Understanding Digital Assets
I want to keep this explanation very short and sweet, I believe too many are over explaining it and we are all definitely overthinking it. Most will tell you Non-Fungible Tokens are like sports cards or fine art and that Bitcoin is currency — these statements are true but that is only the beginning. Digital Assets go so much further.
Bitcoin is indeed a currency, in the same fashion that Gold is a currency. Bitcoin and Gold can both be used to make a purchase but it is far more practical to utilize them as a storage of value or investment.
Non-Fungible Tokens are not a form of currency but still hold value because they are authenticated and given a unique identifier. Similar to when you buy a limited edition sports card that has been authenticated. Rather than a middleman needing to do the authentication, it is all done on the Blockchain and Smart Contracts.
All assets only hold as much value as people are willing to pay. There was a time, long ago, when Gold held no value at all. People of that time had no idea the heights this metal could reach. It was only when many people began to believe that gold was precious that the value began to rise. The value grew to a point that it became the backing for the U.S Dollar, until the value of the dollar grew so strong that it no longer required to be supported and the Fiat currency was born.
The same was true for the housing market. In 1940s the median house was under $3000 in the United States. Adjusting for inflation it was still below $50,000. The success of America led to an increase in demand, increase demand caused less supply which results in people being willing to pay more. All of this increased value. In 2020 that median climbed above $330,000.
Right now we are seeing many sport themed NFT, there is music being released using the technology, and even a cat meme selling for over $500,000. You might be asking yourself who has the money to spend on such a thing and that is a great question that I do not have the answer to. I can share with you the why though.
The evolution of Crypto and, especially, NFT are being led by the gaming industry and gamers. These individuals grew up buying, trading, and selling “rare” digital collectibles in games like Madden and Fornite for many, many years now. This is a language that they understand fluently and they can see what is coming.
