NFTs, or non-fungible tokens, are the hottest thing in the world right now. It seems like everyone has suddenly gone NFT-crazy and most people have no idea why:
These digital collectibles only exist online but are selling for millions of dollars. So we ask, what exactly are NFTs, and what’s the fuss over these digital collectibles?
What is a Non-Fungible Token (NFT)?
NFT stands for a non-fungible token, which means it is unique and cannot be replaced. NFTs are a blockchain asset, like cryptocurrency, for example, a bitcoin is a fungible token. And each bitcoin is a unique commodity.
Therefore, an NFT that contains a piece of digital art can be one-of-a-kind and in consumer demand. Therefore, it can be traded or sold like any physical piece of art.
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How do NFTs work?
Traditionally, works of art, including paintings, are considered to be so valuable because they are one of a kind:
However, digital files can be easily duplicated to no end. With the use of NFTs, artwork can be made unique, as to create a digital certificate of ownership that is then bought and sold.
NFTs are stored on a blockchain, a type of digital ledger:
An NFT is created by uploading a file, like artwork, to an NFT auction market. This will create a copy of the file recorded on the digital ledger in the form of an NFT, which can be purchased and resold.
It is important to note that the records of who owns what (blockchain) cannot be faked or forged because the ledger is being maintained by thousands of computers around the world.
Some NFTs can also contain smart contracts, for example, a contract that gives the artist a cut in any future sale of that particular token.
What can NFTs be used for?
NFTs can be used for many things, including:
- Digital Art: Digital art was one of the first things NFT was used for due to the ability of blockchain technology to ensure the unique signature and ownership of a particular NFT.
- Collectibles: NFTs can be used to represent collectibles such as card collections, only in a digital format.
- Games: NFTs can be used for in-game assets that are controlled by the user rather than the game developer. NFTs make it possible for in-game assets to be traded on third-party marketplaces without needing permission from the game developer.
- Music: Many musicians are now turning to NFTs to tokenize their work on blockchains.
Can NFTs stop people from copying my artwork?
The answer is no:
Nothing can stop people from copying digital art that is on an NFT. For example, in 2021, digital artwork by Beeple was sold for $69.3 million. Millions of people saw this artwork, and the image has since then been copied and shared numerous times.
In some cases, the artist retains the copyright and ownership of their work, so they continue producing and selling several copies of their artwork. However, the buyer of the NFT now owns a token that proves that they are the original owners of the work.
How much are NFTs really worth?
As wild as it may sound, people are spending millions of dollars on NFTs:
When you think about it, it is possible for anyone to tokenize their work and sell it as an NFT. And the interest in NFTs has been fueled further by recent headlines about the multi-million-dollar sales that are taking place.
For example, on February 19, 2021, an animated GIF of Nyan Cat, a 2011 meme made of a flying pop-tart cat, was sold for over $500,000.
A few weeks after this, musician Grimes sold several of her digital arts for over $6 million. And these multi-million-dollar sales are not just limited to artworks being tokenized and sold.
Twitter founder Jack Dorsey was recently in the news for promoting an NFT of his very first tweet. Bids for purchasing this hit $2.9 million.
Why are people buying NFTs?
This is one of the reasons why NFTs have become so popular right now. Many people believe non-fungible tokens are the future of collecting in a digital age.
Where can I buy and sell NFTs?
Several marketplaces have opened up recently to allow people to buy and sell NFTs. These include:
Are NFTs just a fad, or are they here to stay?
NFTs are not a fad. They are here to stay but their use is largely restricted to creating and selling digital trinkets that can still be copied:
In time, this will likely change and owners of NFTs will see the benefit and rewards.
There is no doubt that NFTs will one day revolutionize how we collect, trade, and invest. And right now, it is the wild west, with people in a gold rush frenzy, not truly knowing what will and will not be valuable in the future – but they’re buying anyway.
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