Without a doubt, 2021 was the year of non-fungible tokens, a segment of the crypto business with a market cap of more than $7 billion.

More crucially, the explosion of NFTs has enflamed the worlds of art and gaming, in addition to contributing significantly to the decentralised economy. They are still selling for millions of dollars.

Christie’s auction house’s first digital-only art auction in March 2021 netted $69 million for artist Beeple, making it the single most expensive NFT ever sold.

NFTs aren’t simply profitable for sellers; they’re also one-of-a-kind, which adds to their value. As valuable as NFTs are, you may need to understand what they are, how they work, and why they are so expensive.

What Are NFTs

Simply explained, non-fungible tokens (NFTs) are digital assets that cannot be changed or exchanged. Original artwork, trading cards, music, photography, video clips, and other collectables are examples of these assets.

In other words, NFTs cannot be swapped for other NFTs or digital assets; hence the name “non-fungible,” which implies that they are irreplaceable and cannot be duplicated.

Because each NFT has its worth, it cannot be traded like traditional cryptocurrencies. As a result, NFTs serve as a type of authentication rather than an exchange medium. Because NFTs can’t be duplicated or changed, they’re ideal for recording ownership of non-replicable property, such as property rights.

NFTs are recorded on a blockchain, which is a distributed public ledger that is both safe and decentralized. NFTs are often held on the Ethereum blockchain, though they can also be held on other blockchains.

Also Read: Everything You Need To Know About NFTs In Nigeria

How And Where NFTs Can Be Purchased

With the help of the blockchain, NFTs are bringing digital ownership to the next level, and with more people showing interest, understanding how to obtain NFTs is critical. To begin, most NFTs are acquired in Ether (ETH), the Ethereum network’s native currency, which can be easily translated to US dollars on exchanges such as Coinbase and Gemini, to name a few.

You’ll also need a digital wallet to store your Ethereum to buy NFTs. Companies like Binance and Coinbase allow you to build wallets that you may use to connect to the marketplace where you wish to purchase NFTs.

It’s also worth noting that most NFT marketplaces operate similarly to auction houses, where you submit a bid and wait to see if you win your NFT.

Finding a place to buy or sell an NFT has never been easier, thanks to the rising popularity of NFTs. There are a plethora of reputable websites where you can quickly purchase an NFT of your choice. The following are some of the most well-known NFT marketplaces:

  • Nifty Gateway
  • Axie Marketplace
  • Rarible
  • Mint able
  • OpenSea.io
  • SuperRare
  • Foundation. app
  • BakerySwap

Types Of NFTs In The World

The definition of an NFT is still a bit vague, as it may be applied to almost everything. Here are a few of the most common and useful NFTs on the market.

1. Art Work:

Art is the most widely used kind of NFT. NFTs were established to allow artists to sell their best work online as if it were a physical item. Currently, many of the most expensive NFTs are pieces of art. According to Luno, the most valued NFT ever sold is “EVERYDAY’S: THE FIRST 5000 DAYS” by renowned artist Beeple. At the auction, this sculpture garnered a staggering $69 million. Other incredibly pricey NFTs are causing billionaires’ bank accounts to collapse.

2. Music:

Music scores well on the NFT scale as well. Music has been a fungible good for decades, created and delivered on vinyl, cassettes, CDs, and the internet. On the other side, musicians and DJs have just begun selling their work as NFTs, making millions of dollars in a couple of hours.

3. Major Sports Events: 

NFTs offer something that no physical counterpart can: unforgettable sporting moments. These are short clips of historic sporting occurrences such as game-changing slam dunks or touchdowns. These videos can be as short as ten seconds long, but they can sell for as much as $200,000.

4. Memes: 

Just when you thought the internet couldn’t be any more entertaining, the NFT market allows you to buy and sell memes. What’s even more interesting is that the person in the meme is occasionally the genuine retailer. The list includes Nyan Cat, Bad Luck Brian, Disaster Girl, and other well-known memes, with earnings ranging from $30,000 to $770,000. The most valuable meme to date is the Doge meme, which sold for $4 million.

5. Video game items: 

Another frontier in the NFT space is video games. Complete games aren’t sold on NFTs. Instead, in-game items such as skins, characters, and other items will be sold. DLC assets can now be purchased in millions of copies, but NFT assets will be one-of-a-kind and exclusive to a single customer. On the NFT market, developers can sell standard DLC as well as a limited edition version.

6. Event Tickets:

NFTs can also be used as event tickets, making it easier to verify people’s tickets and identities. Organizers of big events such as concerts and music festivals can create a limited number of NFT tickets using a specific blockchain.

These tickets can be purchased through auction postings and then kept in wallets on mobile devices for easy access.

Why Are NFTs So Expensive On Ethereum

The average price of NFTs on Ethereum is fairly low, yet some of them can be more expensive than you might expect. Some artists have become millionaires overnight, and I’m sure you’re curious as to which NFTs have sold for that much. In February, an animated Gif of Nyan Cat, a popular internet meme from 2011 was sold for more than $480,000 on the NFT Foundation website.

Beyond art, Twitter CEO and co-founder Jack Dorsey sold his “first tweet” as an NFT for $2.9 million through the Valuables platform. So, why are NFTs on Ethereum so expensive? Keep in mind that each NFT is one-of-a-kind and serves as a collector’s item that cannot be copied, making them uncommon and one-of-a-kind by design. Rarity makes them scarce, and when items are scarce, prices tend to rise.

People assign value to NFTs because they are scarce, as they are built on cryptographic technology that prevents copying. Another reason is that the price of an NFT is determined by the market, which is made up of all the buyers and sellers that trade that specific NFT. If there are more buyers than sellers, the price will climb because the gas fee will be higher.

Specifically, the Ethereum blockchain still has a congestion problem, notwithstanding its recent update 2.0. In comparison to its tremendous daily demand of over a trillion transactions per second (TPS), Ethereum, unlike other blockchains, currently handles a restricted amount of transactions per second (TPS).

However, because it is the most widely used method for minting NFTs, congestion is inescapable, resulting in expensive NFT gas fees.

Also Read: How To  Make Money With NFTs

Conclusion 

NFTs are still in their early stages, with few NFTs in circulation, hence the scarcity which gives rise to high demand and high prices. The industry remains unregulated as of now, it remains to be seen how governments and regulatory bodies will respond to this, as well as the laws that will be enacted as a result of it.

Non-fungible Tokens (NFTs) are here to stay in the end. They’re on track to continue shaking up the art and gaming sectors for the foreseeable future, upending digital ownership regulations in the process.