NFT stands for Non-Fungible Tokens (NFTs), created using the same type of programming as cryptocurrencies. As cryptocurrencies are declared as the answer to the digitalisation of currency, similarly, NFTs are the digital answer to collectibles or the art world.
Most of the news on non-fungible tokens (NFTs) is making headlines because of the huge sum of money that is being made by digital artists and those who are investing in their blockchain creations. For those who are familiar with these headlines, it is easy to understand why people are excited about the opportunities that NFTs have brought to the art world.
The term NFT signifies that it can neither be replaced nor interchanged because it has unique properties. Physical currency and cryptocurrency are fungible, which means that they can be traded or exchanged for one another.
NFTs are built on blockchain technology and offer a secure record of transactions, just like fungible assets, such as Bitcoin or other cryptocurrencies.
Ever since its introduction in 2014, NFTs are consistently gaining more and more popularity and credibility, etc. A very popular way for e-commerce of digital artwork. In 2021 alone, the market of NFT's net worth was worth a staggering $41 billion. The amount is alone venturing the total value of the entire global fine art market.
What comprises NFT?
NFT refers to a unit of data that functions as a unique signature, a digital certificate that certifies the authenticity of a creation. It can be an image file or a song or a tweet or even a text posted on a website, a physical item, and various other digital formats.
NFTs are the safest units of data and also can't be copied, hence keeping the credibility of the original data such as digital artwork. Even the NFT certificates are created based on Ethereum, a blockchain, and are traded using a cryptocurrency called Ether.
How have NFTs brought a revolution in the Digital World?
As we are progressing toward digitalisation, the demand for digital artwork is on the rise. However, the digital work gets easily copied, shared, or downloaded, decreasing or giving no value to the original works. Hence, there were problems with its authenticity and uniqueness.
Digital Assets most secure than it was ever before
With NFTs now, digital artworks become similar to physical ones as they turn digital art into real assets. Moreover, with the blockchain in NFTs, it’s not possible for anyone to entirely duplicate the artwork it’s tied to and hence also making it unique and unalterable.
This facility is now helping several digital artists to monetize their artwork and maintain originality and avoid issues of piracy and duplication. Also, recently it was witnessed that NFT artworks went in millions, which also displays that people want to buy and hence collect them.
The reason for buying these digital artworks can be because a person likes them or also can buy them as an investment. So, NFTs can be said simply as ‘digital ownership’. Now, digital assets have become more secure than ever with this facility.
NFT is Unique
Every NFT is unique, meaning that it is non-interchangeable and replaceable and is encoded with a blockchain-native identification code that is unchangeable. This also makes it unfalsifiable, incorruptible and indestructible, etc.
Hence, once an NFT is made, it becomes a part of the blockchain, a digital asset with its own uniquely identifiable and traceable.
The main characteristics of NFTs include:
- NFT trading happens using cryptocurrencies.
- NFT is cryptographically encrypted making every NFT unique.
- The value of NFTs does not remain constant. It is a non-fungible asset, which means NFTs are impossible to be exchanged for one another.
Use of NFTs
With the increase in digitalisation, the use of NFTs has also increased. Now, NFTs are being used more creatively and successful manner. Various places where NFTs are used at present times include:
- Art Galleries: With digitalization, even various museums worldwide are keeping NFT pieces of artwork. People have started loving this version of artwork which is both beneficial for the artists as well as the buyers. It not only gives credibility to the artwork but also makes the owners generate revenue. Also, the virtual world provides users to access it from anywhere in the world. For example, Cryptovoxels host different art galleries and museums from all over the world in their virtual space.
- Real Estate: Even in real estate too, the physical assets can be represented on a blockchain as an NFT. This means that now even land asset information can be stored in token form and stored. Hence, also making it convenient to do business conveniently and safely with it.
- Virtual Marketplace: It is one of the best places, where NFTs can thrive. The virtual spaces act as a fertile trading ground for NFTs, where their creation would happen directly in the VR landscape.
Buying NFTs
- First, you need to have a digital wallet to store NFTs and cryptocurrencies.
- Next, buy some cryptocurrency like Ether, using a credit card. It can be bought on various sites like PayPal, Robinhood, eToro, Kraken, etc. It will be bought based on what currencies the NFT provider accepts.
- It will then be moved from the exchange to the wallet of your choice.
Note: Keep fees in mind as you research options. Most exchanges charge at least a few percent of our transactions when we buy crypto.
Should NFTs be bought?
- Investment in NFTs is a personal decision. If a piece holds importance for you especially then, it may be worth considering.
- NFTs value is driven by their demand, it may be also due to the price. Hence, it may happen that it may be resale for less than what is paid for.
Therefore, NFTs should be approached only after being aware of their pros and cons. An investment that needs to be thought deeply before investing. Research- Understand risks and if you have decided to take the concerned risk, proceed further by taking a healthy dose of caution.
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