How do NFTs Create Value?

6 min readJun 17, 2022

Let’s get into the world of digital collectibles. Non-Fungible tokens are becoming increasingly popular. What exactly is an NFT? How do they create value?

What is NFT?

Non-fungible tokens (NFT) are digital tokens that represent something unique such as cryptocurrency tokens or assets. Each NFT is unique and rare, unlike conventional fungible tokens.

Fungible tokens, on the other hand, are units of one asset or utility (like loyalty point) and can be traded interchangeably.

NFTs are not fungible because they are digital assets that are distinct from each other. This means that each token is unique and can not be altered. It could be limited-edition sneakers or digital artworks, virtual land online, or the right to access a Blockchain application.

NFTs are obviously different than all other assets. What’s more, they are not assets in the traditional sense. They create an anomaly immediately: they can create value and increase their price but they have no inherent utility or purpose at the time of creation. A cryptocurrency’s utility is also a debate. An NFT cannot generate value unless it has a user base that wants to interact with it. Data and metrics like daily active users or just the number of transactions per second can be used to measure this interactivity.

Assets can also be converted into NFT

Blockchain allows for the creation of intellectual property and smart contracts for physical assets. Blockchain can be used to trace the ownership of digital or physical property by attaching permanent, unalterable distributed information to it. You can do it using a special hardware token or other non-internet access devices.

Non-fungible tokens differ from generic ERC-20/721 tokens because each NFT is different, just like a digital collectible. These tokens can be used to interact just like physical ones.

Attaching the token to an asset in real life is the first step toward an NFT. This is where most of our progress has been made. You will need a real baseball cap if you want to create a digital version.

It will greatly reduce the cost of protecting and storing valuable assets such as intellectual property, and real estate titles, and allow for accurate tracking of ownership history. This is a critical advantage for luxury goods companies.

These are the steps by which any physical asset can be transformed into a valuable NFT

1. Look for a niche that is hot.

A niche market is defined as a small group who have a common interest. They will pay for your product if it solves their problem and is useful.

How do you find such niches? Researching what is trending online is the best way to find such a niche. Google Trends is a good tool for this. This shows you which websites are getting more popularity in search results. It should also give you an idea of what niches are most popular.

2. Look for products that aren’t commonly used

NFTs are novel and unique, which means that people who have them have at least temporarily overtaken the noise. Venture capitalists and their ilk aren’t the only ones that hype up NFT products. They are the ones that have succeeded despite not being in fashion.

3. Create your unique items

NFTs goes beyond buying and selling items. It’s about creating value, for all people, from collectors to speculators or game developers.

NFTs allow you to create unique digital objects that can’t be copied or taken away. NFTs allow us to have digital stuff, just like Bitcoin did.

4. Start selling products on an NFT marketplace.

It is logical to begin selling products if you have an NFT market. This will build liquidity and create a community for your token. It can also help you market your project.

There are many options, but the easiest is to use an open-source service like OpenBazaar.

Why is an NFT so valuable?

NFTs, bring value to the industry by solving a problem that has been affecting it for many years: fairness in-game assets. The tokens and platforms allow players to trade, buy, sell, and collect digital assets. Game developers can create scarcity to generate new revenue streams that don’t depend on the sale of their game.

NFTs are scarce in nature and can be transferred easily. They are therefore valuable. They would be worthless if they weren’t scarce or could not be traded.

Diamonds are valuable because of their scarcity, but they are also physical objects. An NFT’s scarcity is digital which makes it possible to transfer and modify without losing or modifying.

A ledger, which stores transaction history, and a network that can verify transactions are necessary to transfer an NFT. Due to the nature of blockchains, NFTs can be unique (because they allow only one transaction per time slot) or transferable (because there are public ledgers).

Factors that determine the value of NFTs

The most striking feature of non-fungible tokens, however, is their inability to be divided. This makes them valuable in cryptocurrency, where divisible currencies are commonplace.

This means that NFTs can be used to represent abstract assets such as access to services for an individual or a claim to a share of an event ticket.

Non-digital entities can also be represented by NFTs. This makes them extremely versatile and revolutionary in their ability to create other forms of ownership.

There are many factors that can influence the value of non-fungible tokens. These are listed below.

1. Limited Supply

There are a few reasons why a limited supply of your NFT is important:

This guarantees the product’s value. It is harder to make fakes or duplicates if you have 100 shoes.

This makes it feel like you “own” something. Ownership brings with it a sense of pride.

2. Collectable NFTs

Some NFTs were created specifically to be collectibles. CryptoKitties can only be bred together with CryptoKitties. They are more like cards in a card game than the digital currency that can be used for any transaction.

Because it is harder to find, the NFT can be more collectible. It’s your CryptoKitty if you purchase one and keep it in your digital wallet. If you wish to breed two CryptoKitties, you will need to convince another collector that they can also be placed in your wallet.

3. Controlled Circulation

The addition of new NFTs into circulation is controlled by the game developers. The value of a token will increase over time if it is rare, difficult to obtain or highly valued by its community of collectors.

4. It eliminates all intermediaries from the value chain.

They are holders of NFTs. A transfer is initiated by a user who wishes to trade an asset. The trade request can be accepted or rejected by the owner. This is the only system that requires a broker to transfer value and make ownership changes. It speeds up the process and eliminates the middleman.

What are the best places to trade in NFTs?

NFT trading is the same as trading in other types of assets, except that you don’t have to own the asset. If I own a sword in-game A but want a great gun in game B, I could transfer my sword ownership to the weapon in-game. Or, I could sell it in an exchange.

Two main locations to trade NFTs are OpenSea and OPSkins Marketplace.

Why is NFT relevant to marketers?

Marketers have many options with NFTs. NFTs are not like cryptocurrencies which are often viewed as currency or a store of value. Instead, they will offer utility and the opportunity to create unique experiences around highly valuable objects. They can be used to provide context for existing products or services, or even replace them.

NFTs are the most significant new technology since the Internet. They will be changing more in the next ten years than the Internet did in ten years. Technology is still very young. NFTs will need to be a part of the gaming industry for a long time. There are still many hurdles to overcome. All players in the gaming sector should be aware of how NFTs develop. They will likely have a lasting impact for many years to come.




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