2022 will cancel the dawn of NFT
The 2021 NFT surge has fueled lively debate about the future of irreplaceable tokens. However, digital collectibles remain market-based while experts are arguing about the long-term feasibility of NFTs. According to Chainanalysis (blog), as of May 1, 2022, NFT collectors have sent over $ 37 billion to the NFT Marketplace. This number exceeds the total of $ 40 billion sent in 2021.
However, the current cryptocurrency and blockchain market is a swaying ground with Bitcoin’s fall and rapid inflation.
So, do you ever witness the imminent demise of NFTs? And what drives their value? Let’s check.
Anyway, what is NFT?
Let’s say you are an artist who wants to sell your masterpiece. You drew it, and you have complete ownership of your painting. But instead of paying an agent to sell your painting, you can sell it directly to collectors through a digital auction. To do this, you need to convert physical items into digital collectibles. And NFT plays an active part there.
Simply put, NFTs are blockchain tokens that represent unique digital items. Non-fungible tokens allow users to buy and sell ownership of their own digital items without an intermediary.
NFTs are typically bought and sold in specialized markets and provide ownership of the data, media, or items associated with the token.
What does non-substitutable mean?
To define the true meaning of “non-substitutable”, let’s understand the meaning of substitutable. The blockchain contains many of the same tokens that can be replaced with each other. In this way, the system can continue to operate uninterrupted even after the blockchain components have been replaced.
For example, Bitcoin and other cryptocurrencies are substitutable. If you send someone Bitcoin or part of it, you can get it back. Also, it doesn’t have to be the same Bitcoin or the same amount you sent. Physical currency can also be replaced. You can make changes and convert to other flats.
However, you cannot replace the NFT or split it into standalone tokens. Sharing is prohibited because each NFT is unique and resides in a single copy. All information about its creator, purchaser, and transaction is securely stored on the blockchain. In other words, an NFT is a digital certificate attached to a unique object.
In this sense, NFTs are like real art. Monet’s paintings cannot be replaced by the Mona Lisa. It cannot be compared.
What makes NFTs more valuable?
In a general sense, irreplaceable tokens have no physical value behind them. But thanks to the community, they are still worth it. And there are some rationale behind this upward dynamics.
Due to the nature of the blockchain, irreplaceable tokens are created forever. Living people cannot go back in time to manipulate the origin of NFTs. Take a look at the Bored Ape Yacht Club collection. The project started in 2021 and has only 10,000 unique cartoon apes generated by the algorithm. This shortage brings value to the collection and is now worth $ 400,000. Therefore, rarity and exclusivity are one of the foundations of the NFT ecosystem.
Moreover, owning an NFT is like owning a part of art history. Whether or not it’s worth it, irreplaceable tokens are already in history as an era of digital art.
Thanks to the blockchain (again), the NFT ownership history is visible and transparent. At the same time, reliability and sources are documented on the platform, eliminating forgery and theft of art.
On the contrary, to prove the credibility of the Mona Lisa, collectors need:
- A signed certificate of authenticity from a trusted authority.
- A signed statement from the artist (absolutely impossible in this case).
Non-fungible tokens conveniently record all this information on the blockchain and remain immutable until the blockchain exists.
The third and final factor behind the value of NFTs is their rising value. Once purchased, digital collectibles can be worth being manipulated by the overall demand or shortage of tokens. This means that the buyer can sell at a higher price than the amount paid for the NFT. In this sense, non-fungible tokens act as long-term investments that can be profitable in some cases.
Will the NFT industry collapse soon?
There is a lot of speculation in the industry about whether the NFT industry is sustainable. There are some concerns, but it’s important to remember that the industry is still in its infancy. It is still difficult to predict the future of the new industry.
That said, several factors can contribute to the collapse of the NFT industry. For example, if the prices of Ethereum and other blockchain-based assets continue to rise, it may be too high for people to participate.
Another factor is that the market is saturated. More NFTs may be created than anyone interested in buying. This can lead to lower demand and prices, which can distract investors.
The current NFT epidemic is often compared to the Dutch tulip mania when tulip bulbs were touted and speculated in the sky. When the vibrancy disappeared, the tulip bubbles collapsed.
Many experts believe that irreplaceable tokens follow in the footsteps of Dutch tulips. Limited supply, blockchain fragility, energy-intensive mining, and the possibility of copying and pasting proprietary collections can undermine NFT’s bright outlook.
What is the future of NFTs?
Irreplaceable tokens and blockchain terrain generally offer untapped opportunities for both wealthy collectors and enthusiasts. However, the NFT boom gives the impression of high-speed flight frenzy destined for oblivion.
Nonetheless, non-fungible tokens are an attractive investment because they combine the ownership of art with the excitement of modern technology. Today, the growing popularity of NFTs is reflected in that number. The number of wallets traded on NFTs surged from about 545,000 in 2020 to over 28 million in 2021.
For the time being, non-fungible tokens will ride the wave, thanks to the endless possibilities of game adoption and asset ownership.
2022 will cancel the dawn of NFT
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