Why are NFTs so expensive and what are they? Non-fungible tokens explained

From the beginning of 2021, you may have read numerous news stories about the unusual NFT transactions. For example, the media was recently flooded with information that crypto entrepreneur Sina Estavi, who paid $2.9 million for the NFT of  Jack Dorsey's (Twitter founder) first tweet, can now sell it for less than $280. Another interesting example is the NFT depicting an incinerated painting created by British street artist Banksy, which sold for nearly $400,000. 

Wait… What are we actually talking about? If you're wondering what an NFT is — you're in the right place. This article will explain what NFT tokens are, why they were created, what they are used for, where you can buy them, and much more. 

What is an NFT?

NFT tokens (Non-Fungible Tokens) are virtual equivalents of the underlying physical assets but without a tangible form of their own. They can be considered a certificate of ownership and copyright for either virtual or physical assets.

In contrast to standard cryptocurrencies such as bitcoin, NFT tokens are unique collectible cards that cannot be exchanged for the same card because each one is different and has specific metadata. What makes NFTs different from standard tokens is the ability to trade them with other users. 

NFTs use blockchain technology to secure the transactions they perform and track their ownership. It ensures that even if a physical object (for example, a painting) is destroyed, the NFT survives. You can collect, store, browse and transact NTF using an NFT-enabled wallet such as Metamask, Math Wallet, or AlphaWallet.

Who and why created the first NFT?

NFTs were created to represent virtual collectibles such as digital art. The first token named "Quantum" was created by artist Kevin McCoy and software developer Anil Dash. Their iconic creation was created in 2014, and its main goal was to allow online creators to sell their work with the guarantee of retaining their copyrights. 

NFT allows buyers to obtain undeniable proof of authenticity and ownership of an original digital file as if they owned an original work of art. This technology also enables users to use tokens for secure and transparent trading of digital assets. Each NFT trading card has its certificate of authenticity, which is publicly available on the internet, making it easy to confirm the provenance of any existing asset.

Because NFTs are unique and rare, they are an innovative way to collect valuable assets. It's also a helpful solution for artists to create and monetise their work.

Popular NFT Use Cases

In fact, the possibilities of NFTs are almost limitless. Below you will find some examples of how you can use NFTs.

Selling digital art

With NFT, artists can sell their works to collectors in digital form with reliable and irrefutable confirmation of authenticity. It is worth mentioning that we are not talking only about paintings but also animations, music videos, songs, animations, gifs, 3D models, and much more.

Online games

One of the most popular games using NFT is CryptoKitties, a production built on the Ethereum network that allows you to collect and exchange virtual cats. Each cat has its own unique characteristics, such as breed, age, or color. As a result, the value of cat NFTs can fluctuate depending on market trends.

Digital entrance passes

NFT can also be a way to create closed, virtual communities. For example, you can purchase tokens that serve as a ticket to join a specific group whose members have, for example, characteristic elements on their profile pictures. This use of tokens is often initiated by celebrities who want to encourage their followers to join their communities.

Sport

NFT tokens can also be used in sports. One of the examples of using this technology is digital collectible cards of Juventus Turin's players. The first card from this collection features the image of Cristiano Ronaldo.

Sports tokens can be interesting for collectors and football fans who want to get priority in choosing the best seat in the stadium or access to unique content and gadgets.

Pop Culture

NFTs are also used by musicians, actors, or celebrities who, through technology, can not only gain new fans and differentiate themselves from the competition but also create assets that can gain more value in the future.

NFT – Pros and Cons

Popular NFT Investments

NFT Pokémon cards

YouTuber Logan Paul YouTuber sold about 3,000 NFT, including Pokemon cards. In total, he made more than $5 million from these sales. To boost the interest of buyers, Paul organised a contest where he gave away the first three packs of Pokémon cards worth $40,000.

The first-ever tweet

​​Jack Dorsey – the co-founder of Twitter, sold the NFT of his first tweet published on the Twitter platform. The buyer was Sina Estavi, who paid as much as $2.9 million for it. However, as it turned out, it was not a successful investment. So recently, the entrepreneur put his NFT on auction, where the highest offer was only 280 dollars.

Everydays: the First 5000 Days

Beeple – an American digital artist discovered the great potential in NFT, so he decided to sell as many as 21 token-based works. The most profitable was the digital work named "EVERYDAYS: THE FIRST 5000 DAYS", depicting 5000 works of the artist, in which the history of his career is shown. The NFT token was sold for approximately $70 million, and it is the third-highest price paid for the work of any living artist.

Where to Buy NFTs in 2022: Popular NFT Marketplaces

You can buy NFT tokens in places named NFT Marketplaces. The most popular of them include:

• Rarible
• OpenSea
• Axie Marketplace
• Axie Infinity
• Larva Labs
• NBA Top Shot Marketplace
• SuperRare
• Foundation
• Nifty Gateway

Why are NFTs so expensive?

While reading about the examples of transactions amounting to hundreds of millions of dollars, you probably wonder why people can pay such money for non-tangible goods. 

The main reason is the desire to have something unique and one of a kind. No one can have the same NFT token, as it is impossible to own two originals of one piece of art.

Another factor is the opportunity for financial gain and the ability to sell the purchased NFT even more expensively. Finally, we must remember the fast-growing Metaverse, where NFTs can play a significant role.

However, it is worth adding that not every NFT token has to be expensive. It is similar to the paintings – you can buy a painting from a local artist for a symbolic price or spend millions to buy a famous piece of art of a popular painter. However, the media writes only about the most spectacular and most exciting transactions, which may cause many of us to believe that NFT all tokens are expensive.

So how much do NFTs cost? First, it's worth reviewing the NFT marketplaces listed above and checking the actual prices.

NFT – the currency of the future?

Analysing the growing interest in the NFT market, we do not doubt that it will continue to grow dynamically. Therefore, we are curious to see how more groups will start using NFT and whether this technology has the potential to become the "currency of the future."