What is NFT?
NFT or Non Fungible tokens is the new buzz world in the crypto and tech world. It has been making headlines stating the people are millions of dollars buying or selling NFTs. But is NFT worth all this created hype? It is actually worth the massive monetary amount created around NFTs or is it just a bubble in the making which will pop out anytime in the future. Lets understand this further and answer for you that what is NFT!
What is an NFT?
An NFT is a digital asset that are associated with real world items such as art work, music, video clips, songs etc. They can be bought and sold online conveniently, which can mostly be done using crypto currency. Transaction with NFTs are associated with tokens. These tokens are public ledgers which keep all the details of the transactions in the past, details of all past owners etc. Which makes transactions based on NFTs safe.
You would be amazed to know that NFTs have been around as early as 2014. But it has been the buzz word in the air all because of increasingly gained popularity of NFTs to buy and sell digital artwork. A mind boggling amount of $174 million has been spent on NFTs since November’2017.
NFTs have a token associated with them, which have a unique identifying code. “Essentially, NFTs create digital scarcity,” says Arry Yu, chair of the Washington Technology Industry Association Cascadia Blockchain Council and managing director of Yellow Umbrella Ventures.
Which is in absolute contrast to the conventional notion around digital art creations, digital art or digital work since it is believed that they can be copied infinitely. And as per our economic concepts cutting off the supply for anything should raise the value of a given goods, assuming it’s in demand.
But many NFTs, at least in these early days, have been digital creations that already exist in some form elsewhere, like iconic video clips from NBA games or securitized versions of digital art that’s already floating around on Instagram.
Renowned digital artist Mike Winklemann or better known as “Beeple” have crafted a composite of 5,000 daily drawings to create perhaps the most famous NFT of the moment, “EVERYDAYS: The First 5000 Days,” which was sold at Christie’s for a record-breaking amount of whooping $69.3 million.
But a common question that comes to mind is that for a picture or music or video or clip, which is available in public domain for anyone to see, why would anyone want to shell out millions of dollars. So why are people willing to spend massive amounts on something they could have easily taken a screenshot or could have downloaded at the click of a button? The answer lies in the fact that NFTs allow the buyer to own the original item. Not only it implies ownership, but it gives a authentication serving as a proof ownership. Collectors generally value those “digital bragging rights” almost always more than the item itself.
How Is an NFT Different from Cryptocurrency?
NFT which stands for non-fungible token is generally built using the same programming as cryptocurrency, such as Bitcoin or Ethereum, But everything changes beyond this
Inherently physical money or cryptocurrencies are “fungible,” which means that they are no unique and can be traded easily. There are several of this kind present in the world, with the same worth of value for example one US dollar is always equal to another US dollar, and one Bitcoin is always equal to another Bitcoin. In fact, Crypto’s fungibility makes it one of the most trusted means of conducting transactions based on the blockchain. But NFTs are very different. Each NFT has a digital signature in its token that makes it almost impossible for NFTs to be exchanged or transacted for or equal to another (hence, non-fungible). One basketball Top Shot clip, for example, is not equal to another cricket clip NFT simply because they’re both NFTs since both are unique which makes it impossible to compare artistically or monetarily.
How Does an NFT Work?
NFTs exist on blockchain, which has a distributed public ledger that records transactions. Blockchain is the same underlying process on which most cryptocurrencies are operating.
To be precise NFTs are typically made on Ethereum blockchain, although other blockchains support them too.
An NFT is created from digital objects that represents either tangible or intangible goods, including:
• Videos clips
• Sports highlights
• Virtual avatars and video game skins
• Designer sneakers
• Famous paintings
Yes! Even tweets count. Twitter co-founder Jack Dorsey sold his first ever tweet as an NFT for more than $2.9 million!
Since NFTs are like digital version of a physical collector’s items, the buyer instead of getting an actual painting to hang on the wall gets a digital file.
What is NFT Used For?
Blockchain technology and NFTs offers artists and content creators a one of kind opportunity to monetize their work. For example, artists will no longer have to rely on middle men such as galleries or auction houses to sell their art. Instead, Now it can directly be sold by an artist to the buyer in form of an NFT, which allows them to make much more profits. In addition, artists can also add in royalties so they’ll get a part of sales whenever their work is resold to a another buyer. This is an attractive feature as artists generally do not receive future proceeds after their art is first sold.
But art is not the only way to make money using NFTs. Brands such as Charmin & Taco Bell have auctioned NFT arts based on themes to raise funds for charity. Charmin offered “NFTP” (non-fungible toilet paper), & Taco Bell’s NFT art was sold out in minutes, with the highest bids around 1.5 wrapped ether (WETH) equivalent to approximately $3,723.83 Some other very prominent sold NFTs are Nyan Cat, a 2011-era GIF of a cat with a pop-tart body, sold for around $600,000 in Feb’21. And NBA Top Shot made more than $500 million in sales as of late March. Similarly a LeBron James highlight NFT made more than $200,000!
Written by Monish Kumar