The same thing that gives a banana duct taped to a wall value. It is valuable because we, as a society, have decided it is valuable. It has no use, yet it’s worth $120,000. PFP NFTs are one of the first types of digital art NFTs – they have no use, yet they are valuable because people perceive them to be. As the ecosystem matures, we’re seeing new categories of NFTs form, with functional traits now becoming the norm…unsurprisingly, with function, comes increased value.
One of the early categories of NFTs released was the PFP NFT. A PFP is quite literally a profile picture NFT that you can use on social media such as Twitter, Instagram, and Facebook or you can just collect them. A while back, Twitter released a cool feature that allows users to connect their web3 wallet, and select their PFP NFT for their profile picture. Once completed, the profile picture is bordered by a hexagon, showcasing to the public that the PFP NFT is verified. PFP NFTs are valued for their rarity rather than for any specific use. An example of NFTs that people often use as profile pictures are BAYC, Cryptopunks, and World of Women (WoW).
Music NFTs are audio files that can be sold and collected. The most notable thing about music NFTs is that some musicians can make significantly more by selling their songs as NFTs versus on music platforms like Spotify. Giving this ownership back to musicians allows them to make money without signing with a label and giving up the rights to their songs. In February 2021, 3LAU, an electronic music producer and DJ, made $11.6 million from his album through a record-breaking NFT sale.
Game NFTs allow users to claim game assets, such as characters and skins, or they can unlock/earn new items. The game NFT industry has been booming, with players reaping significant rewards through play-to-earn games, like Axie Infinity. Axie Infinity is similar to Pokemon in that players will fight digital pets called “Axies.” The difference is they can breed these Axies and earn tokens as they play. You can earn so much from playing this game, some people make a living from it.
There are many ways Fashion NFTs have earned their place in the world of crypto. Fashion NFTs are NFTs of different fashion products that you can collect or even try on virtually. Fashion lines have also used NFTs to market themselves and their more casual and affordable sub-brands. Some fashion lines have even dived into “phygital fashion.” which is when a fashion line will release the physical product along with an exclusive NFT. The exclusive NFT is one of a kind and can possess more value than the product itself. An example of a company that did this is RTFKT Studios which dropped a sneaker line in February 2021. They earned more than $3 million in sales by selling a pair of sneakers and a corresponding NFT.
Organizations can form a collector DAO and pool their funds to collect NFTs or work together to release NFTs. When multiple individuals go in on an NFT project, each individual owns a fragment of the NFT. When DAOs create NFTs, they do so through something called community governance. Community governance is when community members and creators can collectively decide on ideas and plans for an NFT project. A great example of a collector DAO is MeebitsDAO – the community has pooled their funds to “collect” land in various metaverses. They’ve also set themselves an ambitious goal of building their own metaverse which will play host to their avatars.
Utility tokens – you guessed it – have utility. An example of utility tokens is the digital tickets Doja Cat was selling for her concert. Other examples are tokens that are redeemable for experiences or physical products such as tangible art. Utility tokens can give you discounts at cafes or even a patch of forest to plant trees.
NFTs have come a long way since coming into existence in 2014. You can use them to own a digital asset and even create and sell your own. Blockchain has made an impact on major industries such as the music and gaming industry by giving ownership to creators and allowing artists to earn significantly more for their art. Blockchain also allows collectors to have unique, rare digital assets they can own. NFTs are a fun and exciting way to get involved in Web3 and beyond that, they’ve provided a way for artists to make a living. Next, we’ll look into how to research and value an NFT.