Factors that Determine the Value of NFTs

ungible token, like an artwork, is unique and non-interchangeable. Simply put, fungible tokens may be used to buy non-fungible tokens but non-fungible tokens can only be bought, traded and have its ownership transferred. 

For those who do not know, NFT stands for non-fungible token, a digital certificate that proves authenticity and ownership, which may be transferred when sold. Though both exist on the blockchain, NFTs should not be mixed up with cryptocurrencies, which are considered fungible tokens—something that may be divided and exchanged for another.

nterest in shelling out money for intangible commodities. But according to Reuters, NFT total sales volume reached 25 billion dollars in 2021, a significant jump from the 94.1 million dollars in the previous year. These numbers prove that NFTs are here to stay.

NFT art includes digital art, computer graphics, virtual land estate, photo paintings and music files. CryptoPunk’s “Covid Alien” is an example of digital artwork, which was sold at Sotheby’s for more than 11 million. There are also NFT collectibles, such as digital trading cards, memes, GIFS and video clips of events that made a mark in real world, which are turned into NFT. The unforgettable “Disaster Girl” meme sold for half a million dollars.

How does one determine the value of an NFT? A collector value is not the same as speculative value, the former being what a buyer believes the asset is worth, while the latter is the possible value of an asset in the future, which depends on a market which can be volatile at times.

A buyer must be knowledgeable enough to look at certain factors when acquiring NFTs. First, a buyer usually calculates the value of an NFT art or collectible depending on the name and fame of the people behind it: the artist, creator or the owner. 

As purchasing digital assets remains a matter of taste and interest, the owner may not even be famous or have a well-established social media persona. Not too long ago, an Indonesian student Sultan Gustaf Al Ghozali sold his selfies as NFTs at a trading platform and earned about a million dollars. He himself does not seem to understand the phenomenon, for these photographs were simply shots of his expressionless face taken every day. It did help that a celebrity promoted Ghozali’s selfies on his social media accounts after buying it. 

On the other hand, Jack Dorsey, the well-known philanthropist and former CEO of Twitter, auctioned off his first tweet for charity, and it was bought for over two million dollars. Buyers should also assess an object’s worth depending on its uniqueness, or rarity. Who else could have made the first-ever tweet aside from the founders of Twitter? How many assets are like it out there?

Cultural significance is taken into account, too. What makes assets like NFT art recognizable or iconic? What historic moment does it represent? Of course, as mentioned earlier, an investor will also look at the digital asset’s future value.

Like any market or business NFT sales may slow down at times, but the volume is definitely substantial and rising each year.