All you need to know about Non-Fungible Tokens
NFT is the known abbreviation for non-fungible token. NFTs are unique and non-interchangeable data stored on digital ledgers like the blockchain.
The term 'non-fungible means not replaceable or not interchangeable; thus, in essence, NFTs does not share the same fluidity with conventional cryptocurrencies.
NFTs represent accessible digital products like photos, videos, art music, etc., on the blockchain system. In cryptocurrency, one BTC equals another BTC from a different user, which means they are replaceable, unlike NFTs.
The NFT project has gained significant momentum since its inception in 2015. The rise has been attributed to the widespread acceptance of cryptocurrency.
Reports have shown that the market capitalization of NFTs tripled in 2020, amounting to over 250 million USD; in 2021, over 2 billion USD worth of NFTs has been sold.
NFT was launched on the ethereum network though there are some NFTs accessible on the bitcoin network.
NFTs exist as unique digital assets with individual ownership and copyright at any point in time. The inherent value that trails NFTs is copyright and license.
NFTs has gained prominence in the entertainment, art and sports industries, where Owners can sell content and copyrights.
This article seeks to shed more light on what NFTs are and what they are not; at the end of this article, readers are expected to know;
- The basic concepts of NFTs
- The Critics and reception of NFTs and
- How to buy NFTs
The creation of Bitcoin brought about the era of cryptocurrency.
What are NFTs
NFTs are unique digital assets representing ownership of items like videos, art, music, photos, certificates, etc.
Though NFTs use the same blockchain technology as cryptocurrencies, it is worthy to state that NFTs are not cryptocurrencies.
NFTs have unique identifiers that make use of cryptographic keys to assign ownerships to physical or digital products. NFTs are known as modern-day collections of arts and other digital products.
Today, Content creators can sell the right of ownership of any digital art or physical products to a collector. The role of blockchain in this context is to offer a platform where anyone can verify ownership.
NFTs also offers a platform for selling tickets to avoid ticket reselling because of the unique identifier attached to each NFT product.
There are many potential that exists in NFTs. It has been proposed as means of verifying certificates in educational institutions.
Blockchain technology makes it impossible to offer counterfeit products or certificates because of individual verification.
Most NFTs runs on the ethereum network. Products such as videos like top 10 NBA shots can be tokenized and sold as an NFT.
Upon creating a product, a unique identifier that serves as the NFT is added to the blockchain technology for verification purposes.
The hype with NFTs has led many investors to invest vast sums of money to buy NFTs.
Mike "Beeple" Winkelmann holds the title for the man who sold the most expensive NFT in the world. Beeple's digital artwork titled Everyday: The first 5000 days sold for a whopping price of 69.3 million USD.
Tron's CEO and founder Justin Sun was the second-highest bidder at 60.2 million USD during the open bid.
On 22nd March 2021, Twitter CEO Jack Dorsey sold his first tweet for 2.9 million USD.
The instances above show that the value espoused by NFTs is scarcity and authenticity. For example, there are many copies of the Mona Lisa, but only one original, NFT system identifies the owner of the original piece (if Mona Lisa is an NFT).
How to buy NFTs
Anyone can buy, sell, trade and create NFTs on known online marketplaces. An individual can decide to generate or mint an NFT then sell it online.
The current owner of an NFT product can also decide to trade the NFT and receive payment in cryptocurrency. Most platforms for selling and buying of NFTs use ethereum as the de facto currency.
In some cases, investors do not buy NFTs directly; instead, the creator or owner might choose a bidding option and allow collectors or buyers to bid for the NFTs.
The bidder must remit the amount to an escrow; if there is a higher bid, the previous amount is returned to the old bidder.
While Creators can sell NFTs' ownerships, it is worthy to note that some creators can also opt to retain copyrights of their NFTs while the new buyer retains ownership. In such cases, the creators earn royalties each time the NFT is resold.
Most NFTs are created on the Ethereum Network.
Critics and reception of NFTs
NFT has experienced favourable reception in the cryptocurrency ecosystem, and this is evident in the market value and the number of dollars spent in a bid to buy and sell NFTs.
Stakeholders in sports have shown interest in the new platform as a means of generating more income. Dapper Labs, a blockchain technology-based company, has partnered with the NBA to create Top NBA shots and clips sold as NFTs.
The fashion industry has also joined the bandwagon. In 2019, Nike got a patent that allows blockchain to attach unique identifiers in NFTs to physical products.
NFTs are also gaining ground in academia, where ownership of innovations, patents and inventions are auctioned as NFTs.
Notwithstanding the significant progress witnessed with the growth of NFTs, Critics have not failed to issue warnings concerning NFTs.
People frown at NFTs offering Porn stars a platform to tokenize their work and auction it as NFTs.
There has also been a general concern about the environmental effect of NFTs. The proof-of-work is a prerequisite for validating transactions on the bitcoin network. There are reports that these transactions consume a large amount of electricity.
There have been cases of fraud and plagiarism in NFT transactions. Unscrupulous individuals also copy others' work and sell it. There are cases of identity fraud, as seen in the Banksy case, which drew media attention.
NFTs are digital assets that retain unique and verifiable ownership on the blockchain system. As stated earlier, NFTs are not cryptocurrencies but rather represent ownership of a digital or physical product.
While there is a positive review on NFTs, investors should trade and carry out comprehensive research before buying or selling any NFT products.
NFTs deal with value, scarcity, and authentication; thus, creators and owners can use NFTs to raise funds for charities, foundations and NGOs.