Why Do People Buy NFTs?

Solana Phone Podcast Title Image

Physical representations of pieces of the “Bored Ape Yacht Club” NFT collection. Source: Paul Yeung/Bloomberg

Undeniably the biggest craze within the crypto niche in recent memory, NFTs seem to have quite a potential to generate conversation when it comes to people’s behavior towards it. 

It’s hard to not have seen them by now. Or at least some news related to them. May it be in the form of the images of apes looking bored in different types of clothing and sets of colors – A.K.A. the Bored Ape Yacht Club – or news headlines stating that the image of a tweet was sold for U$3 million, you probably came across NFTs already… although you may not get it.

As it involves conversations about art, economy, cryptocurrency and even more, the discussion surrounding NFTs (and their actual value) is quite interesting and doesn’t look like it’s going to cool down anytime soon. 

More people outside of the cryptocurrency scope often have a harder time understanding the purpose of NFTs, what they are supposed to represent and what would differentiate them from “normal jpegs”. Ultimately, they kinda all want to know the same thing: after all, why do people buy NFTs?

So we decided that it would be a good idea to go on and answer some of these questions, eventually explaining the reasons behind the actual purchase.

What Is an NFT?

A NFT (short for non-fungible token) is a form of digital asset that, like its name suggests, can not be replicated or copied in any form, as they have unique identifying codes that verify their authenticity. 

This authenticity is verified in a decentralized ledger system called blockchain. And although the digital asset can not be touched or physically damaged like a painting, this certainly doesn’t change the fact that the piece exists within the digital world. 

And although many may think that NFTs are just “deluxe jpegs”, they can actually come in many different forms, such as: 

  • GIFs
  • Videogame collectibles
  • Virtual accessories 
  • Music
  • Metaverse items 
  • Video clips

How are NFTs Sold?

NFTs are mostly bought with cryptocurrency. So, first of all, in order to actually buy a piece,  the person should (preferably) have a crypto wallet with a fair amount of crypto stored. 

Then, you must head to a NFT marketplace. Most NFTs are purchased with Ether (ETH) or Solana (SOL), however depending on the NFT you’re buying and the marketplace you’re accessing to do so, other options may exist. 

Some of the most popular NFT marketplaces are:

Reminder: Every platform has their own sets of fees and you can end up paying more or less crypto depending on the one you choose to use.

Why Do People Buy NFTs? 

Time for the big question. There is definitely not only one answer to this, so we’ll just try to cover what can be seen as the main reasons for it.

  1. To generate profit

NFTs are commonly seen as a form of investment. People run an analysis of an asset’s potential value in order to buy them, with the main goal being to make a profit. Others simply bought a piece unpretentiously in the past and discovered their NFT is suddenly worth a lot, selling them right after that.

Either way, the fact is that many people made a lot of money buying and selling NFTs

  1. It’s a modern form of art collection

NFT collectors often see the gathering of their digital assets as their own personal form of collecting art. To them – as the blockchain verifies the authenticity of their pieces – just as Picasso only made one Guernica, their NFTs are also one of a kind and therefore irreplaceable in their own right. 

This makes the digital pieces just as valuable as art pieces or other objects that you can actually touch. Therefore, following the same line of thought, a “normal jpeg” would never carry the same weight as the original NFT does, even if you can’t tell the difference using just your eyes. 

  1. It provides a sense of belonging 

Buying an NFT makes you part of something. The practical privileges of buying these tokens goes beyond exclusive entry to online forums or early access to future NFT collections. It also gives you some sort of “bragging” rights.

Let’s just imagine that you’re a Lakers fan and you’re all set to go to Sunday's game with a whole bunch of your friends. You meet your friends in the parking lot of the Crypto.com Arena and you realize you’re the only person not wearing a Lakers jersey. That would make you feel kinda silly, right? Well, that’s a close-enough analogy to the NFT community energy.

Not having your own NFT but calling yourself a part of the community may seem odd or misplaced at times, and people often want to just buy an NFT as soon as they can, stamp it as a twitter profile pic and, at last, feel at home. 

Why are NFTs so Expensive?

That’s a very common question; and it is pretty understandable that it is. After seeing multiple headlines that depict NFTs getting sold for millions of dollars, people can assume that probably all of them are outrageously expensive. But that simply isn’t true. 

You don’t see NFTs that sold for $2,000 getting a headline on the evening news. But the reason for that is pretty simple: it’s just not as interesting. 

Headlines are not generated from smaller sales. They are created when celebrities like Snoop Dogg, Steve Aoki, Stephen Curry and Post Malone are spending an average of $200,000 to be an owner of a Bored Ape Yacht Club NFT

The truth is that the price range for these assets actually vary widely, with key factors influencing the final price of an NFT. Some of these factors are:

  • Creator Status: The actual value and quality of work linked to the creator of the piece, similar to traditional art. 
  • Community: NFT investors are willing to pay more to be a part of a community they believe will bring them value and/or status. 
  • Investment: Many people buy NFTs as a store of value, similar to traditional art. Investors believe they will be able to sell these NFTs at a higher price in the future. 

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