How Do NFTs Accrue and Keep Their Worth?

Unless you’ve been living under a rock for the past few years, you’ll likely have come across the term NFTs – short for non-fungible tokens – even if only in passing. This new asset class has taken the online community by storm, giving power back to artists and creators and allowing for a completely innovative type of investment.

While NFTs can take a variety of different forms, the most common is as digital artwork. But where does the NFT value come from, we hear you ask, when it concerns an image or video that everybody can, in theory, download to their device for free? We take a look at the ways in which NFTs accrue and keep their worth below.

Ownership

First and foremost, NFTs hold value because they denote the actual ownership of a specific image, video, audio file or other online media. While anyone can download a copy of the asset, none of those people own it. The holder of the NFT can prove beyond all doubt that the rights of the image belong to them, thus conferring on them a status that has not previously been witnessed in the digital world.

Authenticity

What’s more, the nature of NFTs mean that it’s impossible to forge one or steal it from someone else. That’s because every transaction involving a given NFT is stored on an immutable online ledger, underpinned by blockchain technology, which everyone can view but no one can tamper with. It’s for this reason that fakes and forgeries are not applicable to the NFT world, so there is no possibility of a repeat of major scams such as when internet personality Logan Paul spent $3.5 million on Pokémon cards – only to find out they were not the real deal.

Community

While a certain degree of the value surrounding NFTs often stems from their aesthetic attributes, they must have a robust community to support them – or the entire venture will collapse. It’s for this reason that the creators and propagators of NFTs regularly hold community meetings to communicate with their fans and continue to instill belief that the assets will continue to hold or accumulate more value.

Membership

Being part of such a community doesn’t just give you a warm, fuzzy feeling inside, either. Often these groups can hold tangible real-world benefits. Take the Bored Ape Yacht Club, for example. What started out as a simple community trading digital artwork of various simian personalities soon developed into an exclusive society wherein members can display their status, mingle with one another and even attend yachting parties in the real world.

Royalties

Finally, NFTs are revolutionary in the way that they have given control and a legitimate source of income back to their creators. Certain NFTs carry code built into their blockchain ID which automatically diverts a percentage of any future sales and resales back to the original artist, which gives them royalties for their work. This is not only novel in the online investment world, but also incentivizes creators to continue promoting and adding to the worth of their assets.

So there you have it! Hopefully you now feel a little more knowledgeable about the attributes and assets which NFTs carry – and maybe even confident enough to make your first purchase!