Why buy an NFT? Collectability
For centuries, people have collected things. Some of these items may be nostalgic items such as ticket stubs or lucky coins. Others may be particularly rare items, such as classic cars or limited edition vintage watches.
In many ways, the things we collect become a reflection of who we are. Whether it’s physical objects we hold in our hands, experiences we have in our minds, or digital objects we admire on a screen – the objects we collect are a reflection of us.
Often we end up having deep attachments to the most unique objects we collect at different stages of our lives.
Scarcity drives value
When things are scarce, only a very limited number of people in the world can own them. This exclusivity often makes them very attractive to potential collectors. As a result, the high demand for these limited items usually leads to higher prices.
This relationship between scarcity and price is the driving mechanism behind large parts of the collectibles market. Rare items, whether they’re pristine trading cards from a player’s rookie year or modern masterpieces of art, are simply hard to come by. Because of that, people are willing to pay a premium to own them.
The market for toys, stamps and limited edition artwork is worth over $300 billion, according to one UnivDato’s Markets Insights Report. But even these figures pale in comparison to the potential of a relatively new form of collectibles.Non-fungible tokens (NFTs) represents the next generation of collectibles. These digital tokens have already begun to open the doors to entirely new revenue-generating opportunities. While collectibles have traditionally relied on an intermediary to verify authenticity and ownership, NFTs allow a distributed group of individuals to share this responsibility.
NFTs are traceable, digital tokens that are immutably linked to unique tangible or intangible objects. These tokens are used to refer to the current owner of an item. Objects can be anything from a computer file stored on someone else’s hard drive, or a physical object kept in a safe deposit box.
Anyway, all NFTs live on blockchains. This technology provides a completely transparent, globally accessible and censorship-resistant method of tracking and storing ownership information. This factor allows anyone in the world to purchase and provably own goods wherever they are found in the world.
Generally speaking, any NFT has the potential to be a collector’s item. However, there are some NFT-related items that creators purposefully build to be collectibles. Often, creators launch NFTs as part of a very limited collection or based on an existing franchise. Examples of these include, TIME: Pieces build a better future, Damien Hirst: The Currencyand Anthony Hopkins’ The Eternal Collection.
Beyond their aesthetic qualities, various NFT-based collections offer a number of different advantages and benefits to their owners.
Some collections focus heavily on the benefits of NFT Community Membershipwhich host live events for their members to network and build relationships.
Others allow individuals to track ownership of unique digital objects in metaverse experiences such as Decentraland and The Sandbox. Play to earn games such as Axie Infinity and Star atlas also has integrated NFTs. This feature allows players to truly own the in-game assets they earn. Based on their performance in these games, individuals can earn things that have real value in the form of NFTs.
What benefits do NFTs bring to the collectibles market?
Because NFTs exist as purely digital records that point (most often) to intangible objects, they offer several unique advantages over physical collectibles, including:
- Verifiable authenticity (without intermediaries): Anyone with an internet connection can verify an NFT’s authenticity. By copying and pasting a wallet address, anyone can examine any NFT. This verifiable authenticity avoids third-party costs and provides an undoubted degree of certainty about the NFT’s authenticity. While it is true that the media of an NFT can be copied, blockchain technology makes it easy to track which NFT is genuine and which is counterfeit.
- Immutable Ownership: Similar to their ability to track authenticity, NFTs make it easy to track who is the rightful owner of an authentic NFT. When you buy an original NFT, a blockchain network stores cryptographic proof of your ownership on the blockchain. This system provides a highly secure and tamper-proof way of tracking ownership.
- Global reach: Blockchain technology’s decentralized nature makes it easy for NFTs to have a worldwide presence. Because NFTs are effectively digital collectibles, it is much easier to connect and organize groups with other holders regardless of geographic location. Additionally, when buying or selling NFTs, it is usually much easier to access liquid secondary markets than when dealing with physical collectibles.
- Damage-proof: Certain physical collectibles must be in perfect condition to maintain their value. NFTs, on the other hand, have no physical form and cannot degrade or suffer damage over time.
- Personal safety: The pseudonymous nature of blockchain-based NFTs means that holders can buy, own and trade these assets without having to share their identity.
What do NFTs offer for collectibles?
NFTs have value for the same reasons physical collectibles do: they are scarce, aesthetically unique, and they represent membership in a community of co-owners.
Additionally, some NFTs exhibit traits that end up being rarer than other traits in the collection. These properties allow individuals to quantify the rarity of various NFTs and base their numerical value on this score.
Beyond rarity rankings, holders of certain NFT collections have begun to create their own exclusive communities that offer members-only access to private channels and platforms. Bored Ape Yacht Club (BAYC), Doodlesand Cool cats are all examples of NFT member-based communities. This process adds an additional layer of utility to NFTs that collect, and aims to keep demand for these limited assets high.
Whether you believe that digital collectibles offer the same “value” as physical ones or not, there is no doubt that the market is gaining global interest. With sales already rivaling the prices of some extremely valuable physical collectibles, we’re definitely in uncharted — and exciting — territory.
Interested in starting your own NFT collection? Sign up for Kraken NFT today!