NFTs mean Non-Fungible Token. It is a digital file stored within a block chain network. All digital information can be recorded and distributed on the block chain network. The most unique thing about NFTs is that they are original files. The person with the ownership of an NFT has permanent custody. It is almost impossible to copy the properties of an original NFT. If you are selling an NFT, you are giving the entire ownership and rights to the buyer.
How Does an NFT Work?
NFTs are presenting block chain networks. A block chain is a public ledger where all kinds of transactions are recorded. Most people are familiar with block chain because it enables the transactions of crypto currencies. NFTs are usually suitable for the ethereal block chain. However, there are many other block chain networks as well that support NFTs. To create an NFT, you must mint it from other digital objects. Digital objects can include tangible as well as intangible objects. Some examples of digital objects include the following:
Even tweets can be counted under digital objects. Jack Dorsey, the co-founder of Twitter, sold his first tweet as an NFT. It amounted to more than $2.9 million. NFTs resemble physical collectibles. The only difference is that the items are collected digitally. This means that instead of buying an oil painting to hang on the wall, you get a digital copy of it.
It also ensures that the owner of the NFT has exclusive rights. Each NFT can have only one owner at one time. If the owner or creator wants, they can store certain information inside them. Sometimes artists sign digital copies of their artwork by inserting their signature in an NFT metadata.
Application of NFTs
NFTs have enabled content creators and artists to monetize their creations. Artists no longer have to depend on auction houses and galleries to sell their art. If the artist wishes, they can sell it directly to the consumer. NFTs also help artists and content creators to keep profits. If the artists choose to program in royalties, they will get a share when the art gets sold to a new owner. This feature can be quite appealing to the artists because they don’t get profits after the first copy is sold.
There are also other ways apart from art to earn money using NFTs. Sometimes brands auction a themed NFT to raise money for charity. Charmin has started selling NFTP or non-fungible toilet paper. On the other hand, Taco Bell has sold its NFT art within minutes. The highest bid for the art came at 1.5 WETH (wrapped ether).
A GIF from 2011 sold at $600,000 approximately. The GIF is known as Nyman Cat and has a pop-tart body. More than $500 million was generated by NBA Top Shot. A Lebrun James highlight has been known to fetch around $200,000. The NFT bandwagon even got celebrities jumping on it. Celebrities like Lindsay Lohan and Snoop Dog have been on this bandwagon, releasing artwork, memories, and moments as NFTs.
How Did NFTs Become Popular?
NFTs began originating around 2013 and 2014. Its creation was triggered when people identified their intention to trade assets and collectables. It was not until January 2021 that NFTs became a hot cake. Some of the factors that enabled NFTs to explode into the mainstream psyche are mentioned below.
One of the major reasons why NFTs have become so popular is that you will be able to provide evidence for their ownership. It is possible to link ownership of an NFT to a single account because they are available on the block chain network. Since NFTs are non-distributable, they cannot be distributed among multiple owners. On the other hand, NFTs also provide protection to the consumers. There’s no risk of counterfeiting involved when it comes to NFTs. If you are selling your NFTs, transfer of ownership is possible with smart contracts.
The authenticity of NFTs is one of its biggest advantages. Each NFT is unique from another. Since NFTs are produced on the block chain, each of them will have unique data. NFT producers often release a limited number of NFTs and cause supply scarcity. Sometimes NFT producers can make multiple duplicates of the NFTs. But since the files can’t be modified on the block chain, the legitimacy of the files will remain intact. Therefore, authenticity will always be the most desirable quality of NFTs.
Trading NFTs for free is not difficult. In some particular markets, you will get numerous choices for trading. In quite a few video games, it is possible to purchase in-game items to enhance the gaming experience. But the in-game items could not be used anywhere else. Players lose their investments due to this. With NFTs, the in-game items can be used even when the game becomes outdated. The players can hold the game items in their digital wallets and use them outside. Players can even sell the game items outside for a higher profit.
4.) Promotes Inclusive Growth
NFTs bring together content creators from a wide range of avenues. It helps in fostering inclusive growth for all the content craters. The creators are able to understand the true value of their content and interact with the audience directly. The potential of future royalty rewards indicates opportunities for growth.
How To Buy NFTs?
The popularity of NFTs might have caught your attention, and you want to make your own collection of NFTs. The first thing that will be needed to buy NFTs is a digital wallet. The digital wallet will have to allow you to store crypto currencies and NFTs. According to what crypto currency is accepted by the NFT provider you have chosen, you will be required to buy some crypto currencies.
Ether seems like a good choice while buying crypto currencies. But if your provider accepts other crypto currencies, you can go for other options. If you use a credit card, you can buy crypto currencies. Some popular platforms to buy crypto currencies include PayPal, Coin base and Kraken. After buying, move the exchange to a digital wallet of your choice. It is prudent to research the fees before purchasing your crypto.
NFTs have indeed come a long way when you talk about their popularity. However, you should not invest in them just because they are popular. If you have the capital, investing in NFTs is not a bad idea. However, NFTs have a lot of uncertainty associated with their future. You need to remember that the value of the NFTs will depend on how much others are willing to pay. Your NFTs might get resold at a lower price than what you purchased them for. In fact, you might not be able to sell it at all if no one wants to purchase it. Also, remember that NFTs are not exempted from capital gains taxes.
The advantages of NFTs show why suddenly their popularity is on the rise. They will soon become the biggest thing in the field of online commerce. The sudden popularity of NFTs is also indicative of the unpredictable curve in the adoption of the latest technologies.