How Do NFTs Gain Value? (A Simplified Answer)

There’s a lot of speculation about how NFTs gain their value. Most people see the media headlines stating that a JPEG sold for hundreds of thousands or even millions of dollars.

So when I hear others talk down on NFTs and claim that they have no value, it’s understandable, because all they see are the headlines of random images selling for big money. So, how do NFTs gain value?

NFTs can gain value from being created by well-known or respected artists or creators, being rare or limited edition, leading to an increase in demand over time. These factors can contribute to the appreciation of an NFT’s value.

In this article, I’m going to break down exactly how the value of an NFT is determined, and if the value of NFTs will last.

How Do NFTs Gain Value?

NFT value. A person looking at the value of their NFTs increase in front of their eyes.
A person looking at the value of their NFTs increasing

Similar to brands that are known so well today such as Apple, Amazon, Coca-Cola, and Nike to name a few, the founders of these companies have been building their brand’s reputation for decades, and as a result, their products have gained value.

It’s no different when it comes to creating value for NFTs. Why is it that people tend to pay more money for a pair of Nike over a generic brand of shoes? Do Nikes do something different that generic brand shoes don’t do? Not really.

People are willing to pay hundreds, if not thousands of dollars for a pair of Nikes solely because of their brand name, it’s that simple.

Now when it comes to NFTs, it’s true that there are thousands of NFTs that have not built a reputable brand name, nor do they offer any real value to consumers, yet people are still spending thousands of dollars for these “JPEGs”, why is that?

This is called a bubble. If you look up “dot-com bubble”, you will quickly understand what this means. But allow me to explain this new technological bubble—the NFT bubble.

The NFT Bubble

NFT value. NFTs inside numerous bubbles. Are NFTs just a bubble soon to burst?
NFTs inside numerous bubbles

The NFT bubble originally formed because there was more demand for NFTs than there was supply, allowing creators to demand any price they want, and people would buy it in hopes that they’d make a quick profit from their purchase, and many did.

However, now that more people are becoming aware of NFTs and their potential to provide a source of income, everyone is biting at the bait to invest their hard-earned money into random NFTs without doing research or having any thoughtfulness in what they’re actually buying.

This allows unknown creators and brands to cash in on this digital gold rush without building much of a brand or solid reputation at all. That’s also why 98 percent of NFTs are bad investments and are destined to be worthless in the near future.

So how do you and other creators make NFTs valuable? That’s a good question.

How Do You Make NFTs Valuable?

Making an NFT valuable involves several different aspects and strategies, but the concept is not much different than creating value for any other product or service someone may offer.

Here is how creators can make their NFTs gain value:

  1. Determine your target audience
  2. Create a supply of products and/or services
  3. Build a brand name around the NFTs you’re offering
  4. Provide value to your consumers (give them what they want)
  5. Market your NFTs and share your story to build a community of consumers

Now I know these steps may seem a little vague, but this is the foundation for building any brand name and making your product more valuable, including NFTs.

It’s important to understand that when you create an NFT you’re actually building a brand. Regardless of if you’re creating NFTs for your personal goals or for a company, ultimately you’re creating and representing a brand. 

That brand might be you as a person, or maybe you’re trying to build the next Nike, either way, you have to provide value to your consumers and share your story.

Creating value isn’t an overnight task either, value comes from hard work, patience, and consistent effort in providing your target audience with an NFT they want or need.

If you’re curious to know more about marketing your NFTs, check out NFT Marketing 101: How to Sell Your NFTs Successfully.

Will NFTs Be Worth Anything in the Future?

NFT value. NFTs equals what?
An image saying NFTs equals what?

The use cases for NFT technology will continue to develop into more than what it’s known as today.

NFTs will be even more valuable in the future. Here are some potential use cases for NFTs in the future which will provide value:

  • NFTs will be used for various loans and contracts
  • Every coupon and ticket will be some form of NFT
  • Memberships will be distributed as NFTs
  • NFTs will be used to prove ownership of digital items in the metaverse
  • Play-to-earn games use NFTs to prove ownership of in-game assets

These are just a few examples of how NFTs will be used in the future to provide value to the world moving forward. In all reality, NFTs are simply the digitalization of world assets. Before, we had no way to prove ownership of digital assets. Now with NFTs, we do.

Think about it, everything that is viewed and valued today such as business contracts, home loans, concert tickets, and many coupons is still provided in the form of a physical good, usually a piece of paper.

There’s not anything wrong with that necessarily, but there’s no denying the fact that the world is changing, and it has been evolving into a completely digital world for decades. NFTs and blockchain technology are the next steps of this evolution. 

It’s easy to fall into the mindset that NFTs are useless JPEGs that are only used to make the rich richer, and maybe even enable illegal activity like money laundering, but that’s because we are in the early stages of this technology, and some humans have bad intentions.

When a new technology is being developed, especially when it’s a technology that has the potential to change how the world operates, similar to how the age of the internet has evolved, there will be many road bumps and inconveniences that make it seem inefficient and useless.

NFT value. A hand swiping across a futuristic screen with NFTs floating around.
A hand swiping across a futuristic screen with NFTs floating around

But this is just the beginning, and JPEGs being sold for big money is a result of the exploration of this new technology. Imagine if NFTs were introduced to society first as home loans or business contracts, not only would this catch everyone off-guard, but it would be completely inefficient because the technology simply isn’t ready for that kind of mass adoption yet.

That’s why NFTs have been presented as art and JPEGs, it’s easier for society to wrap their minds around versus changing the way we transact and do business on a daily basis. Although NFTs will be there soon enough, it takes time and exploration to optimize the technology.

When the internet first came out, there was hardly anyone who was selling a single product online, it was simply a place to consume information and nothing more. Now, twenty years later everyone is shopping online and physical stores are shutting down due to a lack of business.

Final thoughts

Ultimately, we are already living in a digital world, and technology is progressing at speeds never experienced before. NFTs are simply the next step. So yes, NFTs will be valuable in the future, but in different ways and with various use cases.

Not all NFTs should be considered valuable, just like not every product or service on the planet is considered valuable. Generally, the people and businesses who build a brand name for themselves, their products, and their services are the ones considered to be the most valuable.

NFTs aren’t much different, it’s just different applications. What do you think? Are NFTs valuable or are they just a huge bubble waiting to burst?

Only time will tell, but history has already shown that the evolution of technology is inevitable. At the end of the day, it’s your choice to go against the grain or join the movement.

About Alex Gomez

Alex is a professional writer based in the U.S. focused on the blockchain industry. With years of experience, he contributes to some of the most recognized publications such as Yahoo, ONE37pm, and others. He previously worked for Gary Vaynerchuk as his NFT editor before going all-in on Cyber Scrilla.