NFTs Are Making Digital Products Scarce and Valuable

Apr 27, 2022
4 min read

If you, like many others on the internet, have come across the term 'NFT,' you are probably aware of the current craze. Did you know that in 2021, about $41 billion in bitcoin was invested in the NFT markets? From Q2 2021 to Q3 2021, the amount of NFT trading increased by 704%. What is it about NFTs that has made them so popular in recent years?

NFTs are non-convertible units of data that may be sold or bought on the blockchain system. Nowadays, NFTs are becoming increasingly responsible for digital scarcity and product innovation. How so? That’s what we will be exploring in this blog.

What is An NFT and Why Do We Use It?

NFT, or ‘non-fungible token’ is basically a non-transferable unit of data that could be sold and exchanged and is maintained on a blockchain, a type of digital registry. Digital media such as photographs, movies, and music may be integrated with several types of NFT data units.

NFTs may be used to reflect real objects like art and real estate. These real substantial goods may be "tokenized" to make purchasing, trading, and transferring them more efficient while also lowering the risk of fraud. NFTs can also be used to symbolize people's identities, property rights, and other things.

An NFT may be created by anybody, including artists, entrepreneurs, art advocates, companies, authors, videographers, social media celebrities, and even regular people apart from them.  No prior expertise is needed, and anybody may mint an NFT provided they can verify they developed or legitimately own the material.

The History & Evolution of NFT

Beeple, whose actual name is Mike Winkelmann, is an illustrator, visual artist, and animator. He began making a form of art each day for 5,000 days back in the year 2007.

It was officially the first NFT of an artwork to be offered at Christie's. Furthermore, it managed to sell for $69 million on March 11th, 2021. This made it the third most costly piece of work by a living artist. The title of this NFT is “EVERYDAYS: THE FIRST 5000 DAYS”, by Beeple.

Three months following the creation of the Ethereum blockchain, the first NFT project, Etheria, was presented and showcased at DEVCON 1 in London, Ethereum's inaugural developer convention. This took place in October 2015.

When Pak's "The Merge" sold for more than $91.8 million in December 2021, it vaulted to the top of the NFT rankings. 30,000 collectors participated in "The Merge," currently the largest NFT purchase ever.

NFTs Offering Digital Scarcity and Product Innovation

Numerous embedded functions have already been built and integrated with the evolution of smart contracts. This, in turn, has helped push the tokenization system to unimaginable heights.

Cryptocurrencies and tokens have evolved as a safe and digital substitute for people throughout the world to obtain, exchange, and store wealth. These forms of wealth may be varying from real estate or property investment security tokens that reflect fractionalized assets to platform-specific tokens that reward the usage of a certain program.

It enables brands to keep total control over their digital products without constraining their distribution or fearing that a fraudulently manipulated copy, such as one modified with deep fake technologies, maybe wrongly ascribed to them. Possession comes with accountability, and NFT allows companies to be solely accountable for the original content they create without jeopardizing its viral possibilities.

NFTs have the possibility to increase in value due to market speculation and scarcity. Therefore as a consequence, based on where purchasers perceive the asset's worth is, if an NFT holder sells the item again, the resale price may be significantly higher than the original purchase. We can consider it to be similar to classic, tangible art.

Impact of NFTs on Current Economy

With the advent of Non-Fungible Tokens (NFTs), the art and content creation business is undergoing a dramatic transformation. This is because a huge majority of artists want to profit from the creativity and distribution potential that blockchain technology provides. Blockchain technology is working to revive what digitization took away from art, reinventing the art industry with credible tools for authenticity, integrity, and circulation.

The power to render branded digital assets both rearrangeable and non-fungible is what the NFTs bring to the game. This may sound counterintuitive, but NFTs may confirm that businesses are the legitimate owners of their digital assets and hence rule out alternative versions as fan-made material.

Major players adopting decentralized finance will have a net beneficial influence on everyone else.

How Are NFTs Impacting Business Models?

As NFTs gain widespread popularity, we predict more businesses jumping in and beginning to explore delivering digital items based on IP. This will be done in order to generate extra income and indulge the core fanbase or create exclusive experiences with tokenized access that may become sought-after collectible items. This will help in capturing the attention of the aforementioned experiences. Business development methods for digital media artists will be tried, allowing them to skip networks and cash straight from their consumers.

Eventually, NFTs are critical in linking the physical and virtual worlds. They can be quickly swapped without the need for a trusted intermediary owing to blockchain networks. They can also be safely maintained on a crypto asset portfolio for the rest of their lives.

Conclusion

The NFT industry has been seeing substantial development in the last few years. Implementation is still a relatively new concept. Although the sometimes astronomically large amounts generated by NFT sales have sparked undesired criticism, the innovation that underpins these digital commodities has already been fully functional. With the rise in new use cases emerging on a daily basis, NFTs are greatly broadening the crypto-asset market.