What the Hell is an NFT?

Quick Summary

  • NFT is a non-fungible token that works on the blockchain alongside with cryptocurrencies. NFT is a new innovative digital asset that people are hungry after
  • Their attribute of non-fungibility is what makes them unique, scarce …

For decades, there have been only several well-known assets such as stocks, bonds and commodities. In the last few years, there is a number of new asset classes. Firstly cryptocurrencies and now NFTs, which are proof of investors showing their interest in innovative assets. In this blog, we’ll take a closer look at NFTs.

What’s a non-fungible token (NFT)?

https://www.forbes.com/advisor/investing/nft-non-fungible-token/

Non-fungible tokens are one of the strongest concepts created along with blockchain and cryptocurrencies. It is basically another layer product on top of cryptocurrencies and blockchain. Without blockchain, there are no cryptocurrencies, and without cryptos, there are no NFTs. They provide several benefits which need to be understood. 

Fungible vs Non-Fungible

It’s important to know what non-fungible really means. Tokens are either fungible or nun-fungible. For example, money is fungible. A $100 bill has the same value as ten $10 bills. However, all the NFTs represent different assets which essentially makes them non-fungible.

The boom officially started in 2021 as there are more than 10,000 accounts created every week on NFT marketplaces. Why are people so interested in this thing called NFT and what are the benefits of owning one? 

  1. Secured digital content – true ownership

Once you own an NFT, it is only yours and there is no NFT that is exactly like yours. Every NFT is special and can only be owned by one wallet at a time. So if you have an NFT, you are a true content owner of that specific digital asset until you transfer or sell it to someone else while all transactions will be recorded on the blockchain. 

2. Provenance 

NFTs are immutable because of the blockchain’s cryptographic linking properties, and have provenance (origin), meaning the transaction that creates the NFT and all subsequent transactions related to it are all in a linked list and available to anyone with access to the blockchain.

3. Fair distribution of profits for NFT creators

NFTs provide a fair distribution of profits for creators (gamers, artists, etc.) because there is a cut of every sale given to the original creator. For example, when Picasso created a painting, he sold it and that was it. Now, artists create digital art and they receive a few percent from every transaction. 

https://dailyfintech.com/2021/03/29/nfts-can-eliminate-original-sin/

New industry, big growth

Although NFTs did not provide enough time and data to show if they are really secure and so good like people say, traders do not hesitate to buy any NFTs they see. Many of these tokens are sold for millions at NFT marketplaces or even at Christie’s auction! One of the biggest artists right now are Beeple, Pak, Xcopy, FEWOCiOUS and Hackatao according to the list on cryptoart.io, and their artwork’s worth is already exceeding $200 million. At the beginning of 2021, one of the most expensive artworks of Beeple have been sold for $6.6 million (picture below). Another NFT of his has been sold for $69 million later on this year. Activities connected with NFTs are dramatically rising in 2021 which can be marked as the year when NFTs “broke on through to the other side”.

New Age – Will Artists Finally Become Rich?

As NFTs create real scarcity, these products rise in value tremendously and thus attract a lot of attention. Moreover, artists love NFTs as it’s a cheaper way of creating art and it is easier (they can create one digital artwork a day, no problem). And because artists get a percentage cut from every sale, they can create a passive income when people will be reselling thousands of their artworks to each other. Just by getting 5% from every sale and selling artwork for $1 million every month makes $50,000. That is how much one of the biggest NFT artists make and this is still just a humble calculation. 

Conclusion

Non-fungible token (NFT) is a new type of asset class that is solely digital and provides a number of benefits that attracted the attention of the whole world. NFT is a product of blockchain and cryptocurrencies, which shows their usefulness. This whole industry is rising with meteoric speed and it seems to know no stop. 

More interesting blogs

People Continue To Pour Millions Into NFTs

5 Hot NFT Games to Earn $100 a Day

sources: economictimes.indiatimes, verizon, artnews

Rene Remsik