Will NFT Prices Eventually Crash?
Currently, non fungible tokens are a major topic of discussion within the crypto space. Creators and collectors jump on the bandwagon.
However, Charlie Lee, Litecoin (LTC) creator, believes that the hype is unsustainable. On Monday, he tweeted that unlike real art, NFTs have zero cost of creation. With all that said, he claimed he was willing to be proven wrong.
According to Lee, in the real world, artists are constrained by time and effort. He claims that this restriction creates scarcity. This is how famous artists create value for a piece of art.
On the other hand, NFTs create artificial scarcity. Because of the near-zero cost to generate another NFT, the market will eventually be drowned by them. Supply will exceed demand, and the prices will finally crash, Lee said.
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His comments are a common criticism of NFTs. However, other analysts make counterarguments for the art scene. According to them, the value of the piece of art depends on the artist. Collectors pay attention to the creator of a work of art and distinguish it from other pieces.
Indeed, another oft-attributed benefit of NFTs is the ability to sign art pieces cryptographically. It allows artists to include metadata, file links, and other important copyright elements.
With NFTs, scarcity becomes an expression of consensus. This is why, back in January, an ultra-rare alien CryptoPunk sold for 605 Ether (ETH). It would be possible to recreate this rare item. However, it would not be part of the collection created by Larva Labs back in 2017.
Hashmarks, another NFT collection, created 16,384 “cards” in its first four days, selling out over $10 million.
Also, Lee’s critique seems to limit NFTs to art rather than looking at the broader collectibles scene, with elements such as in-game assets and digital land.
This month, nine digital plots of land on the virtual realm Lunacia were sold for about $1.5 million.
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