Beginners’ guide to NFTs
NFTs are among the latest trends in blockchain innovation. NFTs seeks to digitize assets and reward creators simultaneously. Here is everything there is to know about NFT.
Technology and the financial world have been tightly connected in the last decades. High-tech solutions and innovations have brought about opportunities to automate many processes. As a result, money flows become more transparent, and transactions become more efficient than ever before.
Recognizing the potential of the IT industry, the financial sector has been utilizing the benefits of digitalization by keeping pace with technological advancement.
Trading has changed significantly in recent years thanks to innovative solutions like online trading platforms and respective apps. These high-tech novelties have proven to be highly valuable for investors, traders and economists.
What makes these digital trading solutions so popular? Well, the answer is obvious. With the help of trading apps and online trading platforms, financial specialists are given 24/7 access to the financial markets.
Traders and investors can also manage their trading activities from the comfort of their homes.
The above features are found in MetaTrader 5 (MT5), one of the best trading solutions known in the industry. It allows traders to stay up-to-date with the latest financial news and optimize their trading decisions. To find out more about MT5, you can check out Exness broker, a leading representative of global trading.
Cryptocurrencies are some of today's most talked-about investment options, and it is not hard to understand why. The technology behind the digital assets — blockchain — explains the value of cryptocurrencies.
It provides faster and safer transactions, including buying and selling, trading and peer-to-peer transfers.
Blockchain developers have also tailored other solutions to turn traditional assets into digital ones to increase their reliability and values. One of these solutions is NFTs.
What are NFTs?
NFTs stand for non-fungible tokens. They can be anything digital.
The history of NFTs is associated with the breakthrough of blockchain technology. Coloured Bitcoins were considered the first NFTs. Compared to current NFTs, they were less effective and limited in functionality.
The coloured coins represented many assets like coupons, subscriptions, property and digital collectibles. Regardless of the infancy of blockchain at that time, people found out the potential of keeping assets through on this digital marketplace.
In 2014, peer-to-peer protocol Counterparty became a starting point for NFTs to gain more success and approval. This platform included digital games and other assets. The most popular games were Spells of Genesis and Pepe Memes.
By 2017, another digital coin made strides — Ethereum. Since then, famous CryptoPunks have been embedded in the blockchain. And very soon, these unique characters became digital collectible. They were one of the first NFTs minted on Ethereum.
Later, it attracted the attention of investors like SamsungNEXT and Google Ventures, who reviewed promising opportunities to invest in NFTs. Stepping forward gradually, the implementation of NFTs has led to new NFT spaces where everyone could create and mint their NFT art. Thus, it has become an ambitious and long-term kind of business affordable to everyone, especially for financial experts.
Some examples of NFTs
As we've mentioned above, NFTs can be anything digital. For example, you can create something unique using photoshop and upload it to a special NFTs platform.
The evolution of NFTs is impressive, and it is now possible to make a profit through NFT stores. Typically, NFTs can be classified as follow:
- Digital art such as music, videos and GIFs;
- Items from the physical world like tickets, legal documents, signatures, tokenized invoices and deeds to a car;
- Other creative properties.
The value of the digital items is tested based on their uniqueness. Otherwise, it will be identified as a fake with no future to progress, discouraging buyers from investing in it.
“Everydays: The First 5000 Days” was the first ever NFT to be sold in the world.
Fungible and Non-Fungible NFTs
When it comes to NFTs, it is crucial to define "fungible" and "non-fungible".
Fungible assets are interchangeable. An example of fungible assets is currencies. For instance, a 5 EUR banknote is interchangeable and equal to another 5 EUR banknote. Four 5 EUR bills are equivalent to a 20 EUR bill.
Cryptocurrencies are also fungible: one unit of Bitcoin is exchangeable with another unit of Bitcoin.
On the other hand, non-fungible assets are unique and irreplaceable. For example, your car is not equal to your neighbour's car. It can be of the same model and colour. But your vehicle might have way more miles, for instance, and be in better shape.
These are characteristics that differentiate your property from the property of someone else. Therefore, your car is not fungible.
Both asset types have their advantages and disadvantages. Non-fungible assets are of high value and are an excellent option for business transactions. Fungible assets also have a high demand because they can fulfil many financial purposes.
Blockchain and NFTs
NFTs are stored on blockchains. Therefore, it is possible to process a transaction with no intermediary between the owner and the buyer. The above allows digital art creators to interact directly with their potential clients.
Blockchain technology also enables NFTs to reach a wider audience and provides a high level of data security. Thus, some experts consider NFTs as a revolution in the financial markets.
There are many variations of global NFT usage. For example, NFTs can help track employees' identities who enter and exit a company's premises. Creators can transform physical ID cards into non-fungible tokens with unique features.
Even the real estate sector has been utilizing NFTs and the immersion into digital space to allocate assets between multiple owners.
The tokenization approach, built upon the blockchain system, can be applied to other assets that nobody could imagine several years ago.
As a result of the NFT boom, many related projects have been launched unprecedentedly. Other than carrying out buy-and-sell operations with digital assets.
NFTs provide an excellent opportunity to build digital ownership that is much easier to manage. Here are a few well-known NFTs that have made history.
Everydays: The First 5000 Days
It is the first NFT digital artwork that gained worldwide popularity. It was sold at the auction for $69 million.
Jack Dorsey, Twitter’s CEO, sold the very first tweet on the platform for nearly $3 million as an NFT.
In March 2021, RTFKT (the digital creator) sold a series of sneakers they made with artist Fewocious — they managed to collect $3.1 million in sales in a matter of minutes.
NFT: Digital Sneakers.
Looking at the current use of NFTs in a wide range of life, NFTs seem to be reaching other areas that haven’t been touched by blockchains yet. Are NFTs simply a hype that will only last several years or a real revolution in the financial world?
The well-known examples of NFTs used in charities, trading, expanding brand awareness, and building monetization systems are more than promising for us to consider NFTs a new trend.