Non-fungible tokens (NFTs) are not exactly new—at least not for crypto enthusiasts. However, they have gone mainstream recently. That is largely due to celebrities vouching for and voicing their fascination for these curious digital objects. Those that joined the NFT bandwagon include Madonna, Dolly Parton, Brie Larson, and Paris Hilton, to name a few.
Now, the question is, what’s the fuss all about? Before we can answer that valid query, first, let’s discuss what NFTs are.
NFT stands for non-fungible token. The difference between NFT and other cryptocurrencies like Bitcoin, for instance, is that the latter is fungible. If you sell Bitcoin, in return, you get precisely its value—at least its value in the market at the time you made the trade.
By contrast, NFTs don’t operate that way. They are unique and, thus, irreplaceable. Moreover, they don’t come with a definitive value. That’s the similarity NFTs share with artwork in the physical realm. A collection of market factors will gauge how much an NFT is worth.
NFTs began mainly as digital artworks. Nowadays, everything has the potential to be turned into an NFT.
Different Types of NFTs
NFTs come in many iterations. Here are the most common.
- Collectibles. Collectible NFTs are like the trading cards you had while growing up. The only difference is that they’re purely digital. This trend was pioneered by unique digital kittens who made the rounds online in 2017. They were called CryptoKitties.
- Event tickets. These tickets became popular at the height of the pandemic when performers staged digital events. Basically, instead of getting a physical ticket, you get a digital version. Beyond the pandemic, event organizers continue using them to cater to their tech-savvy clientele.
- Gaming. If you’re a gamer, you’ve probably already engaged in NFT trading without you even knowing. NFTs built into games come in the guise of skins, characters, powers, and other in-game objects that could propel the player to victory or could, at least, provide them a sense of accomplishment for owning something limited.
- Virtual fashion. There’s a market for digital fashion pieces and accessories like dresses and shoes. These may be used for online avatars like those you use for your social media platforms. While you can’t use an NFT hat in the real world, you get to remain stylish in the digital realm.
- Memes. Yes, there’s no shortage of memes online. But those that have been turned into NFTs become valuable in a monetary sense. There are people willing to splurge money to stake an exclusive claim on them.
- Domain names. You can now register and sell domain names via the NFT market. Providers of this service let you get an NFT for a domain name, and you get exclusive rights on that handle.
- Real-world assets. The NFT blockchain has allowed the tokenization of real-world assets. This is all about cryptographic proof of ownership. For example, you create a digital version of your luxury car, which becomes a digital asset that you can trade.
- Iconic sports moment. Clips of iconic moments in the world of sports have been turned into NFTs. They then become the owners of those quick enough to make the purchase. It’s like paying for the privilege to say that you own the moment when a basketball player tripped on the court and lost the game for their team.
- Music and media. Musical artists go to NFT platforms to sell their creations. That’s because there’s no intermediary to contend with. Artists get roughly 100% of their earnings.
- Artwork. This is arguably the most popular application of NFTs. Artists across the globe have turned their creations into digital tokens to trade online and make a profit without having to approach the art world’s gatekeepers.
NFT Facts: 4 Things You Should Know
Before investing in NFT, it pays to know the subject as much as possible. In that regard, let’s get you started with the following facts.
- NFT utility is disputable
The question of utility is a source of ongoing debates among NFT enthusiasts. On one side of the argument are those supporting the inherent value of tokenized digital assets. On the opposing side are those who demand NFTs offer a sense of utility. The utility could come in a variety of manifestations. For instance, someone selling an NFT song could include a membership to an exclusive community of audiophiles. It’s essential to take note of this subject so that should you decide to finally invest in NFT, you’ll know exactly where to put your money based on which side of the debate you favor. - Blockchain technology hosts NFTs
Blockchain is where the majority of NFTs in circulation are sold and traded. Nowadays, more and more blockchains support NFTs. - The sky is the limit
Twitter founder, Jack Dorsey, made $3 million for the NFT version of his first-ever tweet that goes like this – just setting up my twttr. There’s nothing philosophical or life-changing about those words. However, NFT enthusiasts agree those words are worth millions. That’s how promising the platform is. If you luck out, it’s as good as winning the lottery.
Other big NFT purchases include a 50-second video of Grimes sold for $390,000 and a Beeple video worth $6.6 million. The latter was eventually auctioned off for $69 million at Christie’s.
- NFT is all about ownership
While the same clip of Grimes can be copied and viewed multiple times online, buying its NFT version awards you sole ownership. That’s what the whole system is about. You get official dibs, which cannot be contested because you got the receipt.
Wrapping Up
Digital assets and the blockchain technology that enables them can intimidate some people. That is always the case with emerging trends, after all.
However, there’s no reason to be scared of something just because you have a vague understanding of how it works. That’s most true for NFTs, a trend you can monetize, especially if you’re an aspiring artist. Whether you draw or paint, there’s room for you in the digital art world. Traditional gatekeepers won’t block your entry.
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