Why Do People Buy NFTs and What Happens Now?
Is it boom and bust for NFTs? After a groundbreaking year in 2021, sales are down and events in the cryptocurrency world continue to cause uncertainty. We’re looking at why people invest in NFTs and what might lie ahead for the industry.
Are non-fungible tokens even still a thing? With prices dropping sharply in 2022, we explore the boom and potential bust of the NFT industry and what might next be in store.
After a huge surge in NFT ownership during 2021, sales have dropped and the future looks uncertain. Today, we’re asking why do people buy NFTs and, as we enter a crypto winter, what’s next?
What is an NFT?
While most people in the crypto space will have heard of NFTs (non-fungible tokens), let’s just make sure we’re covering all our bases. NFTs are digital representations of real-world items and are used to manage and secure the information associated with ownership.
NFTs can be bought and sold just like physical assets, but are not regulated by a central authority. They are also immutable—meaning they can’t be changed. Instead of a paper document, they are securely recorded on a blockchain, or distributed ledger.
While NFTs can be used for a variety of purposes, they are most commonly used to collect digital works of art. Why do people buy NFTs? They can be incredibly valuable, with the artist Grimes making $6 million through the sales of paintings and videos online.
Quantum, the first ever NFT, was created in 2014, and a huge wave of interest in 2021 saw sales skyrocket.
Major Brands Pushing Mainstream Popularity
When NFTs were introduced to the cryptocurrency community, tokens were designed to indicate the ownership of digital art, and used across multiple industries. Since then, they’ve been associated with a variety of assets, such as classic cars, and even sports teams.
There are a number of industries experimenting with NFTs. For example, Nike has used NFTs to ensure the authenticity of their sneakers. Several mainstream celebrities have also begun adopting NFT technology, such as Paris Hilton and Jimmy Fallon.
NFTs have also been used for marketing purposes. Several artists have expressed interest in using NFTs to sell their work. They can use their tokens to track their digital art creations, and then trade them for other NFTs. This can help them to build a larger community and engage with viewers.
Why Do People Buy NFTs?
It’s mostly due to scarcity. NFTs are non-fungible, meaning they cannot be copied. Some people invest in NFTs to secure digital ownership and the potential to re-sell them at a higher price in the future.
Buying NFTs has become a big deal. These digital tokens can be purchased as collectibles or, as in some cases, used as event tickets. Marvel, for example, has released NFTs of classic comic books, and the NFL is selling game highlights as NFTs.
The purchasing of NFTs isn't for everyone, though—especially people without a foot in the digital world. There’s financial risk, too, as recent market crashes have further highlighted.
Crypto Crashes Causing Chaos
Despite NFTs sales reaching a record peak, the market is rapidly slowing down. This is the result of a number of factors, including the increase in regulatory scrutiny, inflation, and the free fall of cryptocurrencies.
Prominent NFTs have dropped in price. The Bored Ape Yacht Club collection, for example, is now trading at just $101,000, compared to $130,000 in July (at the time of writing).
According to a recent report from Morgan Stanley, the NFT market is set to crash. The firm claims that the market is treating cryptocurrencies like a risky speculative investment, and that this is likely to continue, due to current global economic issues.
Recovery Mode
Several companies have piled into the NFT market, but the industry has suffered from bear market forces. In recent months, the prices of tokens have dropped drastically.
The future of NFTs is not without controversy. Some criticize the technology for being fraudulent. Others say it is a fad. Regardless of these opinions, it is important to realize that the technology is relatively new.
The crypto world has faced a winter before—as recently as 2018. Having come through a difficult period and bounced back previously, there’s no reason to suggest why digital assets and NFTs won’t stabilize and recover.
Using NFTs to Enhance Smartphone Security
At LOX Network, we’re using NFTs to create an irrefutable proof-of-ownership model for wireless devices and tackling the smartphone crime industry head on. Built on a custom hybrid-blockchain, our decentralized ledger removes international barriers and brings global enforcement agencies closer than ever before. Get in touch with us today.