WHY DO MILLIONS OF DOLLARS GO TO NFT?
Non-fungible tokens(NFT) are one of the more odd alternative investment possibilities available. All the digital assets that are part of the Ethereum blockchain are referred to as an NFT. You can buy a digital artwork, the rights to a tweet or logo, or even a character to use in a game of chance when you invest in an NFT.
By putting money into a digital device, you can achieve whatever you want. NFTs are currently on a bizarre trajectory that appears to be traveling “towards the moon,” as they frequently say. CNBC reported in August that an investor paid $ 1.3 million for a digital shot of rock. Big businesses are now getting into the game, with Taco Bell, Pizza Hut, and Pringles all releasing their own NFTs. This year, the same Visa paid $150,000 for an NFT, while Adidas paid an additional $ 156,000 for digital artwork.
Why are these businesses spending millions of dollars on digital “assets” that no one will ever touch or feel? We spoke with some of the leading authorities in the industry, and here’s what they had to say.
Businesses are capitalizing on the trend.
It’s simple to see why big businesses spend a lot of money on NFT, according to attorney Tal Lifshitz, partner of the cryptocurrency, digital assets, and blockchain group at Miami’s Kozyak Tropin & Throckmorton (KTT). He describes it as “trendy, exciting, and cutting-edge technology that has the potential to alter the way these brands do business and connect with their customers.” “The most crucial question is, why aren’t the large brands investing heavily in NFT?”
In fact, increased adoption tends to materialize, and DFTs are now an essential part of our lives.
“As adoption rises, the value and usability of the product rise exponentially,” Lifshitz explained. “It’s worthless if you’re the only one with a cell phone.” There is a benefit if two persons own cell phones. You need a cell phone if billions of people have them. This is the result of higher adoption rates. This is where NFTs could go in the future.
Businesses are seeking new methods to boost their profits.
NFTs are a new revenue source and engagement tool for brands, according to Lydia Hylton, an investor at Redpoint Ventures.
“Exclusive businesses like Louis Vuitton thrive on scarcity,” Hylton continues, “and are exploring LV branded NFTs for the metaverse.” “Brands are also always seeking new ways to boost client involvement.” According to the investor, NFTs can be used to reward and encourage customers through inventive freebies, exclusive access, and other methods.
Businesses follow trends
Dr. Dustin York, an associate at the University of Maryville, claims that businesses are motivated to take the risk since individuals are spending more time in virtual worlds.
“When customers went to malls, brands went with them. “When people went to e-commerce, brands went with them,” he explains. “And now that customers are turning to Web 3.0, digital-native companies are following suit, giving NFTs even more credibility.”
According to York, consumers should expect an NFT hype cycle, and we are currently in the quickly rising hype phase. According to him, demand for traditional NFT paintings will plummet at some time. “Critics will label NFTs as fashion, just as they did with e-commerce during the dot-com bubble,” he predicts. “The NFTs will then resurface and become a part of our daily lives.”
The Metaverse is the way things will be in the future
Andrew Lokenauth, an NFT investor, believes that big brands are investing in NFTs because of the digital world in the future. He claims that a large number of people are currently spending several hours per day in virtual worlds and that this figure will continue to rise. This is why firms are already witnessing and reaping the benefits of metaverse marketing.
Many well-known performers, like Justin Bieber, Travis Scott, the Weeknd, and Ariana Grande, have performed in the Metaverse before, according to Lokenauth.
“Perhaps the elite fashion houses will come next,” he speculates, “and throw fashion presentations in the metaverse.” “The options are limitless, which is why brands pay so much.”
What you should know about DFTs as a consumer
There are plenty of reasons for new investors to approach NFTs with caution, especially when huge companies spend millions on digital assets. For starters, because NFTs are virtual, they are suitable for con artists. For example, it is relatively uncommon for naïve investors to be sold phony NFTs.
“Make sure the individual selling you the token genuinely holds the rights to the token,” Lifshitz advised. “The intellectual property issues around NFTs are still being worked out, but the bottom line is that a seller can’t sell you something they don’t own.”
According to Justin Giudici, Product Manager at Telos Foundation, this shouldn’t be a cause for concern because scammers exist in any market.
“Research the asset before you buy an NFT to make sure the person/brand isn’t ripping you off or selling assets that aren’t theirs,” Guidici says. “Scammers have an opportunity to profit from the excitement now that big brands have joined the fray.”
He also points out that many platforms have yet to implement the most effective verification techniques. Thus there is always the possibility of fraud.
Before getting started, consumers should educate themselves on the benefits of NFTs and Crypto 101, according to Akbar Hamid, Founder and CEO of 5CRYPTO by 5th column, a unique practice in cryptocurrency, blockchain, and NFT. Potential investors should understand how to open and operate a wallet in addition to learning more about blockchain technology.
Hamid points out that there is a slew of new NFT communities popping up, and it’s critical to immerse oneself in the conversation and ask questions. In the end, the most excellent method to learn is to ask questions and chat with other investors.