As if crypto, Bitcoin and blockchain, DeFi and Ethereum weren’t enough, we now have NFTs.
What the heck are they?
Are crypto folks hopeless romantic, their love skirting them with No Further Texts (NFTs) to stop their incessant texting?
NFTs, as you may have heard, are not after all complicated–or foreign.
If you could relate them with crypto and blockchain, that’s a good start!
In this article, we’ll break down this exciting innovation to the basics for your easy understanding.
So, sit tight, let’s begin.
What are NFTs?
NFTs are short for Non-Fungible Tokens. They are a type of digital token on the blockchain–and not just any run-of-the-mill coin. It is different since it can hold additional information–images, videos, or audio–because of a few tweaks intentionally made by developers.
Let me illustrate with an example using BTC and the greenback.
You see, one BTC or one USD is the same as the other. You can swap them seamlessly—and trust me, there won’t be any problem—unless, of course, the USD in question is “fake.”
This interchangeability makes them “fungible.”
A non-fungible token, on the other hand, is, as the name implies, non-fungible–the opposite of “fungible.”
What does this mean?
Every NFT in circulation cannot be swapped for another.
But why? You may ask.
In crafting NFTs, the developer of the issuing network built new rules–a standard that spells distinguishing properties of each of these tokens.
While all fungible tokens in Ethereum adhere to the ERC-20 standard, all NFTs are minted in compliance with the ERC-721 or ERC-1155.
Understand this though; NFTs are not only an Ethereum’s thing. Impressive pieces are being minted in other smart contracting platforms like IOST, Waves, to name a few.
Out of this, you will notice that each NFT in circulation is unique and exists individually. To spice things up, most NFTs are in limited supply. This scarcity element only makes sense because NFTs cannot be swapped for another.
What gives NFTs Value?
The combination of uniqueness, individuality, and scarcity allows developers to mint verifiable assets on the blockchain.
However, their very existence in the digital realm and the operation from the highly dependable blockchain makes this once niche field attractive, opening up even more exciting inventions spanning different sectors of the real economy.
For example, NFTs have seen the explosion of in-game items and accelerating the digital art renaissance. Unique, blockchain-verifiable artworks are being sold for millions of dollars. To illustrate just how popular NFTs have become, a Beeple‘s collectible, “Everyday’s: The First 5000 Days” was auctioned by Christie’s for a whopping $69 million—so that you know, bids for the crypto art began at $100. That’s not the only NFTs that made headlines. Sotheby sold a piece by Pak for jaw-dropping $16.8 million in April 2021.
Other top NFT pieces are being auctioned daily at different marketplaces for tantalizing amounts. Crypto punks, NBA Top Shot, and more are available for thousands of dollars in ETH—just if you are interested in these memetic, beautifully casted pieces of digital art with Ethereum provenance.
NFTs, like crypto, eliminate red-tape, allowing gifted digital artists worldwide to release their timeless pieces to the global audience. Beyond the artistic liberation that comes with NFTs, they are avenues where artists can earn coins without necessarily making purchases from exchanges or mining.
However, the main reasons NFTs are being sold for millions of dollars are because of several baked-in factors.
- Artists who choose to release their pieces as NFTs are shielded against pirates. These are notorious individuals or entities that have made it their job to duplicate original work, passing them as authentic to unsuspecting buyers. Therefore, every sale means the buyer inherits all commercial rights—and they can do as they please, further assisted with blockchain provenance.
- All crypto arts minted in NFTs are rare. Often, a digital artist chooses to mint only a few of their masterpieces at a time. Therefore, the buyer is assured of ownership of only limited-edition rare pieces potentially re-sellable for millions.
- NFTs can quickly turn a buyer into a collector. Think of Beeple fans—over two million of them on Instagram. These are folks who may choose to only scrabble for, bidding for his artwork whenever ready, building a vast collection of timeless, probably highly coveted pieces down the line. This allegiance to a particular artist and creating a collection can generate income for buyers who resell their works for a tidy profit.
NFTs are valuable—without a doubt. Originality, blockchain signature, geographical agnosticism, it goes on and on.
Some critics claim NFTs are just a fad, a passing cloud, and the era of glorified downloaded JPEGs will come to pass.
Positive criticism is welcomed, but pedestrian analysts—most of whom are no-coiners—should realize crypto art is just one application—just like crypto is one in the blockchain. NFTs could power the multi-billion dollar gaming industry, anchor the trillion-dollar eCommerce, and the blend with DeFi bring even more efficiencies bettering the whole.
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