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Wherefore are NFTs so expensive  
  

Stemma as the informant of appreciate is nada young. Kanye West toilet deal a t-shirt for $120 because he’s Kanye Mae West. Suppose how a good deal he could betray the tweed t-shirt he wore on point for a bear witness. Belle Delphine’s bathwater is sold prohibited at $50 (NSFW site). It doesn’t weigh that we rump steal a t-shirt for $5 or produce our have dingy bathwater. Descent matters.

  
Wherefore NFTs are Valuable  
The Beeple "Initiatory 5,000 Days" NFT sold for $69,000,000 most recently week. Naturally, that's raising about eyebrows more or less what the emptor truly bought.  
Obviously, the buyer doesn’t ain the graphics in whatever traditional horse sense. Look, I stool spread it right on here: 
  
  
And ahead you read "you tin can do that with a picture excessively!" That’s non rather honest. A image of a house painting is unlike from the house painting. The JPG of the First of all 5,000 Days piece is the piece. There’s no divergence.  
  
This is ane problem with the ownership argument or so NFT artistry (introduction for the unfamiliar). You don’t have the art the Saami path you mightiness have an original Pablo Picasso. You can’t destroy it, you can’t modify it, you don’t in truth controller it in whatever particular style.  
Only that’s the matter with NFTs, you’re non buying the artistic creation. You’re purchasing the NFT. The NFT is non the graphics. It’s a few lines of codes that includes a mention to the art, merely that’s it. The artwork doesn’t eve survive in the NFT since it would be path excessively very much information to pose on the Ethereum blockchain. Whole the NFT has is a contact to where the prowess is!  
  
I could go cause another NFT of the exact Saami firearm of artistic production redress now, and no peerless could real block me. Simply it wouldn’t be Worth anything. Wherefore not?  
Well, for one, it wouldn’t receive an unquestionable origin. It's highly gentle to verify whether an NFT came from Beeple or not. In fact, it's significantly easier to do this with NFT nontextual matter than with "real world" graphics since everything on the Ethereum blockchain is legible. Altogether Beeple would get to do is pinch the public speech he's signing his graphics from and and then anything of his that's sign-language by any early call we'd have it off is pseud.  
Extraction as the germ of value is zero raw. Kanye Rebecca West rump trade a t-shirt for $120 because he’s Kanye Mae West. Imagine How do I buy NFT a good deal he could sell the clean t-shirt he wore on stagecoach for a show. Belle Delphine’s bathwater is sold away at $50 (NSFW site). It doesn’t matter that we keister grease one's palms a t-shirt for $5 or shuffling our ain cheating bathwater. Parentage matters.  
You power opine of an NFT not as the art, simply as the signature tune on the art. Historically you had to have the physical firearm to give the signature. Straightaway we butt nonobjective the signature tune into its ain asset, and you fundament bargain the creator’s self-stated stamp of legitimacy.  
Some other doctrine of analogy Here is a college level. Tutorship at Carnegie Andrew William Mellon is $57,119 per year. At the conclusion of quaternity years, you invite a musical composition of composition. Is that objet d'art of newspaper worth $228,476? You could scarce photoshop your figure into this nonpareil and call up it a day:  
  
But it’s non the set up of paper, it’s the inception of the theme and What is the most expensive NFT ever sold it tells populate. The signature tune matters. It tells mass you dog-tired 4 age and enough money to save 65 lives from malaria learning… something. Hopefully. And consequently they should earnings you more than than the otherwise identical scholarly person a few miles departed.  
The price of a academic degree is non or so noesis or the friends you made along the mode. Those could be had for Former Armed Forces less money. It’s all but signaling. Signal you were private-enterprise and feeder sufficiency to incur into this institution, and and then insure your gormandise crapulence well sufficiency to death for quartet eld.  
The college level exists someplace on the spectrum between "utility" and "signaling." And unmatchable fairly uniform the true with the substitute to bespeak spectrum is that as things have to a greater extent expensive, we normally obtain ourselves closer and finisher to the signaling final stage of the spectrum.  
The $5 t-shirt is everlasting public utility company. The Kanye t-shirt is well-nigh all signal. Everything we buy, and own, waterfall somewhere on this utility program to signaling spectrum.  
  
So where are NFTs proper right away? Redress here:  
  
NFTs are entrancing in partially because they take on the utility-grade to signaling ratio to the extreme point. In that respect has ne'er been something so worthful that’s so absolutely useless. Tulips you could at to the lowest degree engraft. In that respect is efficaciously zero in substitute to owning NFTs that are on the commercialize powerful now, in any case speculation just about their next treasure.  
So on the far side speculation, wherefore are they worthful? Signaling. In that location are close to 240,000 individual wallets with o'er $1m USD in Bitcoin. If you on the spur of the moment came into a few milly, you’d wanna testify hit to a fault. NFTs are a fun recently way to signalise wealth and perceptiveness.  
Only they’re too a mode to sign How do I buy NFT early on you are in the crypto economy. If you grease one's palms into the theme that NFTs will laid a unexampled monetary standard for extremity rights management and appendage ownership (which I do, More on that adjacent time), purchasing around nowadays is tolerant of wish purchasing BTC plunk for in 2013 or registering a 3-alphabetic character demesne appoint in the too soon years of the net.  
And to be clear, I perfectly roll in the hay NFT engineering science and am departure to compose around it very much to a greater extent. I’m non pointing prohibited their in high spirits signal to service program ratio to criticize them. I’m pointing it away because I mean they’re organism unfairly criticized for organism a godforsaken of money. Signaling is exceedingly valuable, and NFTs are a riveting recently right smart to peacock butterfly and possibly acquire fat along the style.  
So are NFTs a belch? I doubt it. NFTs are getting heaps of mechanical press only the commercialise is inactive small in the howling dodging of things.  
The artistic production grocery store is worth  
67 million dollars. The NFT commercialise but murder 338 zillion in 2020. Maybe it’ll hit a few jillion this year. Just and so factor out in how much easier it is to grease one's palms NFTs than art, and how many other industries NFTs could corrode aside at, and Why are NFTs so expensive that 67 billion phone number only sounds corresponding a start gunpoint.  
For example, sports ware. Around of the money acquiring gone on NBA merch is right away aerodynamic into TopShot. TopShot has through at least a few one hundred zillion in transactions so far, which sounds insane until you commemorate that NBA merchandise, which has no high-risk investing component, Why are NFTs so expensive is a all but 50 billion dollar bill industriousness.  
Or comparability NFTs to other crypto options. Bitcoin’s food market crownwork is terminated 1 one million million. If thither were a Beeple-sized, $69m sales agreement every single mean solar day for a year, the NFT grocery store would nonetheless be simply $25b, or 2.5% of the Bitcoin securities industry. It is Too soon.  
While I don't think NFTs are a bubble, I call up thither are a great deal More interesting exercise cases for NFTs that aren't existence through with yet. Uses that wish direct them on the far side mere signaling, and make them approximately freshly forms of public utility company that weren't previously possible online.  
Erst we first eyesight Sir Thomas More of those role cases arrive, the market bequeath upright go forward to uprise.  
This clause primitively appeared as an prove in my Mon Medley newsletter, which you ass mansion up for here. 
  
  

"We're seeing a Modern genesis of traders inside the NFT market; populate WHO are digitally aboriginal look for extremity native plus classes out-of-door of established plus markets," Ivanova aforementioned. "These are populate WHO take congregate repute and riches and lack to empower it in strictly virtual assets the likes of NFTs."

  
What are NFTs?  
NFTs are non-fungible tokens — significance you couldn't change one NFT for another — that ladder on a blockchain network, a extremity account book that records whole proceedings of cryptocurrencies corresponding bitcoin.  
The dispute with bitcoin and other tokens, though, is that apiece NFT is unique and can't be replicated. Each matchless accrues appraise independently. Crypto investors allege NFTs descend their prize from how barely they are. They're stored in appendage wallets as collectors' items. Beyond artwork and sports, populate suffer likewise establish uses for NFTs in virtual very estate of the realm and play.  
Nadya Ivanova, foreman operational policeman of BNP Paribas-affiliated inquiry unshakable L'Atelier, says collectable digital assets john be cerebration of as a punter rendering of an MP3 filing cabinet. Musicians get struggled to net from their exercise in the digital age, and Ivanova says roughly are turn to NFTs to show possession of their function and discovery an extra source of revenue.  
"It's allowing content creators to in reality own the belongings rights for what they create, which allows them to benefit from it in dissimilar slipway which they can't do with strong-arm art," she told CNBC, adding that crypto artistry is the strongest development subdivision of the appendage collectibles commercialise.  
The sum esteem of NFT transactions quadrupled to $250 zillion lastly year, according to a meditate from NonFungible and L'Artist's workroom. The numerate of appendage wallets trading them well-nigh two-fold to all over 222,179, spell close to traders were capable to cook net profit of all over $100,000.  
"We're sightedness a fresh contemporaries of traders within the NFT market; people who are digitally aboriginal look for extremity indigen asset classes extraneous of accomplished plus markets," Ivanova aforementioned. "These are mass WHO experience collected reputation and wealthiness and privation to endow it in purely virtual assets similar NFTs."  
Ivanova says the NFT grocery store has been maturing. Noted auction bridge menage Christie's auctioned an NFT-based employment of art created by Beeple, a well-known digital creative person WHO has created videos and nontextual matter for celebrities alike Ariana Grande and Justin Bieber.  
  

What was it well-nigh this graphics that made it so hotly contended? The sale of the nontextual matter came with just about interesting features:

  
Integer art: What are NFTs and why are they so valuable?  
  
How do you influence respect? Cerebration approximately this now as I learn dabbled crossways the media news show about a digital artwork that sold online for US$69.3 1000000. Today that's a rattling expensive JPEG filing cabinet. What caused the price to range so much wise high? Provide and demand, scarceness value, bangle factor, crowing rights? In the sheath of this nontextual matter potentially a combining of entirely of the above.  
The creative person Mike Winklemann professionally known as “Beeple” was non good known outdoors of the appendage art global. At once he is unmatched of the about expensive bread and butter artists you had plausibly ne'er heard of. Until forthwith.  
Christies was the auction domiciliate that sold his graphics and whilst they have got an incredible lineage in merchandising art which dates dorsum to the 1700's, this was the beginning metre they or whatever former John R. Major auction sale theater had sold a part of graphics that was entirely extremity (with a NFT). I scan that they themselves were diffident of how to measure the set up. Its carnival to enjoin the auction sale went really well, it was a record book breaker, and why are NFTs so expensive judgement by the artist's twitter fertilize he appears to be amazed by the final Mary Leontyne Price paid.  

.@beeple 's 'The First of all 5000 Days', the 1st purely appendage NFT founded graphics offered by a John R. Major auction business firm has sold for $69,346,250, placement him among the elevation triad nigh valuable living artists. John Major Thanks to @beeple + @makersplaceco. More than inside information to be discharged shortly — Christie's (@ChristiesInc) March 11, 2021

  
What was it all but this art that made it so hotly contended? The sale of the art came with close to interesting features:  
  
Sold with a Not Fungible Item.  
Strictly appendage artwork.  
A digest of 5,000 separate artworks.  
Sale process managed by peerless of the most venerable vendue houses, Christies.  
Cryptocurrency was an accepted conformation of defrayment.  
  
Until Tuesday this workweek I had never heard of NFT's or Non Fungible Tokens. Crypto up-to-dateness? Yes. Blockchain? Trusted. NFT? Nope. I institute stunned around them by probability when meeting with a line mate he mentioned NFT’s to me. "NF what?" I queried. He with patience explained the conception and How do I buy NFT NFT's could be applied to assets so much as artworks and euphony victimization blockchain engineering. I was interested to try most it merely wondered where had I been altogether this clock? He believes NFT's are the following braggart thing, but his opinion, absolutely non advice!  
The record producing graphics by Beeple is highborn “Everydays: the first gear 5,000 days", a digital asset compiled of 5,000 individual artworks. If the new owner(s) decide to sell the artwork in the future it will have to be sold as a whole, they will be unable to siphon off individual pieces to sell. Whilst the artwork is a rich tapestry of thousands of pieces the owners will be able to zoom in on each individual piece, so it can certainly provide them with some viewing variety.  
  
  
  
Everydays — The First 5,000 Days, by an artist named Beeple, released by Christie's (Christie's Via AP)  
There is no doubt in my mind that an important part of the value of the artwork was that it was sold with a non fungible token or NFT. The NFT is essentially a digital trademark providing proof of provenance and ownership. With the use of a NFT authenticity of the asset is forever assured; using blockchain technology the token will be stored on a digital ledger. Should the artwork change hands in the future the NFT would go with it providing an important safeguard that this is the original piece, helping combat the risk of fraud and forgery. This can be a serious and expensive issue in the art world which is well covered in the popular BBC television series “Fake or Fortune”.  
It is easy to understand how a NFT can provide safety to buyers and sellers, particularly important for digital art which can be easily replicated. It will be fascinating to watch from the sidelines to see how the use of NFT's develop. No question that we really do live in interesting times.  
  

Deutsche Bank suffered a similar shock in 2015 when a junior member of the bank’s forex sales team accidentally transferred a hedge fund $6 billion, but luckily for the fledgling member of staff, the hedge fund was kind enough to send it back.

  
What are NFTs?  
NFT stands for “Non-Fungible Token.” Non-fungible essentially means it cannot be traded in for something else, in the same way a $50 dollar note could be traded for two $20 dollar and one $10 dollar note.  
NFTs are sometimes compared to art pieces like paintings (because there will only ever be one original) but they’re also regularly compared to autograph prints, collectibles, and trading cards. Whichever traditional, real-world analog is closest, they are effectively digital certificates of ownership.  

NFTs can contain smart contracts — which run on the Ethereum blockchain — which could, in theory, give the original creator of an NFT a percentage of all future sales of the token.

  
Why are they so expensive? Scarcity, first of all, but the marketplace in general — and the subsequent price of NFTs — is driven by the momentum and sentiment floating around this young, exciting new asset.  
Who knows how expensive NFTs will get — or, conversely, when the bubble will burst.  
  

Swiss IT security company Wisekey has also moved into this business. “Digital twins for luxury items and art are the main markets so far, but other uses of NFTs are emerging, in particular for certifying intellectual property and identity,” says CEO Carlos Moreira. The company provides NFTs to protect luxury objects and has recently launched an art marketplace. It plans to introduce its own cryptocurrency and is working on projects for digital rights management of music and movies.

  
NFT explosion: Why are people buying digital art?  
You are free to share this article under the Attribution 4.0 International license.  
Built on the same technology as Bitcoin, NFTs have been a hot topic in 2021. They enable a real market for digital works of art while fueling unprecedented speculation.  
2021 might become known as the year when digital art exploded. On March 11, a cryptocurrency investor paid $69 million for the digital painting “Everydays: The First 5000 Days” during an auction organized by Christie’s. The blinking GIF Fomo is currently for sale for $2 million—60 times what it sold for only nine months ago. And a series of 10,000 straightforward-looking illustrations of monkeys, called the Bored Ape Yacht Club, are collectively worth more than one billion dollars.  
This mind-boggling bubble is fueled by the NFT technology, which enables cryptocurrencies such as bitcoins or ethers to be exchanged against digital objects. An NFT or “non-fungible token” is a digital data string that establishes proof of ownership of a specific item that usually exists in the virtual world. It could be, for instance, a digital work of art, a financial asset, or a patent.  
NFTs live on the blockchain, a transaction-tracking decentralized ledger, which until recently was mainly known for being behind Bitcoin. It has generated incredible hype while extending its potential impact on many industries, from finance to art, music, intellectual property, and luxury goods.  
NFTs and royalties  
“NFT has really enabled a market for digital art,” says Robert Zumkeller, a graphic designer who started creating NFT illustrations while a student at the FHNW Academy of Art and Design in Basel. “I am not certain that I would have found a brick-and-mortar gallery willing to exhibit my digital work, nor buyers who would acquire a physical screen to own it. With NFTs, I could use an online gallery, Superrare.com, to showcase my work and sell it.”  
Like everything else recorded on a blockchain, art NFTs allow for tracking all transactions after their initial sale. This tracking allows for a perpetual royalty payback, explains Zumkeller. Under his moniker, Vicarivs, the young artist will receive 10% on any subsequent sale of his work—something that rarely happens with physical objects sold by galleries or collectors.  
In physical art, only one original copy usually exists (or a few dozen, in the case of art prints). The original is distinguishable from reproductions, which are sold legally or as forgeries. With digital painting, the work of art is a data file, which can have an infinite number of perfect copies. That is Why are NFTs so expensive an NFT does not comprise the data file of the work of art itself; instead, it functions as proof of original ownership.  
Digital versions of luxury goods  
NFTs have also entered the luxury market, where recently, digital twins (a photograph or a 3D animation) of collector watches went up for auction in spring 2021. “More and more brands are looking into NFTs,” says Serge Maillard, managing editor of the watch magazine Europa Star. “First, as a useful tool to fight forgery by ensuring traceability and authenticity. Second, to develop and maintain a closer, more personal relationship with their client, without having to rely on intermediaries.”  
Swiss IT security company Wisekey has also moved into this business. “Digital twins for luxury items and art are the main markets so far, but other uses of NFTs are emerging, in particular for certifying intellectual property and identity,” says CEO Carlos Moreira. The company provides NFTs to protect luxury objects and has recently launched an art marketplace. It plans to introduce its own cryptocurrency and is working on projects for digital rights management of music and movies.  
Altogether, the NFT market ballooned over the last twelve months with a 700% increase from the second to the third quarter of 2021, according to the analytics platform Dappradar. This bubble confirms the speculative character of cryptocurrencies and blockchain applications; namely: the dollar value of the bitcoin has increased by a factor of 100,000 over ten years.  
Speculation and impact  
“So far, design choices on the technology have helped to fuel speculation,” explains Claudio Tessone, professor of blockchain and distributed ledger technologies at the University of Zurich’s department of informatics. “The most widespread systems are based on the so-called proof-of-work, where the validating and tracking of all transactions by the network as well as the introduction of new tokens only work because users run computations on their systems.  
“As the devoted resources have been accelerating under a constant rate of supply, the creation of assets is becoming more and more expensive, which fuels an increase of their value, just like oil prices going up when it’s harder to extract. In turn, this creates incentives to invest resources in the blockchain, which fuels a self-reinforcing loop driving speculation and inflating prices further.”  
The energy consumption of blockchain applications has been an increasing worry. While society is desperately trying to tackle climate change, it has simultaneously introduced economic services that consume as much electricity as a middle-sized country like Sweden. “There is some hope that a new architecture for blockchains, called proof-of-stake, will make the electricity needed to run it negligible,” says Tessone. “A new generation of platforms such as Cardano, Polkadot, or Tezos are already running on such systems, but their impact—while increasing—has been limited so far. We’ll have to see.”  
However, this new architecture could generate new, problematic incentives. Until now, cryptocurrencies rewarded those setting up huge computer farms to profit from economies of scale and more efficient energy usage. A proof-of-stake blockchain rewards users instead who heavily invest in it, which fuels speculation. “As of now, it is hard to imagine blockchain without speculation,” says Tessone. “It is good to see that the community takes this problem seriously, cryptoeconomies for a future with more functional cryptoeconomies.”  
Catherine Tucker, a professor of management at MIT who specializes in the blockchain, regrets this focus on speculation: “Most of the reporting on NFTs has been on the speculative aspects. This is rather frustrating, as it may lead to less experimentation on ideal-use cases.”  
Not so private after all  
One worry is that the anonymity provided by blockchain technology could help financial fraud. The most obvious ones are shill bidding to drive prices up at auction and insider trading. In September 2021, Opensea, the largest marketplace for NFTs, revealed that one of their employees had purchased items just before they were displayed for sale on its front page—an action that would amount to insider trading.  
Many specialists’ forums discuss the risk of shill bidding, where an artist or someone they are conspiring with buys their work for a large sum to drive its price upwards and maintain the current bidding frenzy. This culminated with the suspicion that the owner of an NFT of the art series CryptoPunk borrowed 500 million dollars as a flash loan—a financing mechanism only available on the blockchain—to buy the NFT from themselves before returning the money. While a clever trick to inflate the price of their art, this move also raised suspicions that NFTs could be a perfect tool for money laundering.  
Interestingly, specialists discovered these suspicious activities because all blockchain transactions are fully available to the public. “The famed privacy of cryptofinance is a mere illusion,” says Tessone. “It is based on the premise that users create a large number of wallets holding their assets in an attempt to obfuscate their transactions.” But in fact, many people choose to avoid this option because of the cost of transactions. And then, of course, there’s the traceability, adds Tessone: “mathematical network analysis can uncover suspicious activities, allowing tracing back transactions to a person even if they manage many wallets. This is Why would anyone buy an NFT shill bidding on NFTs is not actually safe for fraudsters, contrary to what many commentators say.”  
Catherine Tucker also cautions us against putting the blame entirely on NFTs, saying that “problems such as insider trading with NFTs are reflections of underlying user behavior in uncertain environments and persistent transaction costs. I am not sure if attributing fault to the technology is correct. Ultimately, technology is just technology.”  
  

Now, as prices surge, owning a CryptoPunk has become a "digital flex" due to there being only a limited number of them. Several of their owners have also taken to flaunting them by using their punks as an avatar on social media sites like Twitter.

  
First and foremost, limited quality. Just like there would only ever be 21 million Bitcoin and not a single more, there will only ever be 10,000 CryptoPunks. It is up to the NFT creator if they want to have a rare collectible or have several versions of their NFT. Still, in both cases, the authenticity of the NFT is verifiable through their unique IDs and metadata.  
In CryptoPunks, no two punks are the same. Some have a headband, some have caps, others have small shades, and many are wearing gold chains. Each punk has different attributes, and some are rarer than others. Simply put, the rarer an item, the higher its value.  
  

After all, if you were to spend millions of dollars to buy a piece of work done by Picasso, you could hang it in a gallery and charge quite a bit of money for tickets to simply look at it. But NFTs are different. They’re digital files that can essentially be copy and pasted by anyone.

  
NFTs Are Unique  
First and foremost, it’s important that you understand what the acronym NFT stands for, which is non-fungible token. The non-fungible part of the name points to the uniqueness of the digital asset. These pieces of art simply can’t be replaced.  
To understand the difference between a fungible asset and a non-fungible asset, all you need to do is look at Bitcoin, Ethereum, or a wide range of other cryptocurrencies, which are all indeed fungible. After all, there’s nothing unique about a single bitcoin other than its ownership. One could be replaced with another and the owner wouldn’t mind because the value is the same no matter which coin he owns.  
On the other hand, your dog is a non-fungible asset, albeit one that’s likely a very valuable member of your family. After all, I couldn’t walk in with another dog that looks pretty much the same, take yours and leave mine, without you being upset about it.  
Your dog is unique. You know his personality, he knows yours, he gets along with your kids, friends, and family. Shucks, he’s part of the family. There’s no way to replace him.  
Not that NFTs are living, breathing, animals that become part of the family, but they are just as unique and irreplaceable as your beloved family pet; hence, making them non-fungible.  
Ultimately, uniqueness adds value. After all, value is a concept that’s built on supply and demand. When the supply is high and demand is low, value is hard to come by, but with NFTs, the supply count for each unique token is one! As a result, if someone wants to buy it, they’re not going to be able to unless they pony up the amount of money that the owner of the NFT is willing to accept for it since there’s no competitors to lean on when you don’t want to pay the price asked.  
  

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Why are NFTs so expensive?  
  
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Nonfungible tokens (NFTs) burst onto the scene earlier this year when some of them started pulling in millions of dollars at auctions. A confusing and controversial new digital asset is on the rise. DW‘s own experiment selling an NFT made a smaller splash. Which made us all the more curious: Why would anyone buy an NFT are some so expensive?

  
Explained: Why some NFTs are so expensive  
Nonfungible tokens (NFTs) burst onto the scene earlier this year when some of them started pulling in millions of dollars at auctions. A confusing and controversial new digital asset is on the rise. DW‘s own experiment selling an NFT made a smaller splash. Which made us all the more curious: Why are NFTs so expensive are some so expensive?  
Patrons of the arts?  
First, a reminder: NFTs prove ownership of digital files. They can represent digital works of art but can also be associated with video game accessories, collectors items and more. Anything that can be stored as data on a blockchain can be an NFT. NFT transactions are recorded publicly on a blockchain and often bought with cryptocurrencies.  
Investment bank JPMorgan recently valued the global NFT market at $7 billion (€6.3 billion). In October, an experiment by The Economist pulled in $420,000 when the weekly news magazine auctioned off an NFT of one of their cover pages. An issue about decentralized finance, the cover art portrayed cryptocurrencies alongside images from the children’s book “Alice’s Adventures in Wonderland.” Buyer @9x9x9 told The Economist it was the fitting title — “Down the Rabbit Hole” — that compelled them to purchase the data file of the cover.  
But buyers of breathtakingly expensive NFTs point to a whole range of reasons for spending big bucks for the rights to a data file that anyone else can view or copy. Cryptocurrency entrepreneur Vignesh Sundaresan spent a record-breaking $69 million on an NFT earlier this year. The NFT enthusiast, who has invested in the technology, denied that he was trying to push up prices. He said he wanted to support the artist and showcase the technology. For other buyers, it’s about scarcity. “The buyer knows how many will be made and has blockchain proof of ownership,” American billionaire and NFT collector Mark Cuban told online news portal Business Insider.  
What the data says  
Researchers at the Alan Turing Institute (ATI) wanted to know what the data said about this phenomenon. “What we observed is that there is this gigantic heterogeneity in the success of NFTs,” Andrea Baronchelli, associate professor in mathematics at the University of London and ATI’s token economy theme lead, told DW. “Some — very few — do very well, a bunch do decently, and the majority are worthless.”  
In 2021, ATI’s team of experts completed a study which looked at the role certain factors play in the price of NFTs. They looked at three components: the NFT’s visual features, previous sales of related NFTs and the social network of the buyer and seller. Researchers used a machine learning model to consider a dataset of 4.7 million NFTs exchanged by over 500,000 buyers and sellers. The result? Past sales of related NFTs was the most important of these three factors, accounting for over 50 per cent of the price variance.  
For example, past sales of NFTs from the CryptoPunks collection, a prominent set of 10,000 tokens depicting pixel images of punks, would be a good indicator of future sales of tokens from the same collection. Visual features were the second most important aspect. Including this data increased the performance of the machine learning model by up to 20 per cent. Data showing the popularity of the traders increased performance by 10 per cent. Combined, they concluded these three factors can explain up to 70 per cent of the variability in NFT prices. They plan to look at more factors in the future, including the platform where the NFT is sold and the activity of the creator on social media.  
An old market rethought  
In the market for NFTs of digital artworks, one can recognize something of the traditional art market, where scarcity, social networks and, often to a lesser extent, content of the art piece help determine an object’s worth. But NFTs have some features that distinguish them from their real world counterparts, Mauro Martino, director of the Visual Artificial Intelligence Lab at IBM Research and ATI study co-author, told DW.  
“A very big difference between the art market and NFTs is that the artists take 10 to 20 per cent from the secondary sales,” he said, “So anytime the piece will sell again, part of the sale will always go to the artist. This is really a novelty in the idea of art and can be a big game changer for artists.” This is possible because future sales of NFTs are recorded on blockchain, which allows artists to receive their cut automatically.  
A JPEG of a rock  
That is good news for anyone whose NFT has generated some money. But what about the majority that aren’t worth much at all? “There are 10,000 new pieces each and every day ready to go…I don’t know where,” said Martino. “There are not 10,000 new buyers every day to sustain this incredible production.” Stability in the NFT market would require greater attention from the public to attract traditional investors, as well as greater comfort with cryptocurrencies, the experts said. This development is likely still years away, and surprises could pop up in the meantime.  
“If we notice that enthusiasm for NFTs today is very similar to the enthusiasm for cryptocurrencies at the very beginning, then we can expect some major correction,” said Baronchelli. This would have unclear implications for this nonfungible asset. “If I have Bitcoin and it goes down 40 per cent, I still have 60 per cent,” he said. “If I have a JPEG of a rock? What happens to the value of that JPEG? We don’t know, because there is nothing similar.”  
  

As more financial advisors are learning, NFTs are starting to catch on, even among non-celebrities. And it may not be long before a client asks you how to include NFTs in their portfolio.

  
Why NFTs are so appealing  
Simply put, people love collectibles. And thanks to the growing accessibility of NFT marketplaces, the title of "collector" now applies to someone trading free Space Jam tokens just as much as it does to prominent figures like the pseudonymous Whale Shark, who owns more than 220,000 pieces of digital art and has consulted Paris Hilton on how to break into the market.  
As a financial advisor, your first priority is to look out for the long-term financial security of your clients. It might be helpful to think of NFTs the same way you would a rare stamp collection, for instance, or a signed original manuscript of the great American novel. NFTs are a lot like old-school comic book collecting, or baseball cards and Pokémon cards. Except, thanks to blockchain, their true scarcity (and value) is much less speculative because we have an irrefutable record of every token.  
Assuming your clients have a healthy amount of money invested for their retirement, a sizable emergency fund and enough disposable income that they can experiment with NFTs, collecting can be a fun and innovative way to feel a part of the future.  
But if someone isn’t in the position to invest money on speculative art – whether a hundred dollars or a thousand dollars here and there – there are ways your clients can dip their toes into the NFT market for free.