NFT is the abbreviation for Non-Fungible Tokens or, in other words, tokens that are unique and prove the ownership of a digital asset. Where normal crypto coins are of uniform value, an NFT’s value is determined by how much someone in the world is ready to buy it for. In other words, if you trade a bitcoin for another, there is no net change between before and post transaction since every bitcoin has uniform worth and is therefore fungible. As mentioned, NFTs work very differently and could be loosely thought of as the subjects of an auction or an autograph in the world of cryptocurrencies. In this blog, we will explain it to you what is NFT Crypto? and How it works?
If an NFT is created by someone famous such as a CEO, a painter, musician, etc., they could be worth a huge amount of financial resources if the buyer is a wealthy collector. This is directly opposed to a crypto coin which is always traded for its inherent value in the market. Therefore, digital assets as NFTs can be traded based on the assets’ perceived value in the present or future, instead of a value based on how the currency itself trades in the market.
NFTs are a unit of data stored on a digital ledger called Blockchain (the founding technology on which all cryptocurrencies operate) in slightly more technical terms. Such a digital file is certified to be unique and therefore not interchangeable. Does the asset become an exclusive property of the buyer of the NFT? No. Although we might not have purchased a piece by a famous painter sold as an NFT, we would still be within our rights to download the same file from the internet with the usual trademark laws protecting the piece, as deemed necessary by the creator. The unique identity of an NFT can be verified via the blockchain ledger, and they also have metadata that can be processed through a cryptographic hash function.
Three major blockchains operate NFTs, namely, Etherium, Flow, and Tezos, with every Blockchain having its own standards in supporting the same. However, with the immense growth of interest in NFTs in recent years, it might not take long before introducing newer players in the segment. How much interest? NFTs market value tripled in 2020, reaching more than $250 million, showing no signs of slowing down to the present day.
What can you purchase as an NFT?
NFTs are digital assets, and as the same suggests, they could be anything from funny cat gifs to exquisite art created by a famous painter. As long as it has a digital form, it can be sold as an NFT. For example, Twitter CEO Jack Dorsey sold his first-ever tweet for $2.9 million, which simply read “just setting up my twttr.” The tweet was bought by a Malaysia-based businessman, but does it give him some ownership over the tweet? No. Every Twitter user has always been able to view the tweet and shall continue to do so in the future. However, what buying the tweet does give the businessman is a digital certificate which is guaranteed to be unique and is signed by Jack Dorsey- essentially, as previously mentioned, a purchased autograph.
Just like tweets, digital art pieces by renowned artists can be auctioned as an NFT as well. For example, Christie’s (a major auction house) auctioned “Everyday: the First 5000 Days“- a digital art piece by Mike Winkelmann, known professionally as Beeple, for an eye-watering $69 million. The piece of digital art was purchased by Vignesh Sundaresan, also known as MetaKovan– a Singapore-based programmer. However, MetaKovan only acquires the rights to display the artwork while the original creator of the work- Beeple, retains the copyright.
So what’s the point of NFT Crypto’s?
As an artist, you might find more artistic freedom while creating your artwork since NFTs offer a safe place to sell work that might not strictly conform with societal norms or might not have a market elsewhere. Also, you can enable receiving a percentage every time the NFT is traded. In this way, you can be sure that if your art goes viral or deals for a handsome number of coins, some of the benefits from such transactions would also reflect in your personal finances.
As a buyer or a collector, NFTs could be one of the easiest ways to support your favorite artists or collect unique art pieces which might trade for more sometime into the future. In this way, not only does the artist benefit, but you can also possess a unique digital asset signed by the artist himself/herself.