What are NFTs? Are they worth millions? Is the NFT revolution a fad or an enduring legacy of digital capitalism? How are they ground-breaking for the world of digital art? Is it a cryptocurrency? How can NFT transform the way collectibles are bought and sold? – These and many more such questions have been popping up in the minds of newsmakers, techies, artists, investors, and creators in the field of digital art.
NFTs stands for Non-Fungible Tokens.
These are becoming popular after being on the scene since 2014, which is nearly a decade!
2021 is being highlighted as the year in which NFT rules the market.
But, what is NFT? How did it emerge? What is the buzz around NFT all about? Let’s jump in-
What is a ‘Non-Fungible’ Token?
First things first, NFT is not a cryptocurrency. It is a digital asset that may represent objects in the real world, or a digital video game, artwork, or even an item of furniture!
On an advanced level, most NFTs are a part of the Ethereum Blockchain- but Ethereum is a cryptocurrency and NFT is not? How so?
Well, because very simply Ethereum’s blockchain supports NFT. The word ‘Blockchain’ has the cue.
A Blockchain is a digital account book that streamlines the manner in which transactions are recorded. It is decentralized and records information in blocks. It also tracks assets in a business network.
NFT is a certified digital asset that is stored in the form of information on a digital register called a Blockchain – see the connection?
Blockchain also helps the owner with the proof of ownership.So the owner can sell a variety of tangible or intangible items as NFTs, For example, did you know that Tweets can be sold? Yes! and that’s an important part of NFT’s becoming.
The Story of its Becoming – A Glimpse of its History
On 3rd May 2014, Kevin McCoy and Anil Dash created a one-time-use NFT for a work of art. This was the first instance where NFT was linked to a unique piece of art. Later on, in October of 2015, Etherium launched an NFT project called Etheria and created tradable hexagonal tiles, which went unsold till March of 2021, when the craze for NFT rose again and the tiles were sold for USD 1.4 million.
In 2017, Ethereum coined the term ‘Non-Fungible Token’ and began gaining popularity, because it was able to create and store tokens in its Blockchain. In the same year, Crypto Punks traded unique cartoon characters on Ethereum’s Blockchain and later the co-founder and CEO of Twitter Jack Dorsey sold his tweet, which read- “just setting up my twttr” as NFT for USD 2.9 million in March of 2021!
That’s how ridiculous and bizarre the world of NFTs is! So how do NFTs work? The very process of creating and trading of NFTs holds the magic and lures in users. Let’s understand how…
What’s All the Rage Around NFTs About?
Now that you know its crypto-like sudden rise to prominence. Let’s see its features which makes it unique and popular-
NFTs are Indivisible
Non-Fungible simply means that it is irreplaceable! They cannot be divided into smaller parts like Bitcoins. The wholeness adds to the uniqueness of NFTs. Where fungibility in monetary exchanges creates free flow, it is not as useful when it comes to collectibles, hence an artwork’s or any digital asset’s individuality lies in it being unrepeatable.
NFTs are Indestructible
The way NFT data is stored is what makes it indestructible. The data is stored through a Smart Contract on Blockchain. The NFT creator executes code in the Smart Contract which conforms to standards like the ERC-721. The user has to do the following to mint an NFT:
- Step 1: Get the Test Ether Testnet.
- Step 2: Download Interplanetary File System or IPFS to share and store NFTs data off-chain.
- Step 3: Upload the artwork to IPFS.
- Step 4: Create Smart Contract with Editor remix and write Smart Contract in Solidity.
- Step 5: Deploy the contract and create an NFT.
This is what gives the required fortification to each token, rendering them immune to destruction, elimination or replication.
NFTs are Owner-Oriented
NFTs are unique and can have a single owner at a time, and because it’s on Blockchain, the owner is easily traceable, also because of the public nature of NFTs, verification is seamless. Besides these, owners can do the following with the NFT they’ve created-
- Sell NFTs anywhere in the world.
- Owners can claim resale royalties on these tokens.
- NFTs can be used in unique ways: for example, a work of digital art can be used as a collateral in a decentralised loan as well!
NFTs are in Short Supply
NFTs are scarce because they are unique. You must have seen quotes and pictures online, changing ownerships and getting plagiarised because of the speedy manner in which they are shared without attribution. However, Artworks, quotes, pictures etc tokenized as NFTs do not allow replication or removal of attribution.
Artists hold the sole-proprietorship to their creation because of the Blockchain technology. When the ownership of an NFT is transferred, it is done so fully, not in parts, which retains its value, eliminates the threat of duplication and the minting artist is always the original owner, contributing to the scarcity of a token.
NFTs are Here to Stay
Not only artists and tech savvy people; but real estate owners, collectors, academicians, advocates and anyone from any field is utilising NFTs and its power of liquidation.
Through NFTs, users have sold videos, songs, and even virtual lands for as high as USD 1.5 million. The highest NFT ever sold was Beeple’s ‘Everydays: the First 5000 Days’-a collage of collected images, which bagged USD 69.3 million.
Nigel Green, CEO and Founder of DeVere Group envisions 2022 as the “breakout year of NFTs” , according to IT Web’s article.
With the Covid-19 digitizing the world and people spending more time exploring earning options through digital methods, the rising interest in cryptocurrencies and its associates like NFT is naturally gaining prominence.
The tokenization of an asset gives power to its owner and creates value and overall the Blockchain Is expected to grow at a CAGR of 71.46% by 2022 According to a Research and Markets report and NFT will be a major contributor.
So will you invest in the creation of NFTs? Share your thoughts in the comments section below.
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This blog has been published with references from Ethereum.org and Medium.com.