For a couple of years now, it looks like a new hype has emerged in the next generation of digital assets, i.e. the “non-fungible token” (NFT).
Some recent figures reveal that in the third quarter of 2021 alone, people spent $10.7 billion on NFT which is eight times the sales volume of the previous quarter. With increased interest in the digital medium during COVID-19 lockdowns, this looks to be evolving.
So, what is NFT? What does the concept stand for and how does it work? What is the technology behind it? Are there any advantages and disadvantages? Why is its popularity increasing so fast lately and how is it worth considering?
Today, we will look into these questions, as we will also tackle some fancy examples.
And since we all love educational cartoons, do you fancy tuning into today’s topic with a click? Here you go!
What is NFT?
As its name suggests, NFT is a non-fungible (meaning non-interchangeable) data unit stored on a data ledger (blockchain). It provides a digital token that serves the role of a certificate of authenticity or proof of ownership for digital files such as pictures, GIFs, avatars, text, photos, videos, music, games, film, audio, etc. See more here.
Each NFT is one of a kind and has a unique identifying code, which is recorded in a distributed public data ledger. NFT may be bought or sold but they do not have a tangible form in itself. Unlike money or bitcoin, they can’t be swapped or interchanged for one another. No NFT is equal to another NFT.
NFTs are highly popular for collecting digital art. When purchasing a piece of digital artwork, buyers obtain a digital certificate of ownership of the file which may be looked up in the records. NFT may be bought and sold but one NFT may have only one owner at a time.
Yet, the NFT token does not cover the copyright which usually remains with the author. This makes it particularly suitable for artists who can get their royalty cut on each sale of a copy. Read more here.
How does it work?
If you wish to start using NFT, you must first get a digital wallet that lets you do so. Your next step should be filling it in with some cryptocurrency. This way, you will have pretty much all set up to jump into NFT marketplaces. The most popular of these seem to include OpenSea, Rarible, Foundation, etc.
To explore this further, scan this article by Forbes, casting some further light on the process, including what to research and pay attention to.
Do NFTs and cryptocurrencies differ?
Yes, they do. They contain different information. Although they do share a similar kind of programming blockchain technology, this is believed to be their only similarity. NFTs are usually built on Ethereum although it is not the only blockchain that supports them.
Overall, the principal difference between NFTs and cryptocurrencies stems from the feature of “fungibility”, which the cryptocurrency has and the NFT lacks. While one can exchange one bitcoin for another bitcoin, one cannot do so in the case of NFTs (see above).
Further, NFT creators can be always identified. Although NFT may be sold without restriction, the bitcoin register tracks and contains the whole history of ownership. Finally, the value of an NFT is indivisible and variable. Often, it is defined by the market demand but one cannot buy just a fraction of it.
Pros and Cons of NFT
Today, NFTs are a comparatively new form of a digital “currency” that has empowered artists to incur regular income from their art without the intermediacy of galleries. Still, the NFT application has been expanding quickly and it is expected to extend to physical objects as well. Similar to other novelties, however, it appears to have inherent advantages and disadvantages.
Some of the most evident NFT strengths include that its tokens are unique, undividable, scarce, transferrable and they guarantee the ownership of the asset. Further, they support the collectability of art, improve the owner’s prestige, may be traded and emerge as an attractive form of investment.
On the downside, NFTs are still a new form of technology which makes investment risky. Their present application looks somewhat limited despite its expected extension. Read more here.
3 top examples of NFT sales
Due to their increased popularity, one may find plenty of NFT sales examples that have triggered global interest. Naturally, they all have been million-dollar sales.
Our top three most curious NFT sales thus feature:
- the sale of the first Tweet – The founder of Twitter Jack Dorsey sold the NFT for its first Tweet for $2.9 million. The tweet was reading:
- a GIF of a Nyan Cat sold for more than $500.000 as early as 2011,
- the digital artist Beeple sold his collection of drawings The First 5000 Days for the impressive amount of $69.3 million. This was the first sale of NFTs with the help of an auction house – Cristie’s.
If you are interested in exploring recent NFT sales, please look this up.
“Non-fungible tokens” (NFTs) are a new type of digital asset whose spread has risen over the Coronavirus lockdowns. Being particularly suited for trading ownership rights over digital art, presently NFTs are highly valued by artists and art-loving buyers. Although a comparatively new form of digital asset, their application is continuously evolving.
Drop us a comment on this or another topic of your interest.