What Are NFTs (Non-Fungible Tokens) & Why Should You Care?bitcoin depot
Common items such as baseball cards, Pokemon cards, and comic books may be valued at thousands of dollars if they are considered to be rare enough or one of a kind. This is no surprise if you’ve ever seen the TV show "Antiques Roadshow”.
Thanks to non-fungible tokens, this same idea can now be applied to virtual items such as digital images, audio, video games, and even social media posts.
Non-fungible tokens have been the trend of the year. But what really are NFTs and are they worth the investment? In this article, we are going to be giving you all the information you need on this new sensation.
What Are NFTs?
A non-fungible token (NFT) is a virtual asset that symbolizes real-life items such as songs, videos, games, and art. They are traded online and share the same form of encryption as cryptocurrencies.
While NFTs may have just blown up in 2021, they've been in existence since 2014. The reason why they are becoming more popular now is that more people are seeing them as an effective method of trading digital assets. The transactions in the NFT world have been worth over $170 million.
NFT assets are either one of a kind or very rare and they carry distinct identifying codes. According to Arry Yu, a well-known figure in the crypto world, NFTs trigger digital scarcity.
The uniqueness of NFTs makes them different from other digital creations and this a major reason for their high value. To put it simply, the rarer a commodity is, the higher its value.
However, it is also true that several NFTs have been in virtual existence in other forms. Good examples of these are clips of iconic NBA moments that are already available online. Also, the first tweet ever made by Jack Dorsey, Twitter's CEO, was sold for $2.9 million.
We believe the next question on your mind will be "Why would anyone decide to spend millions of dollars to purchase a tweet I can screenshot right now?"
Well, the answer is simple. When you purchase an NFT, you become the owner of the original commodity. Also, your NFT will come with a built-in authentication that will prove that you own it.
What's the Difference Between NFT and Cryptocurrency?
While NFTs have the same form of encryption as most crypto assets, this is the only thing they have in common.
The non-fungibility of NFTs means that they can't be exchanged with one another. No NFT is equal to another NFT. For example, Jack Dorsey's first tweet can't be exchanged for an iconic NBA clip.
On the other hand, crypto assets and fiat assets are fungible and hence, exchangeable. To put it simply, one dollar is the same as another dollar just as one Bitcoin is not different from another Bitcoin.
How Does It Work?
NFTs reside on blockchains. In case you don't know, a blockchain is a virtual ledger on which information about transactions is saved. The majority of NFTs are stored on the Ethereum blockchain.
Non-fungible tokens are created from virtual items that depict both palpable and impalpable objects. These include art, music, video clips, collectibles, sneakers, in-game objects, GIFs, and social media posts.
NFTs are similar to regular collector's items, what separates them is that they are digital. So, while a collector may purchase a real-life artwork, an NFT collector will receive a digital file.
Additionally, NFTs come with exclusive right of ownership i.e an NFT asset can only be owned by one person. The one-of-a-kind data in NFTs enables investors to trade and verify them easily.
What Are They Used For?
Non-fungible tokens allow creators and artists to get money for their wares. As a result, artists now have another option asides from auctions and galleries.
Buyers purchase items straight from the artists and thereby, allowing the artists to make more profits. However, NFTs have something even more interesting to offer artists.
There is a feature that allows artists to program in royalties so that they can get a fraction of the payment whenever there is a resale of their art.
There are even more routes to earning from NFTs. Celebrities and companies have made thousands of dollars from NFTs by releasing brand-themed NFTs. These include Taco Bell, NBA Top Shot, and Snoop Dogg.
Why You Should Care About NFTs
The NFT boom was triggered by the Coronavirus pandemic. The stimulus checks sent out by the government coupled with the people's inability to spend money the usual way drove them into digital spaces.
Since then, artists, sports brands, and more have opted to market their commodities as NFTs. One day, the trade of NFTs could become a thing for the common collector too, just as the ability to casually purchase cryptocurrency from an ATM is today.
June 23, 2021