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What is this NFT bandwagon that everyone seems to be jumping on?
This year, as you must have seen, public interest in non-fungible tokens (NFTs) seems to have hit an all-time high. From art and music to food and fashion, digital assets are selling like hotcakes, fetching millions of dollars in certain cases.
However, are NFTs worth the money—or the hype? While some believe that the NFT trend is a bubble that will burst soon, others feel that these tokens are here to stay and will permanently revolutionize investment.
But do you know what an NFT actually is?
An NFT is a token that symbolizes physical objects such as art, music, in-game goods, and films. They are purchased and traded online, usually using cryptocurrencies, and are typically encrypted with the same core tech as many cryptos.
Although existing since 2014, NFTs have only just begun gaining popularity as the go-to option to buy, sell and trade digital artwork. So much so that since 2017, around $174 million has been spent trading, buying or selling NFTs.
But why are people paying millions of dollars for art that can be viewed for free online?
NFTs allow their buyers to hold on to the art’s sole proprietorship. Additionally, it has built-in authentication, which proves to be evidence of ownership. Everyone loves to brag — especially on social media. The NFT provides people with bragging rights — which is as good as owning the physical product.
So how can we differentiate between an NFT and Cryptocurrency?
The full form of NFT is Non-Fungible Tokens. It’s based on the same fundamentals and grounds of cryptocurrencies, such as Bitcoin or Ethereum, but that’s where the similarities end.
Physical currency and cryptocurrencies are both “fungible”. This means they may be traded or swapped for one another. They’re also worth the same — one dollar is always worth another dollar and one Bitcoin is always worth another Bitcoin.
NFTs are distinct. Each NFT possesses a digital stamp that makes sure no two NFTs are the same and are distinct from one another — hence, their name, non-fungible token.
So how do NFTs operate?
NFTs reside on a blockchain, a distributed public ledger that keeps track of transactions. You’ve definitely heard of blockchain as the fundamental technology that allows cryptocurrencies to exist.
Although Ethereum blockchain is the most commonly used, NFTs can also be accommodated on various other blockchains depending on the owner.
NFTs can be transacted or minted using digital objects representing both tangible and intangible elements, such as:
- Videos and sports clips
- Video game skins and virtual avatars
- Designer shoes
- Musical Instruments
Did you know that tweets also count? Jack Dorsey, the co-founder of Twitter, sold his first tweet as an NFT and it was sold for almost 3 million dollars!
NFTs are basically digital collector’s items, similar to actual collector’s items. But, instead of receiving a physical art piece to put on the wall, the customer receives a digital image.
They will also have sole ownership rights. That’s correct: NFTs only have one proprietor at a time. The distinctive data of NFTs makes it simple to verify provenance and trade tokens between holders. Many artists can sign their work by assigning their signature and stamping in the metadata of NFTs.