Those who are just getting acquainted with the market of non-fungible tokens are wondering if this is a real investment or another soap bubble. Why do hundreds and millions of dollars pay for some pixels and is it a scam? We propose to look into this issue in more detail.
How the NFT market works
Tokens blew up the public literally in 2021. The market size has grown from $100 million in 2020 to $26 billion. Naturally, this raised a lot of questions and allegations of money laundering, fraud, and other possible NFT scams.
On the one hand, the author himself sets the price for his token. If an NFT project is incredibly popular, for example, CryptoPunks, or Bored Ape, then the cost of virtual images increases thousands of times compared to the starting price. For example, the same monkeys were sold for $370 on the day of sale. And all 10,000 pictures from the collection were sold out in 12 hours. If we now study offers on the secondary market, then the minimum cost of not the most valuable copy (there are rare elements that increase the price) is $ 200,000.
What does the owner pay for in this case? For a set of pixels? This has given rise to many questions and allegations of money laundering. This situation is similar to what is happening in the contemporary art market. When paintings by unnamed masters are sold for tens of millions of dollars.
The second accusation is that this whole industry is a big bubble. And he's about to burst. And there is some truth behind this statement. A prime example is the CryptoKitties game. In 2017, this NFT project attracted a lot of attention. Kittens were bought, then crossed to get new unique characters. At the peak of popularity, rare copies were sold for 100-150 thousand dollars. The most expensive crypto cat was bought for 600 ETH or 960 thousand dollars. And then interest in the game began to decline as rapidly as it had taken off at the start.
As a result, by 2022 the game went down in history as the very first and most popular. But NFT cats are sold for a penny - an average of 1-3 dollars. And the number of active users does not rise to the mark of a couple of million unique visitors per day.
It turns out that those who invested money in the hope of an expensive resale were more likely to lose it. There is no interest – no buyers are willing to pay big money for it. On the other hand, rare NFTs, even cats, are still very popular.
Perspectives and rethinking of the NFT sphere
Despite all the allegations, the token market continues to grow. This is not surprising, because there are huge opportunities in this area. If earlier for companies, the release of NFTs was just an informational occasion, now new opportunities are opening up for entrepreneurs.
One of the directions is tokenization and materialization. That is, the transfer of a real asset first to a digital version, and then the transfer of a physical object to a new client. Due to the peculiarities of the blockchain and smart contracts, this option is much safer and more reliable than traditional methods. Yes, and experts predict that NFT from ordinary pictures for virtual galleries of collectors can become something more.
Even now, pixelated images hide admissions to closed communities, tickets to events, and master classes. In the future, more and more NFT sites will begin to attract brands and companies that are far from the crypto market. After all, this is a real opportunity to sell your services and goods around the world without restrictions.
Due to the lack of regulators in the crypto market, many doubt the reliability of NFTs. However, it is worth remembering that bitcoin was also predicted to have a short life. And it continues to grow and develop. NFT will likely find manifestation in various areas of our lives.