What is an NFT?
NFTs, also known as Non-fungible tokens, are non-interchangeable tokens that run on the blockchain system; read on to learn about NFTs and how to buy NFTs. Here lie answers to the question about 'what is an NFT.'
The question 'what is an NFT' has been the one million dollar question on the lips of most. 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, when the question of what NFTs are asked, one should bear in mind that NFTs do 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 and the growing interest in metaverse projects.
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 time. The inherent value that trails NFTs is copyright and license.
NFTs have 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:
- What is an NFT
- The Critics and reception of NFTs and
- How to buy NFTs
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 worth stating that NFTs are not cryptocurrencies.
NFTs have unique identifiers that use cryptographic keys to assign ownership 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 product to a collector. The role of blockchain in this context is to offer a platform where anyone can verify ownership.
NFTs also offer a platform for selling tickets to avoid ticket reselling because of the unique identifier attached to each NFT product.
There is much 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 run 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 about NFTs has led many investors to invest vast money buying NFTs.
Mike "Beeple" Winkelmann holds the title of 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
As long as the question of what is an NFT is out of the picture then one can ask how to buy or get hold of an NFT. The truth is anyone can buy, sell, trade, and create NFTs on known online marketplaces. Individuals can decide to generate or mint an NFT and 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 NFTs use ethereum as the de facto currency like centralized crypto exchanges.
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' ownership, it is worth noting 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.
Critics and reception of NFTs
NFTs have experienced favorable 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, not all who ask the question 'what is an NFT' favor the new concept. 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 of the blockchain system. As stated earlier, NFTs are not cryptocurrencies but represent ownership of a digital or physical product.
While there is a positive review of NFTs, investors should trade and conduct 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.