What is NFT?
A NFT “Non- Fungible Token” is a unique, not interchangeable item of data referred to as a blockchain. It may represent digital files such as videos, art, audios, and video games. The first form of NFTs were based on Ethereum and introduced in 2015. The rapidly increasing interest in the market for NFTs has caused an increase in speculation, due to an increase in the investors who began trading NFTs in large volumes who had previously speculated on cryptocurrencies.
NFTs are similar to cryptocurrencies such as bitcoin. They are verified through a decentralized program of nodes through a consensus protocol and identified individually. Nevertheless, the NFTs are different from cryptocurrencies as they are “non-fungible”, indivisible, and unique. NFTs are unique as each and every piece of content is connected to a token stored in a smart contract. Only one individual can take ownership of a specific token.
Why are people spending massive sums on NFTs?
People who buy NFTs view their purchase as a medium to support their favorite actors, artists, athletes, and musicians. Although there have been few expensive sales recently, most NFT sales occur at a reasonable price that facilitates creators to make money out of their work. Just as collectors of different products such as baseball cards, antiques etc. NFT collectors hope that their purchase will increase in value and will thus act as a viable investment option.
Key characteristics of NFTs:
Indivisible: NFTs cannot be broken down into smaller constituents unlike bitcoin satoshis. They are thus indivisible and exist as a single item.
Indestructible: Since all NFT data is stored through contracts on the blockchain, each NFT token cannot be replicated, destroyed, or removed. Gamers and collectors have the possession of their NFTs, not the firms that manufacture them. This differs from purchasing items such as music from the iTunes where purchases do not actually have ownership of their purchase, they just own the license to listen to songs.
Verifiable: Another advantage of storing data on the blockchain is the fact that goods such as digital artwork can be linked back to their original manufacturer. This allows authentication of pieces without the requirement of verification by a third party.
Why are NFTs important?
NFTs have modified the areas of gaming and collectibles to a huge extent which is the reason for their popularity among firms and people who use crypto. Due to the introduction of blockchain technology, gamers have become the owners of in-game products and are able to monetize them.
For artists, the ability to sell their artwork digitally to buyers globally without the requirement of a gallery allows them to be cost efficient and maximize their profits from sales. Royalties can also be converted into digital artwork which allows the creator to receive a portion of profits from sales every time their art is purchased by a new person. William Shatner, the famous Captain Kirk from “Star Trek,” launched 90,000 digital cards on the blockchain portraying several pictures of himself. Each card was in the beginning sold for about $1 and now it provides him with royalty income upon every resold.