WHAT are NFTs and WHY are NFTs so expensive?

Non-fungible tokens, or NFTs, are blockchain-based digital tokens. Both digital and physical assets are tokenized using them. The key feature that make NFTs so expensive is whether or not a digital asset qualifies as an NFT is that it must, in all circumstances, be unique. That's the concern, though! Regardless of how much they resemble any other non-fungible asset you may see, the digital art, digital space, and other digital objects you purchase are unique. In another manner, it will belong to only one person. Because the NFT is powered by blockchain, the data saved there is safe and unchangeable.

These days, NFTs are utilized in identity verification, software licensing, document digitization, and asset lifecycle management. NFTs simplify and improve the effectiveness of the supply chain management, logistics, real estate, and healthcare sectors because to their cutting-edge characteristics.

You've probably heard of NFTs selling for millions of dollars and are wondering why NFTs are so expensive. The response might be as simple as saying that NFTs are digital reproductions of artwork, and art is always precious. However, because the digital world is complex due to the use of cutting-edge technology like blockchain and cryptocurrencies, the solution cannot be so straightforward.

We shall examine the underlying reasons of the high cost of NFTs in the sections that follow.

Main Reasons of Why NFTs are so expensive :

1: Scarcity and Ownership of Digital Assets

Scarcity is one factor that immediately raises the cost of an NFT, whether it is physical artwork or a digital collection. Since almost all NFT collections are only available in limited numbers, there aren't many collections available. Because of this, NFTs become more valuable in the NFT market and become more rare.

For instance, the 10,000 separate Bored Ape NFTs in the Bored Ape Yacht Club collection each have unique qualities; some of these are uncommon due to their distinctive features and characteristics, like skins and accessories. These characters are scarce and unique, which adds to their high price and costly sales. In a similar vein, the scarcity of these uncommon NFTs drives up prices on secondary markets like OpenSea for investors and collectors.

NFTs, on the other hand, are distinct digital assets that are impossible to duplicate. For investors and collectors, this characteristic increases the value of NFTs. NFTs are more valuable and costly because they are created on blockchain networks and have their ownership safely recorded on a blockchain, making it nearly difficult to copy or hack them.

2: Easy Buying and Selling

The most apparent benefit of NFTs is their smooth buying and selling due to market efficiency. Eliminating intermediaries and streamlining sales procedures are two benefits of tokenizing tangible assets. NFTs represents digital or physical artwork on a blockchain, eliminating the need for agents and allowing sellers to engage directly with their intended consumers.

As a result, "Tokenizing" these physical assets in the real world increases efficiency in their purchase, sale, and trading while lowering the likelihood of fraud.

 Through the Internet, NFTs can be purchased and sold by anybody in the globe. This implies that greater trade and capital inflows into the market are possible, hence making NFTs so expensive.

3: Metaverse Potential

Another reason for NFTs' high price is their access to the Metaverse, a virtual marketplace where users can create and trade a wide range of in-game goods. In the Metaverse, avatars stand in for real people and have the ability to own virtual real estate. NFTs may be useful in some situations, but it's unclear exactly how digital asset ownership works in the Metaverse. There are similar NFTs for online gaming.

Currently, among the most exciting developments within the Web3-powered technologies category is the metaverse. Its influence on society has significant implications for social computing and social good.

Cryptocurrencies and Non-Fungible Tokens (NFTs), which are used for expressing the attributes of products and assets in digital universes, are among the technologies powering the metaverse. Specifically, NFTs are utilized to symbolize the segments into which the metaverse is split, with unclear implications for the metaverse economy. To put it briefly, the metaverse is expanding opportunities for human expression and connection while also reflecting real-world living.

In recent years, the idea of a fully fledged virtual world called the metaverse has gained popularity, and along with it, the application of non-fungible tokens, or NFTs, has increased. With the advent of virtual reality headsets and other technologies, virtual worlds are becoming more immersive and realistic, and the demand for unique and one-of-a-kind experiences is only increasing. NFTs provide a way for creators and users to create and own unique assets within these virtual worlds, and for those assets to have real value.

4: Economic bubble

Economists believe that NFTs may also be so expensive due to a phenomenon known as a bubble. A market is said to be in a bubble when investors purchase items primarily with the intention of selling them soon after for a greater price. The cost rises as a result.

These kinds of economic bubbles pop anytime a new technology, like blockchain, is introduced. In turn, blockchain led to the creation of non-fungible tokens.

The excitement surrounding non-fungible tokens was fueled by celebrities and other well-known investors. Some even released their own NFT collections, such as Paris Hilton and Lebron James.

Without having an in-depth understanding of the asset, many people began investing in crypto art with the intention of selling their NFTs for a profit as soon as possible, which led to the NFT bubble.

In January 2022, a computer science student uploaded 1,000 odd selfies to OpenSea, the biggest NFT marketplace at the time. This was an example of a minor NFT bubble. Each NFT, which was first listed at $3, reached its highest price of $1,200 (equal to 0.4 ETH at the moment), earning the entrepreneur young man $1 million. Larva Labs and Beeple are two more well-known figures in the NFT space that command substantial prices for their non-fungible tokens.

Final Lines

NFTs are a booming and dynamic new market that gives companies access to a hitherto unexplored pool of potential clients. If you're interested in entering this market, we advise you to first learn about the most recent developments in the NFT industry before assembling a group of developers with the knowledge and expertise required to produce an effective NFT platform.