NFTs, what are they exactly?!

 

Just recently in the cryptocurrency world, there was an explosion when Beeple, sold his art called “Everydays: The first 5000 days” for $69.3 million! This seemed like a breakthrough for all the digital artists, where their art can be sold for whatever price they want in cryptocurrencies (mostly Ethereum). From art and music to tweets, tacos and even toilet paper, these digital assets are being sold in millions and are owned by many influential people as well!

But then, are these NFTs worth all the hype and the money that is spent on them? And what exactly are they, how do they even work?

So, what are NFTs?

Non- fungible token is a digital asset which cannot be copied or stolen. It is based on the famous blockchain technology hence, very secured. But unlike cryptocurrencies, these digital assets cannot be exchanged with one another. In a simpler manner- it is like a digital version of collecting physical collectibles like some rare coin or Pokémon card and can be bought using cryptocurrencies.

How can we buy NFTs?

Non- fungible tokens can be sold and bought on certain platforms only. Since they are built on Ethereum blockchain, you can buy NFTs on platforms like-

1.       OpenSea

2.       Rarible

3.       SuperRare

And many more such platforms, where NFTs are popularly found and sold or bought.

How can we sell NFTs?

To sell NFTs, we need to locate whatever art we want to sell in our marketplace, type the bidding price and also select it to sell.

While some sites charge a fee for any artist to create an NFT, there are other sites that let you create and sell any NFT according to you.

Any information regarding what cryptocurrency is used and required is also needed to know beforehand so that when you try to trade NFTs it would not be a problem regarding what the cryptocurrency when needed (it is mostly traded in Ethereum.)

 

 

 

 The fungibility in the NFTs is all about how they can be traded for something of a similar value. While NFTs can’t be exchanged for another NFT of the same value, they can only be bought and sold unlike cryptocurrencies.

These NFTs exist on a blockchain therefore, they can be traced to the real owner. Each has a different signature that makes them impossible to be exchanged for another NFT. They are held on Ethereum blockchain, other blockchains support them as well. They are created out of digital objects that are both tangible and intangible items.

Whoever buys NFT, get exclusive ownership rights. While anyone can download the copies of the NFT art, no one can really own it, unless they buy it.

Do they have any key characteristics?

Yes, benefits of owning an NFT is that they are distinguished digital assets. Other than this, NFTs are-

1.       Indivisible- they cannot be divided into smaller denominations like cryptocurrencies.

2.      Indestructible- since they are on a blockchain, they cannot be destroyed, removed or replicated. Also, the ownership is immutable so, the companies that create them do not have them, but the buyers do.

3.       Verifiable- they are authentic since they can be traced to the owner, that is why they are verifiable.

Due to these characteristics, NFTs are rare collectibles that can be owned digitally. Which brings us to another important question-

Why do they have value?

Like anything in the market, supply and demand is what drives the market, the uniqueness, scarce nature of NFTs make them a very valuable asset and people are ready to pay for such an asset (like some artifact).

The system they are stored on is Ethereum blockchain, which vouches for the security and since the art is like a token in a digital ledger, therefore, the middle man is removed from the buying and selling of an NFT.

 

What about the future of NFTs?

So, now what next? What about the future? Will they be like the cryptocurrencies?

More than ever, since blockchain uses immense amount of energy, they are potentially causing harm to the environment, they might have a negative outlook by the activists. They use the “proof-of-work” system, making them use a lot of energy and thus, negatively affecting the climate.

Other than this, we cannot deny how important blockchains are going to be in the future as digital asset, it’s still is dependent on the economic and social status of who is the buyer.

For NFTs, it is tough to know its true potential as of now. In big artist industries, what the big players like gamers, influencers think about NFTs might change the way they are in the market.

Even though, the uncertainty of the use of NFTS looms over the future prospects of it, one thing for sure is how it changed the lives of digital creators. NFTs opened doors for artists to be valued and identified and future of this depends entirely on the social and economic status of the buyer then.

Article by- Garima Gaur

Source-abcnews, forbes