- Digital arts of Beeple, CryptoPunk, and even first tweet of Jack Dorsey have sold for millions
- These are all NFTs – meaning their record of sale is stored in blockchain
- NFTs come with the same ‘overvalued’ issues that ail the broader cryptocurrency world
Non-fungible tokens or NFTs are a big market today. Not only are Beeple and CryptoPunk digital arts selling for millions of dollars each, blockchain game tokens with NFT underpinnings are also in demand over the past some months.
NFTs biggest USP – blockchain
Blockchain-based digital currencies have initiated a financial evolution that sometimes seems to be challenging the hegemony of central banks and fiat currencies around the world.
The concept of decentralized money has grabbed the attention of retail investors, leading to a massive inflow of funds in cryptos. Influenced by the idea of quick gains, which is often deemed a characteristic of cryptocurrencies, investors pay little heed to these assets’ hyper-volatile nature.
The underlying purpose of cryptocurrencies is to revolutionize the global payments system. NFTs came up as digital collectibles with the record of ownership stored in blockchain, in most cases Ethereum. It was a great draw for enthusiasts that were looking for alternatives to crypto assets (which are fungible).
Problem with NFTs
The only problem with the NFT market is that many participants are just falling for the 'blockchain-based proof of ownership' narrative.
Can this one element – recording of sale on decentralized ledger – be enough to make anything and everything worth millions of dollars? The point is are we considering this ownership record more valuable than the underlying art itself? By this measure, Leonardo da Vinci's most famous paintings can have a lesser value than any random digital art just because the record of ownership of the latter is on blockchain.
Long-term sustainability of anything relies on fundamentals.
Also read: Top cryptos by market cap that ruled in 2021
Not every digital art selling as an NFT is overrated, for example, maybe someone saw value in Beeple's artwork and shelled out millions. But at the same time, the reckless launch of anything and everything as NFT is what ails the space. For now, the craze for blockchain, fueled by cryptos like Bitcoin and Dogecoin, is what has made every NFT such a hot deal. With the passage of time, dust might settle.
NFTs must be seen as a representation of the underlying artwork. If that digital asset is really unique, like physical artworks of some famous painters, the NFT’s high valuation is justifiable.