For someone new to the world of cryptocurrency and blockchain, the rapid growth of interest in the non-fungible token (NFT) and its trading volume can seem outrageous. What’s more, the amount of money that’s been spent on a single individual NFT and the overall value of NFTs can seem shockingly high.
Thus, are NFTs really worth what their buyers think they are?
The short answer is yes, they can be. A more accurate answer is that it depends on what you’re using them for.
Therefore, how can NFTs indeed constitute a value that stays? First of all, the world that birthed the non-fungible token phenomenon has itself shown substantial maturity. However, cryptocurrency has become more established over the last few years. It can be used to buy a widening variety of goods and services, from something as special as a Tesla to something as prosaic as a smartphone bill. Crypto has a sometimes volatile but established value as an investment, and Coinbase’s IPO, not ICO, didn’t hurt
Nevertheless, is cryptocurrency really that different from what all of us are used to? We are all accustomed to money that’s not even backed by a gold standard, and even stable coins can be backed by collateralized fiat currency of the kind that we all spend and that governments back, as well as more tangible materials.
But it’s the specific difference between a crypto coin and a non-fungible token that makes the latter both more and less valuable. The NFT is more valuable in the sense that it represents something unique, but not as something tradable for another of its kind as a crypto coin is.
Any NFT has an inherent value in its rarity, and it doesn’t require liquidity to keep it viable the way cryptocurrency does.
What makes it potentially less valuable and more uncertain is how unsettled is the new kind of market that NFTs are creating for works of art. Anyone with an internet connection and at times just a few thousands of an Ethereum coin can create a non-fungible token on websites such as Rarible or OpenSea. Amazingly, it has become one of those things that you learn how to do on YouTube and try to sell on your own. This makes it very hard to appraise a piece of NFT art compared to doing so with a piece of art sold in the traditional way.
That being said, is the experience of collecting non-fungible token art really much different than that of traditional art? What’s experienced with NFT art, especially in a virtual gallery, is not inherently different from a work viewed in a brick-and-mortar museum. A digital certificate of ownership proves that an original non-fungible token is authentic and can be bought and sold, and is backed by a piece of code that is guaranteed to be unique and not require a complex chain of provenance.
Moreover, even the relatively high unpredictability of an NFT’s value may be part of what makes NFT art and more unusual NFTs so appealing.