Why Does NFT Have A Limited Supply? Here Are The Top 7 Reasons.
NFTs are non-fungible tokens — digital collectibles with unique attributes and value. And in the past few months, they’ve become a hot topic. From music to tweets to art, NFTs have been attached to just about everything. Major brands, like Nike, Pepsi and GoPro have already begun experimenting with and selling them. But what are NFTs? And why do nft marketplaces have a limited supply? Here’s what you need to know:
1. What is an NFT?
2. Why is there a limited supply?
3. Top 7 reasons why NFT has limited supply:
4. How are NFTs being used?
5. Is FOMO driving the market?
6. Are we in an NFT bubble?
What Is An NFT?
NFT stands for non-fungible token. Most cryptocurrencies are fungible; one Bitcoin is the same as any other Bitcoin, and one Litecoin is equal to any other Litecoin. In contrast, a non-fungible token is unique and has its own history.
It’s similar to holding a physical schwag item from a conference. Each item is unique and has a provenance (who it was given to, who held it before, etc.). But unlike that physical item, you can own and trade the digital version without having to physically move something around. You can prove ownership via a blockchain transaction or scan a QR code that points to the receipt of your purchase.
Why NFT is limited supply?
The idea of a limited NFT supply is not new. However, the reason why it has been successful in non-fungible tokens and all other collectibles is that it creates an arbitrary demand on an asset that has a limited supply. That demand is created by the human mind and its desire to have something rare or valuable. It’s like a self-fulfilling prophecy.
The limited supply of cryptocurrency is because of the code within the network. In NFTs, the same reasoning exists but only because there are limited quantities of each item available in the game or market. For example, there are 10,000 Jackpot CryptoPunks available and only one Jackpot Nifty Gateway NFT.
When you remove the limited supply in either case (NFTs or cryptocurrencies), it makes it much more difficult for value to be created around that asset since everyone will have access to it without any scarcity attached to it.
The rise of non-fungible tokens in the crypto space has left many investors wondering how these digital assets can be sold with such hefty price tags. NFTs are crypto tokens unique to themselves, have multiple uses and have a limited supply. Here is why a token’s supply is limited:
Top 7 Reasons Why NFT Has Limited Supply:
1. NFTs are given out to players as rewards for performing certain tasks within blockchain games.
2. NFTs are used by several businesses as a tool for the marketing and promotion of their products and services.
3. NFTs are used by governments to issue licenses, certificates, and degrees to their citizens so that they can easily verify the legitimacy of their degrees or licenses when applying for jobs or even seeking visas for foreign travel.
4. NFTs are issued by non-profit organizations looking to address issues such as environmental pollution, food shortages, etc where they accept donations through NFTs which can be sold in exchange for fiat currencies.
5. NFTs are used by artists as a way of monetizing their artwork on the blockchain where they create an NFT that represents their work and sells it on various platforms like Opensea and Rarible in exchange for fiat currencies or cryptocurrencies.
6. All NFTs are stored in the same location and there is no duplication of tokens on blockchains (only 1 NFT for 1 person).
7. Newly created NFT project that has limited NFT supply would have high demand from early adopters at the beginning.
How are NFTs being used?
- By musicians, gamers, artists and designers to sell in-game assets, songs, designs and art.
- By brands for promotional purposes – for example, for virtual items that customers can redeem for prizes – and as digital memorabilia.
- By charities to auction off NFTs to raise money.
- By collectors who have seen the value of their collections increase dramatically over the past year.
Is FOMO Driving The Market?
The fear of missing out (FOMO) on the stock market is driving people to buy stocks as they see other people make money from them.
This is despite the fact that markets are trading at historic highs, with the S&P 500 up nearly 150% from the lows of March 2009.
The FOMO phenomenon has been cited for driving investors to take on more risk than they otherwise would. This means that shares in a risky company are often highly overpriced.
Risks and Rewards
You could argue that this has been a feature of markets since their inception, but after such a long bull run, which is now nearly nine years old, it is clearly happening on a much larger scale.
In particular, it appears to be affecting younger investors who generally have a low appetite for risk.
The stock market was not kind to those who bought into it during the tech boom of 2000 or before the financial crisis in 2008, but that does not appear to have put off younger investors this time around.
Are we in an NFT bubble?
NFTs, or non-fungible tokens, are a form of cryptocurrency that has taken the art world by storm in recent weeks.
The NFT craze has even reached the mainstream. Last week, Christie’s sold an NFT for $69 million. But with most NFTs selling for far less than six figures, the question remains — are we in an NFT bubble?
“It is speculative and it is a bubble,” said Clark Winter, CEO of Axonius, which provides cybersecurity asset management. “
Though they are cryptocurrencies, NFTs aren’t used to buy things like other currencies. Instead, they’re used to sell unique digital goods. They can be anything from trading cards to tweets or artwork. Because each one is unique and can only be owned by one person at a time, it’s hard to sell goods without using NFTs.
NFTs are stored on blockchains that hold records for every transaction — making it much harder for counterfeiters to create knockoffs compared with traditional goods. This makes them popular among artists and collectors alike.
At The End
As you can see, there are many factors that play into limited supply and NFT can’t do much in the situation due to it being out of our control. Although this is a setback we are responsive to our user’s concerns and we want what is best for them, investors and the community.