2 reasons why people buy
NFT, or non-fungible token, the trading volume jumped in the third quarter of 2021 to reach $ 10.67 billion, a report by the DappRadar analysis platform found. This is an increase of 704% from the previous quarter.
August in particular fueled this growth. It was a record month, according to DappRadar, with a transaction volume of over $ 5.2 billion. Although things cooled slightly in September, it still accounted for over $ 4 billion in trade volume.
This massive spike is the result of a number of factors, DappRadar found, which are linked to two main reasons people spend hundreds – and sometimes millions – on NFT.
1. Belief in technology
First of all, NFT investors see long-term value in it and believe it will appreciate over time.
NFTs are digital assets and can be anything online, like art, collectibles and even memes. Some projects are considered rare, like CryptoPunks, which was one of the first NFT projects. CryptoPunks are highly respected within the community and typically sell for six or seven digits each.
Many investors are also optimistic about the technology surrounding NFTs and see a number of use cases.
NFTs are represented by code on a decentralized digital ledger called a blockchain. Each NFT can be bought and sold, just like a physical asset, but the blockchain makes it possible to track the ownership and validity of each. The technology is extremely versatile and innovations happen quickly, which is exciting for investors in the space.
An example: NFTs have the potential to store, certify and document a number of different assets and data, beyond art.
“NFTs started off with illustrations that people use as their profile pictures, but it could expand to a whole host of other things like passports, music, plane tickets and even houses and cars. “said previously Benyamin Ahmed, an NFT coder and developer.
One current lucrative use of NFTs is in-game items, where users can purchase things like skins or accessories to use in blockchain-based video games. In the third quarter of 2021 alone, in-game items generated a transaction volume of $ 2.3 billion, DappRadar found. This represents 22% of the total volume of NFT transactions.
2. Social capital
Owning NFTs also provides a form of social status in the crypto community, much like a Rolex or Lamborghini does in “real life”, notable NFT collector Gmoney previously told CNBC Make It. Like most people in the crypto community, he is only known by his online alias and prefers to remain anonymous.
“When someone buys a Rolex in the real world, they don’t spend thousands of dollars because of the utility value of the watch. A simple $ 5 watch could serve the same purpose. That’s for ‘flex.’ its status, ”Gmoney said. “With an NFT, posting it as an avatar on Twitter and Discord, I can quickly ‘flex’ with a photo.”
This “flex” can give an investor access and acceptance into the crypto community, which is “the most valuable aspect of NFTs,” Cooper Turley, a well-known crypto and NFT investor, previously said. “Without community, NFTs have no value. My NFT investment thesis is based solely on the strength of an existing community, or the potential for a community to emerge.”
As the communities surrounding NFTs have grown, NFT projects are more like brands, DappRadar points out. “Renowned celebrities like Snoop Dogg, Shaquille O’Neal and Steve Aoki are among the latest members to join exclusive communities, further strengthening the social outlook of the NFT space,” the report said.
As Gmoney says, “wanting to be part of something and wanting to be part of a group is natural”.
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