Non-Fungible Tokens (NFT) are digital assets such as collectibles, gaming, art, and virtual assets that are exchanged over blockchain platforms such as Ethereum, OpenSea, Rarible, Axie Marketplace, or NBA Top Shot Marketplace and come with their digital signature that designate ownership of the asset. Thanks to the growing popularity of NFTs creators, businesses, and celebrities now buy and sell NFTs in a bid to explore ways to commercialize their brand and generate revenues through NFT collections.
What Exactly is an NFT?
Non-Fungible Tokens (NFT) are interchangeable digital assets traded over the internet. NFTs are generated and traded in cryptocurrency which is digital cash with an encrypted key often in the form of a random string of numbers. NFTs are popular today because they offer a unique marketplace for digital assets with even companies creating their own NFTs as part of their marketing mix. Besides these NFTs allow users a flexible way to store, control, and protect the information related to their identity. NFTs creatives can also receive royalties from their NFTs and receive a percentage of future sales of their NFTs.
What does NFT stand for?
Simply put NFT stands for Non-Fungible Token, which is a one-of-a-kind digital asset that belongs to its owners only. To create an NFT one would have to mint an NFT from a digital asset. Popular NFTs include digital works, digital collectibles, videos, and anything that can be digitalized.
How do Non-Fungible Tokens Work?
Essentially a non-fungible token transforms a digital work of art and other collectibles into a one-of-a-kind, verifiable digital asset that can be traded on the NFT market or NFT blockchain technology. Many NFTs come with their own unique information, including ownership and transaction details stored under its smart contract. NFT creators can also add details to their NFTs such as the creator’s identity, secure links to files, and more during transactions,
Those interested in collecting or investing in non-fungible tokens need a digital NFT wallet. A digital wallet is a cryptocurrency wallet that supports the blockchain protocol on which NFTs are built. Users often use Bitcoin, Ethereum network, and Dogecoin as cryptocurrencies which are the medium of exchange.
NFT Vs. Cryptocurrency
Cryptocurrencies as digital versions of physical money that are controlled by a private cryptographic key that often involves a string of random numbers. Like paper money, cryptocurrencies offer the same values and help to fuel the digital economy acting as currency. Ownership of cryptocurrency is determined by holding a private key and using the private key to make transfers. Cryptocurrencies helps in converting a digital file into a non-fungible token referred to as ‘minting’ as well as act as the medium of transaction for NFTs.
Similar to cryptocurrencies, NFTs are issued on blockchains, Each NFT comes with its unique digital signature which allows owners to prove ownership as well as the authenticity of the NFTs.
What Can be Made into an NFT?
Most NFTs come with unique properties and can be made from any kind of digital content like photographs, art, music, GIFs, or a video clip they are so versatile that they can even include tweets and memes in the NFT marketplace. Thanks to the NFT marketplaces that act as auction houses they have made it easy for trading in NFTs and offer support on how to sell an NFT.
If you are musically inclined creative you can create your music NFTs on a variety of marketplaces including Rarible, OpenSea, Mintable, Ethereum blockchain, Axie Infinity Market, and others. All you have to do is register on the marketplace and decide on whether you want to create a single collectible or several collectibles. With a single collectible, you have the option of creating a single collectible that produces one-of-a-kind NFT. In the case of several collectibles, you have the option to release multiple copies of the same collectible.
To sell digital artwork is easy artists can create their digital art with their computer or smartphone convert their digital art from a variety of formats like JPGs, PNGs, or MP4s and convert them into NFTS to sell them.
You can also make some money by selling in-game items like virtual avatars video game skins, weapons, and even armor. Gamers who accumulate multiple items throughout their gameplay experience with a particular game can sell them for a profit.
Video clips are another popular NFT traded. For example, NBA Top Shots NFTs offer highlight videos of moments in NBA history. Besides real-life highlights, classic movie scenes, as well as video art created by artists, are also on sale on OpenSea.
Artists can create a digital copy of their physical art like photographs or paintings and sell it on the NFT marketplace. As sales of NFTs come over a blockchain network hey help in cutting out the middleman, where artists can deal directly with buyers and enjoy the full profits from their work. They can even set up their own royalties for future sales.
The digital scarcity that NFTs offer makes them attractable to collectibles such as players’ cards, art collectibles of digital artists, game collectibles, celebrity memorabilia and more as their value fetch high prices because of their limited supply. Collectible NFTs can be traded on CryptoKitties3, CryptoPunks4, and NBA Top Shot.
Tweets and Memes
Not surprisingly tweets and memes offer high value in the NTF universe. The first-ever tweet by Twitter co-founder Jack Dorsey was sold for close to 3 million. Influencers are also creating memes and selling them as NFTs and making a tidy sum of money.
Virtual Real Estate
NFTs have also permeated into the world of virtual reality as well. The power of NFT now allows users to buy virtual real estate, decorate their virtual homes, create their own avatars, meet up and make friends. Decentraland, is an online real estate environment that simulates the real world in which people explore the world and interact through their avatars.
Pros of NFT’s
Non-fungible tokens come as tradeable and unique digital objects thanks to smart contracts. Their unique metadata acts as a digital ‘title deed’ that offer the authenticity of ownership and is trackable. Some of the pros of NFTs include:
Cost and time friendly: NFT can be made with relative ease and valuations are straightforwards thanks to the existing NFT marketplaces that make it cheap to mint, sell, price, and bid for NFTs.
Boost Engagement: NFTs besides being more than a collectible or piece of art can be used by businesses to boost brands recognition by connecting better with customers and fans by offering them access to exclusive offers, and the opportunity to earn rewards.
Customer Relationship Management: Unlike physical goods, NFTs are trackable and help to identify the owners helping businesses glean valuable insights into their owners. These come in handy for segmentation and engagement strategies for their brands. In addition, they offer a nifty gateway to target tech-savvy clients.
Potential Revenue Streams: because NFTs are driven by digital scarcity, creators can sell these exclusive, limited digital assets that can fetch them a tidy sum.
Cons of NFT’s
Though NFT trading is an exciting phenomenon many people are now learning how to make money with NFTs it does come with its own challenges though:
Physical assets still reign supreme: as much as owning NFTs is enticing the NFT remains a digital asset that pales in comparison to one-of-a-kind physical assets like a painting or sculpture.
Environment impact: Minting and transactions of NFTs come with a significant computing process requiring massive amounts of energy.
Price volatility: Prices for digital collectibles are subject to volatility opening risks of losing money from the investment of NFTs and hurting your personal finance.
Are NFT’s Worth it?
NFTs market is booming with the craze of turning digital images into assets. There is no definite answer when it comes to whether NFTs are worth it. These are early days for the phenomenon because NFTs are new, there is limited legal and regulatory clarity on how laws may apply to them. legal issues related to contracts, property rights, intellectual property rights, privacy, and securities laws have not yet been addressed when it comes to NFTS. NFT marketplaces operate globally over the internet across several jurisdictions making it difficult to govern them.
What is an example of an NFT?
The NFT artwork by the digital artist Beeple ‘Everydays: The First 5000 Days’ is by far the most popular NFT that brought the discussion of NFTs into households around the world. The digital artwork was auctioned by auction house Christie’s and sold for a whopping $69,346,250. In fact, price-wise NFTs are projected to offer the same value as real-world items.
This article, “What is an NFT?” was first published on Small Business Trends