NFTs are everywhere, and it seems like everyone is talking about investing in them. But have you asked yourself — why are they so expensive?

In a world where everything is going digital, from ordering food to finances, NFTs are the latest addition. And it’s come to point of becoming mainstream, leaving us with no choice but to sit back and take notice!

NFTs started making all sorts of noise in early 2020, which left us both excited and confused at first. In 2021, sales of NFTs reached some US$25 billion as the speculative crypto asset exploded in popularity, data from market tracker DappRadar shows. A possible investment and a viable source of digital transaction, we are here to decode what makes NFTs so expensive. But first, let’s start with what are NFTs.

What are NFTs?

Image credit: Courtesy Instagram/maxwellinked

In simple words, NFTs are non-fungible tokens. When we say non-fungible, it means that these tokens or assets are unique, irreplaceable and provide exclusive ownership on the blockchain. They are something of value that cannot be interchanged. NFTs can be anything digital, such as a piece of art, or drawings, or music.

This means that you own digital work in any form that no one else can possess. And depending on what its value is in the NFT space, you can decide to either keep it as a collectible or trade it for profit.

But the question remains why do NFTs cost so much.

Why are NFTs expensive?

Image credit: Courtesy Instagram/metapsychos

First things first, NFTs are non-fungible, which means that the ownership of the item lies solely with the person. They verify the authenticity of a non-fungible asset, which makes these assets unique and one of a kind. For example, investing in a Picasso piece of art. There can be multiple copies of his art but only one original piece. That is what makes the original painting valuable and irreplaceable.

NFTs are different from cryptocurrency in the manner that you can exchange cryptocurrency to purchase valuable products, so they are fungible that way. NFTs are not, and that is why they are such a huge investment tool.

Other factors that make NFTs such valuable investments are utility, ownership history, underlying value, perception of the buyer, liquidity premium and future value.

How are these NFTs created?

The process of creating an NFT is called minting. Artists, gamers, different brands, musicians, etc. can create NFTs and put them up for sale. After creating the item they want to sell, they can list it out on a digital marketplace of their choice.

The creator of the piece of work usually attaches a certain commission to their work, so that anytime someone purchases it, the creator gets paid.

As the charges for the transaction and the gas or energy required to make that transaction are quite high and are borne by the buyer, the seller stays in benefit for every purchase. Also, these energy charges can fluctuate for different sites.

A creator can get on any platform like Rarible, Ethereum, and SuperRare. These are platforms where NFTs are created and traded. For the artist or brand, these platforms allow you to create NFTs using blockchain technology that cannot be changed or copied. This means that once the NFT is created, nobody can ever change or alter the ownership of this creation and neither can it be recreated.

Once the NFTs are uploaded, they can be viewed by anyone and can be bought or sold, much like stocks. They are like collectibles but also valuable investments.

What are your thoughts on NFTs?

Main image credit: Courtesy Instagram/notfungibleman

This article first appeared on Lifestyle Asia India.

written by.

Sreetama Basu

A self-proclaimed plant mom, Sreetama finds joy wherever she sees greenery. The list of other things that bring her joy is pretty long, but writing about them is her way of celebrating them. In love with little, inconsequential things, like neatly tucked-in bedsheets and big, significant things, like whole cheesecakes. She dreams of being a baker and writing about food someday.

Understanding The World NFTs And Why Do They Cost A Bomb
Never miss an update

Subscribe to our newsletter to get the latest updates.

No Thanks
You’re all set

Thank you for your subscription.