Non-fungible tokens (NFTs) are all the rage now. Its popularity skyrocketed in 2021, along with the cryptocurrency boom as Bitcoin and the likes entered mainstream consciousness. For the starters, NFTs are tokens that can be used to represent ownership of unique digital assets like a piece of art or sound clip that was bought using Ethereum, a type of cryptocurrency. Ownership of an NFT is recorded on a blockchain, and the public has access to its authenticity, ownership and provenance.
To be fair, NFTs have been around since 2014, but it was only recently that this technology was popularised, and its sales even hit US$25 billion last year when it was only hitting US$94.9 million in 2020, according to data collected by DappRadar. With such a huge market, NFTs became a surefire way for people to earn quick bucks or even make a career out of it by becoming digital artists. Celebrities and big companies have also jumped on the bandwagon to create and buy these digital tokens.
- READ MORE: Top 5 Most Expensive NFTs in 2021
Of the sea of newly minted NFTs, blue-chip ones are perennially in demand like the two most popular ones: Cryptopunks and Bored Apes. These are almost equivalent to “museum quality” art produced by the Old Masters and could easily fetch millions of dollars. But the difference is this, physical artworks are tangible and can be touched in real life, while NFTs only exist in the digital sphere and thus, it is difficult for the layman to justify its exorbitant prices. Now, then why are these popular NFTs, popular?
The answers to that are fairly easy to deduce because it is about supply and demand. When Larva Labs first released the Cryptopunks in 2017, the NFTs were free to claim as long as a “digital wallet” was available. There were only 10,000 such NFTs, each unique, and all were quickly claimed. The scarcity is what determines the value of an NFT, and the CryptoPunk project has recorded US$1.93 billion in lifetime trades so far. It still remains as one of the most sought after NFTs in the world.
Another factor that determines the popularity of renowned NFTs is the hedonic value. This refers to the enjoyment the owner gets out of the product. Owners of the Bored Ape NFT get their satisfaction from knowing that they are part of an exclusive club called the Bored Ape Yacht Club (BAYC). When famous people are also part of this community, it immediately makes owning a Bored Ape NFT a status symbol and creates the desire for others to join.
Going beyond just an exclusive club, the BYAC has organised meetups in different cities like New York, California and other countries such as Hong Kong and the UK. Getting involved in such activities provides opportunities for valuable information to be exchanged. As the price floor grows, more crypto-rich traders will become holders. Guarded secrets locked within Discord groups can become valuable tips that could affect the financial self-interest of an owner and if the NFT is sold, one is no longer privy to such tips.
Lastly, another perspective to consider why assessing the popularity of blue-chip NFTs is understanding the relationship between culture and business. The cultural phenomenon of NFTs is attributed to its association with well-known figures such as people who have access to a wide range of audiences. When these personalities decide to give their support, they also bring the tacit recognition of their fans to the company that produces the NFTs. The companies that create NFTs will then be able to slowly climb its way up to become cultural icons.
When businesses start to collaborate with NFT companies, it signals that these digital ventures have actual utility. Both Gucci and Adidas have worked with BAYC to release NFTs while a Bored Ape graced the cover of Rolling Stone magazine. This means that real businesses, most of which are profit-driven, recognise the potential of NFTs, and this gives confidence to potential investors looking to buy a Bored Ape.
In a way, both the cultural and business aspects of NFTs are mutually reinforcing, and this drives the popularity of NFTs further up, but more specifically blue-chip ones like CryptoPunks and Bored Apes stand to grow even further. NFTs are here to stay, but some will last longer than others.
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