What is NFT?

A few years ago, buying a piece of digital artwork seemed like an outlandish idea. However, today you can own a piece of digital artwork on the internet and get a unique digital token that proves your ownership, all thanks to the existence of NFTs. In fact, NFTs are storming the world, and changing the life of digital artists across the globe. If you are interested in learning about NFTs, read the following article.

What is NFT?

The full form of NFT is Non-Fungible Token. It is created utilising the same type of technology/programming that is used to develop cryptocurrencies. The simplest definition of an NFT is that it is a crypto-graphic asset that is created by using blockchain technology. However, in contrast to other crypto-graphic assets, they cannot be traded equivalently or exchanged. This is because NFT has unique properties, representing the fact that it can either be replaced or interchanged, as there is no standardisation in its value. Cryptocurrency and physical currency, on the other hand are fungible, which means that there is consensus in determining its value, allowing it to be traded or exchanged for one another.

How does NFT work?

Now that you have understood what an NFT is, it is imperative to learn how they work, so that you understand its usage and functionality. Generally, majority of the NFT occupy the same public ledger that made ethereum cryptocurrency. This public ledger/database is made of blockchain technology and records all transactions related to NFT. Each NFT is considered to be an individual token that stores valuable information inside them. Moreover, NFT is considered to be valuable because there is a rising demand in the market for it, and, as a result, it is sold like other types of physical art. However, what makes an NFT special is its unique data that makes it extremely easy to check, verify and validate the authority, current owner status, and transfer of tokens between two individuals.

Examples of NFT

Anything can be an NFT, albeit it is digital, unique, unexchangeable and made with blockchain technology. So, anything such as a digital collectables, games, domain names, essays, and of course, digital pieces of art are considered to be NFTs.

What is NFT used for?

The target audience for NFT are people who like to collect artwork and those who are interested in crypto-trading. Having said that, there are some other uses of NFT, including:

Digital content: Content creators utilise NFT to enhance their profits. In fact, this is one of the most significant uses of this token. In a creator driven economy, NFT allow create content creators to have ownership, authority and power of their content. This is extremely empowering for content creators, as usually, content is owned by platforms.
Gaming artefacts: NFTs have harboured in a considerable amount of interest from game developers, as it can provide a lot of benefits to the gamers/players. Usually, in an online game, players have to purchase items for their character. However, with an NFT, the money can be recouped by reselling the items once the player has finished the game.
Collaterals and investments: Both DeFi (Decentralised Finance) and NFTs have the same underlying infrastructure. DeFi applications allow participants to borrow money by utilising the collaterals.
Domain names: NFTs increase the recall value of your domain, helping you create easier to remember names. Based on the length and relevance, you can make IP address more valuable and memorable.

Why are NFTs becoming popular?

Actually, NFTs have been around since 2015, it is only now that they are going through a boost in popularity. One of the biggest contributing factor in their surge in popularity is the normalisation and excitement around cryptocurrencies and the foundational blockchain framework. To add fire to this contributing factor is the economics of royalty in combination with fandom and law of scarcity, which makes NFT rare and thus popular. Whenever the asset is sold, the original creator of the NFT gets a 10% cut and the platform gets a smaller cut, thereby creating a potential source of ongoing revenue for many content creators. This is why NFTs are becoming extremely popular. In fact, celebrities like Jack Dorsey, Shaun Mendes, and even Snoop Dogg have released unique memories and artwork by selling NFTs.

Moreover, NBA has created many popular non-fungible tokens in the past few days. For example, LeBron James “cosmic” dunk is valued at $208000, Steph Curry “deck the hoops” handles is valued as $85,000, and the list goes on.

Conclusion

There are three takeaways from the entire article. NFTs are a digital asset that represent any internet collectables such as games, music or art, and comes with an authentic certificate made with blockchain technology. These are unique, which means that they cannot be otherwise manipulated or forged and are unexchangeable, which means that they cannot be exchanged on specialist sites, unlike how bitcoin can be traded.