Ever wondered why there are always whopping sums of money associated with NFTs? Ever thought what is NFT and why is it so worthy and valuable for people out there? What’s the fuss all about? Well, if you are new to this term, then you are at the right place. Here, you will be getting all the basic yet important details about NFT.
What is meant by NFT (non-fungible tokens)?
Referred to as non-fungible tokens, it is a collectible digital asset that is of essence for cryptocurrency traders. NFTs have become more like a value-holding investment with the potential to pay the investors back within a certain time period. But, how does it do that?
Contrary to some cryptos that are fungible i.e. physical currencies, NFTs are the non-fungible tokens that can be easily sold. For instance, a $1 coin will remain the same for all purposes and intents but, when it comes to a rare baseball trading card, it tends to be different for every single person who owns it.
Therefore, it’s important to understand the term in parts- these non-fungible token are, basically, a type of digital currency, which is more like Ethereum or Bitcoin. But, the thing that makes it different is its nature- meaning that unlike Bitcoin blockchain, traders are unable to transact as like-for-like because NFTs is non-fungible and therefore, cannot be exchanged.
Most of the NFT tokens had been made with one out of two Ethereum token standards (ERC-1155 and ERC-721). The blueprints are also developed by Ethereum, which makes it easy for software developers to utilize NFTs for their benefits with the surety that they can work with a wider ecosystem, consisting of wallet services and exchanged. Tron, Eos and Neo have also stepped forward with the idea of introducing their own NFT token standards. This move has given confidence and courage to developers to create and host these digital assets on their blockchains. This way, traders can also make their mind to invest with NFTs.
Other Characteristics of NFTs
- Indivisible: NFTs cannot be made or traded in small denominations such as Bitcoin satoshis. They exist and dealt as a whole.
- Non-Interoperable: Traders cannot use CryptoPunk for the CryptoKitties game and same goes for collectibles like trading cards. Blockchain Heroes are also useless for the Gods Unchained trading game.
- Indestructible: Since NFTs use smart contracts to store data on the blockchain, there is no chance to remove, replicate or destroy tokens. Their ownership is immutable, meaning that collectors and gamers own NFTs instead of the companies that have created them.
- Verifiable: One of the benefits to storing data on the blockchain is the convenience to trace the creator, which makes it easy to authenticate without asking for a third-party verification.
How Does NFT Work?
Unlike traditional and fine art, which are one-of-a-kind and cannot be copied or duplicated, people can be easily scammed on digital assets.
So, what NFTs used to do here is that they tokenise digital art and make a digital certificate for the owners regarding the trade. The certificate clearly says when the NFTs were traded and who were the parties involved.
Since all the data of crypto trading is stored on the blockchain, it’s quite easy to trace the owners and their trading history. It’s near to impossible to forge the records because there is not a single party who used to maintain them. There are countless systems or networks that are responsible to handle blockchain ledger data in the investing world. NFTs are also provided with smart contracts that are helpful for an artist to figure out about how to deal with the token in the future.
Why Are NFTs Important?
Since November 2017, NFTs have got attention of both companies and crypto users. The type of revolution they have brought is something that has changed the collectibles and gaming space. So far, NFTs have managed to acquire value of $174 million, all thanks to the blockchain technology. Collectors and games are now able to make themselves immutable owners and can these blockchain elements to get monetary benefits in return. There are some situations, where players can get various opportunities to monetize structures like theme parks and casinos. Also, they can find different ways to sell individual digital tokens that were accrued during their gameplay like video game items, costumes and avatars.
For an artist, trying out the option to approach buyers directly, who are interested in buying a piece of digital art like that of Mona Lisa, would be a good step as they will be able to claim a greater portion of the profit from the sales, which usually goes to a gallery or auction house that sells them. Even, the creator can opt to program royalties into the digital art because it will also make them earn sale profit everything their artwork is sold to a new buyer.
From Where to Buy NFT Tokens?
Just like cryptocurrencies, NFTs are also available in numerous platforms and their selection entirely depends upon the buyer. He/she has the freedom to choose the digital item of his/her choice. Once he/she knows which asset to acquire, it would be easy to land on the right platform. For instance, if someone wants to a buy baseball cards, then one of the best platforms would be digitaltradingcards because most of the marketplaces sell generalized items.
However, there is one requirements- the buyer has to acquire a wallet on that particular platform and keep cryptocurrencies into it in order to be eligible for such type of trading. Due to high demand of NFTs, the producers usually release them as drops in which, they are released in batches of tickets at different times. So, if you are willing to own some of them, you have to prepare yourself beforehand they are released. All you need to do is to get yourself registered and fill your wallet so that you can immediately take action as soon as the drops are released.
What Makes Them So Valuable?
Considering the market situation where demand and supply have an impact on the pricing, more and more people are ready to spend a huge amount of money in order to get NFTs’ ownership. With NFTs being so scarce and increasing demand from investors, gamers and collectors, market dynamics have been changed significantly.
There are some NFTs that are capable of bringing a lot of money to their owners. For example, a gamer from the Decentraland virtual land invested in 64 lots and make a single real estate with them. The entire estate was then sold for $80,000 just because of the road access and incredible location. Another investor acquired a segment of Monaco’s racing track from the F1 Delta Time video game with $222,000 which eventually got him the right to claim 5% of the dividends plus entry ticket fees being earned from the races that happen on the track.
What Are the Expensive NFTs?
Dragon, the CryptoKitty has been one of the most valued NFTs across the world having a value of 600 ETH. At the second number, there is F1 Delta Time’s “1-1-1” race car which was for around 41509 ETH in 2019. Alien £2089 was calculated to be for 605 ETH by January 2021. It is the first NFT ever developed and is a part of CryptoPunk collection. On the whole, there are only 9 Alien CryptoPunks and 10,000 different types of CryptoPunks.
Another digital collectible card, NBA Top shot, which is associated with a basketball star named LeBron James, has been traded at $100,000. Nyan Cat, an Ethereum-based digita art, has been sold at a whopping price of $600,000. Beeple, a famous digital artist, also sold hid NFT at an hefty amount of $69 million.
Practically, anyone has this investment opportunity to tokenize his/her work item so that it can be sold as an NFT but, the thing that has to be considered is the interest that is fuelled up by recent multi-million dollar bill.
Why Are People Interested in NFTs?
One of the best things about acquiring NFTs is the right to the one-of-a-kind token, which is only available on the blockchain. So, if you are planning to invest with NFTs in a meme or an image, you will acquire it on the blockchain where you would not be having any control over its distribution.
In other words, if you own NFT token, it doesn’t necessarily mean that you are buying content; rather, it works as a connection between the creator’s digital art and you in the blockchain.
Though, one thing has to be kept in mind that these digital tokens use the same deflationary principles which are being used by Bitcoins. Even after knowing that NFTs can be authenticated, are immutable and can’t be duplicated or copied, you cannot be sure about whether they are able to sustain their value or not.
Experts are quite certain that investing in NFTs is more like scarcity where the investor has the evidence of ownership and knows the number of NFTs that will be made. One of the primary reasons why people want to acquire NFTs is the unique connection they can make with the creator. They know that this type of connection isn’t possible with other digital art forms and therefore, they try their level best to get one for themselves.
Where can I trade NFT?
While there are numerous curated platforms dealing in NFTs, one thing that you need to remember is their trustworthiness and reliability. The rule of thumb is to come up with such curated platforms that specialize in digital assets and deal in them under the expert assistance. One of the trusted platforms is BlockToq that knows how to deal in a piece of digital art and also provides guidance to those who are interested to make money with them.