Imagine buying a digital artwork on the internet at a reasonable price and getting a unique digital token known as an NFT, which proves your authority over the artwork you bought. Wouldn't it be great?
NFTs are currently taking the digital art and collectables world by storm. When everyone worldwide believed Bitcoin as the digital answer to currency, NFTs are now pitched as the digital answer to collectibles. Digital artists see their lives changing thanks to massive sales to a new crypto-audience.
If you are interested and want to explore more about what an NFT is, then you are in the right place.
What is NFT?
- NFT stands for a non-fungible token, which means it can neither be replaced nor interchanged because it has unique properties.
- Digital Asset - NFT is a digital asset that represents internet collectibles like art, music, and games with an authentic certificate created by blockchain technology that underlies Cryptocurrency.
- Unique - It cannot be forged or otherwise manipulated.
- Exchange - NFT exchanges take place in cryptocurrencies such as Bitcoin on specialist sites.
Cryptopunks is a remarkable example of NFT. It enables you to buy, sell and store 10,000 collectibles with proof-of-ownership.
How Does NFT Work?
Now that you’ve begun understanding what is NFT, you should explore and learn about how NFT works too
- The majority of NFTs reside on the Ethereum cryptocurrency's blockchain, a distributed public ledger that records transactions.
- NFTs are individual tokens with valuable information stored in them.
- Because they hold a value primarily set by the market and demand, they can be bought and sold just like other physical types of art.
- NFTs' unique data makes it easy to verify and validate their ownership and the transfer of tokens between owners.
Examples of NFT
The NFT world is relatively new to people. Here are some examples of NFTs that exist today:
What is NFT Used For?
People interested in Crypto-trading and people who like to collect artwork often use NFTs. Other than that, it has some other uses too like:
- Digital Content - The most significant use of NFTs today is in digital content. Content creators see their profits enhanced by NFTs, as they power a creator economy where creators have the ownership of their content over to the platforms they use to publicize it.
- Gaming Items - NFTs have seen a lot of interest from game developers. NFTs can provide a lot of benefits to the players. You can buy items for your game, and when you're done with that, you can recoup your money by selling them.
- Investment and Collaterals - Both NFT and DeFi (Decentralized Finance) share the same infrastructure. DeFi applications let you borrow money by using collateral. NFT and DeFi, both work together to explore using NFTs as collateral instead.
- Domain Names - NFTs provide your domain with an easier-to-remember name. This works similar to a website domain name, making its IP address more memorable and valuable, usually based on length and relevance.
Even celebrities like Snoop Dogg, Shawn Mende,s and Jack Dorsey are taking an interest in the NFT by releasing unique memories and artwork and selling them as securitized NFTs.
NBA Top Shot Is a Hot NFT Use Case
One of the most popular non-fungible tokens in recent days is NBA Top Shot, a partnership between Dapper Labs (makers of the CryptoKitties game) and the National Basketball Association (NBA). The NBA licenses individual highlight video reels, among other content, to Dapper Labs, and they digitize the footage and make it available for sale to consumers. Each reel shows a video clip, such as a famous player's basketball dunk, some featuring different angles and digital artwork to make them unique. Even if someone made a perfect copy of the video, it can be instantly recognizable as a counterfeit. The venture has already generated $230 million in sales, and the company just also received $305 million in funding from a group that includes Michael Jordan and Kevin Durant.
These video reels are selling at high prices. Among the most popular:
- LeBron James “Cosmic” Dunk: $208,000
- Zion Williamson “Holo MMXX” Block: $100,000
- LeBron James “From the Top” Block: $100,000
- LeBron James “Throwdowns” Dunk: $100,000
- LeBron James “Holo MMXX” Dunk: $99,999
- Steph Curry “Deck the Hoops” Handles: $85,000
- Giannis Antetokounmpo “Holo MMXX” Dunk: $85,000
- LeBron James “From the Top” Dunk: $80,000
These unique NBA moments are minted and released into the marketplace via “pack drops.” The most common sell for only nine dollars, but more exclusive packs can sell for much more.
Now that you’ve understood what is NFT used for, and the various ways you can benefit from it, let’s take a look at how it is specifically different from other forms on cryptocurrency
Why Are Non-Fungible Tokens Becoming Popular?
NFTs have actually been around since 2015, but they are now experiencing a resurgence thanks to several factors. First, and perhaps most obviously, is the normalization and excitement of cryptocurrencies and the underlying blockchain frameworks. Beyond the technology itself is the combination of fandom, the economics of royalties, and the laws of scarcity. Consumers all want to get in on the opportunity to own unique digital content and potentially hold them as a type of investment.
When someone buys the non-fungible token, they gain ownership of the content, but it can still make its way over the internet. In this way, an NFT can gain popularity — the more it’s seen online, the more value it develops. When the asset is sold, the original creator gets a 10 percent cut, with the platform getting a small percentage and the current owner getting the rest of that revenue. Thus, there is potential for ongoing revenue from popular digital assets as they are bought and sold over time.
Authenticity is the name of the game with NFTs. Digital collectibles contain distinguishing information that make them distinct from any other NFT and easily verifiable, thanks to the blockchain. Creating and circulating fake collectibles doesn’t work because each item can be traced back to the original creator or issuer. And unlike cryptocurrencies, they can’t be directly exchanged with one another (like baseball cards in real life) because no two are exactly the same.
How is an NFT Different From Other Cryptocurrency?
Although NFTs are created using the same kind of programming language as other cryptocurrencies, that's where the similarity ends.
Ethereum and NFTs
Ethereum blockchain makes it possible for NFTs to work for several reasons:
- Trading NFTs, without needing peer-to-peer platforms, can take significant cuts as compensation.
- All Ethereum products share the same "backend", making NFTs portable to buy on one product and sell it on another effortlessly.
- Once a transaction is confirmed, it's impossible to manipulate the data to forge the ownership.
- Ethereum never goes down, which means your tokens will always be available to sell.
How to Buy NFTs?
Having understood what is NFT used for and its specific advantages over other cryptocurrencies, you might want to venture into buying NFTs. If yes, you will need to acquire some essential items before you can do that;
- You’ll need a digital wallet that allows you to store your NFTs and cryptocurrencies.
- Then you need to purchase some cryptocurrency depending on what currencies your NFT provider accepts, most likely Ether.
- You can use platforms like OpenSea, Coinbase, Kraken, PayPal, etc., to buy cryptocurrencies.
- Then you will be able to move it from the exchange to your wallet of choice.
Keep in mind that most exchanges charge at least a percentage of your transaction as fees when you buy crypto.
Popular NFT Marketplaces
Once you’ve got your wallet ready, all you need to do is to buy NFT. Currently, the largest NFT marketplaces are:
- Rarible - Rarible is a democratic marketplace that allows artists and creators to issue and sell NFTs. It enables holders to weigh in on features like fees and community rules.
- OpenSea - To get started, all you need to do is create an account on the official website of OpenSea and browse NFT collections and discover new artists. This platform is famously known as a vast collection of rare digital items and collectibles.
- Foundation - On this platform, artists need to receive from or send an invitation from fellow creators to post their art. This community’s exclusivity boasts higher-caliber artwork, assuming the demand for NFTs remains at current levels or even increases over time.
What is the Future of NFT?
NFT has enhanced media exposure and special perks for aspiring artists on social media. Recently, Jack Dorsey, the CEO and co-founder of Twitter, with his very first and famous tweet, "just setting up my twttr," and Vignesh Sundaresan, famously known as "Metakovan," bought 69.3 million dollars worth of NFT art on Beeple.
Owing to its increasing popularity, people are now willing to pay hundreds of thousands of dollars for NFTs.
Like David Gerard, author of Attack of the 50-foot Blockchain, many experts in the crypto industry say that around 40% of new crypto users will use NFTs as their entry point. As a result of its growing popularity, NFT could represent a more significant part of the digital economy in the future.
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