
The NFT market is wild and more volatile than cryptocurrencies. You should only consider buying an NFT if you genuinely like the product itself.
If your sole purpose is to make profits, extensive research and analysis will be required. So asking for a professional’s opinion is highly recommended to help you make the right decisions.
And why should you NOT buy NFTs?
Many people are just riding the hype for NFTs, and within the next few months or years, we can expect to see more celebrities, companies, and influencers worldwide making NFTs of their own, which will be huge.
The demand wouldn’t be able to keep up with all the supply. So it’s a foreshadowing danger, and we could see everything crashing down.
The near foreseeable future for NFTs
NFTs are probably here to stay. The widespread use of NFT is inevitable. And as our technology improves, so does our way of using it. There are many other uses for NFTs:
It lessens the possibility of scammers or people that take advantage of other people’s art by making replicas illegally. With NFTs, it’ll be much easier for the masses to validate the original copy from hundreds and thousands of knock-offs, allowing artists and actual creators of their NFTs to get all the credit they deserve.
Imagine if plane tickets, sports event tickets, concert tickets, and even movie tickets were to be sold as an NFT. This would solve the ongoing issue of people getting scammed online. Around 12% of the people who purchase concert tickets online get scammed on the internet.
So if tickets can be sold as an NFT, you’ll be able to avoid counterfeit scams and not have to worry if your ticket is fake or not. This could also mean that tickets can be non-transferrable, taking away the incentives from people who huddle and resell them for a higher price.
Identity thefts are so rampant that 1 in 20 Americans each year gets victimized. If we could turn our Government IDs, resumes, and other documents into NFTs, it would be easier to confirm and validate someone’s identity, preventing such unfortunate events from happening.
Many games out there are already making use of NFTs for true ownership of in-game assets like land plots, characters, skins, virtual pets, and other items, but we can push it even further.
One day, with the use of NFTs, we’ll be able to transfer one game item to another. You can imagine playing a game, leveling it up, getting bored, and then moving to an entirely different game, but you get to retain your current character stats. That is the exciting concept of the Metaverse, and NFTs will be an integral part of it.
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What needs to be improved
There could be a whole lot of other uses for NFTs, and we’ll just have to be creative with it and find new ways to take advantage of this new technology at our disposal. However, some gray areas need to be improved, like the ease of use, for example.
Most of the NFTs made are on the Ethereum blockchain, and making one is not that easy. Not to mention the fees when creating an NFT. It is also insufficient energy-wise because mining NFTs through proof-of-work consumes a lot of power.
Thankfully, this problem can be easily solved by utilizing a different blockchain that uses other ways and has lower fees.
How long will this NFT mania last? Is it a golden opportunity for us? Or is it a giant bubble waiting to burst? I guess only time will tell, but it’s almost certain that NFTs are here to stay.
We will eventually find other efficient ways to make use of this new technology and until then, always be mindful with your financial decisions, especially around NFTs.
And please note that this whole article was intended for entertainment purposes only and is not financial advice, nor should it be taken as a substitute for a professional’s opinion.