A lot has happened in the world of crypto in recent times, and the latest cryptocurrency phenomenon that has hit the major headlines is NFT. And just because it came out of the blue and caught the attention of the world in such an enormous way. Initially, it looks like a joke. But right after Christie’s auction house sold a collage of images. The first-ever NFT artwork by digital artist Beeple for a whopping sum of $69.3 million, it’s like the world stood still at that moment.
This event set a great record and a precedent for the sales of the most expensive pieces of art that were recently sold out so far. This has raised a lot of questions and some even asked if NFTs are worth the money. While others believe that NFTs have come to stay, some experts say they are more or less a bubble poised to pop.
What are NFTs?
NFT stands for “Non-fungible tokens”. They are digital assets on blockchain having distinctive identification codes and metadata that make them different from each other, unlike cryptocurrencies that are not only identical but can also be used as a medium for commercial transactions.
NFTs transform digital works of art and collectables (such as sports cards and rarities) into cryptographic assets that can be easily traded using cryptocurrency. They represent real-world artwork like art, in-game items, music and videos that can be sold and bought online usually with cryptocurrency. Basically, NFTs are encoded with the same underlying software as cryptos but they cannot be exchanged at equivalency like cryptocurrencies would do.
Although NFT seems to be new to most people, it has been around way back since 2014. And currently, they are gaining more ground as they are increasingly becoming a more popular means to trade digital artwork. Since November 2017, about $174 million has been spent on NFTs. Currently, a huge number of investors and celebrities like musicians, artists, influencers etc spend top dollar. To claim ownership of NFT versions of some digital images. To say the least, NFT sales hit $2.5 billion in the first half of 2021.
But why would anyone spend millions on something as intangible as NFTs?
NFTs basic role is to link ownership to digital or physical items hereby. Giving proof of ownership to these digital items. While the individual images or even the entire collage of images could be viewed or downloaded by anyone online for free.
NFT technology allows buyers to own the original piece. Plus, the built-in authentication they possess serves as proof of ownership and most collectors would rather value it. Those “digital bragging rights” so much, even almost more than the piece itself. Learn a lot more about the Hodling strategy – Tony G At crypto holding website.
The notable examples include
- Christie’s auction house sold a collage of images, the first-ever NFT artwork by digital artist Beeple for a whopping sum of $69.3 million
- At Sotheby’s first curated NFT sale, a CryptoPunk NFT was sold for $1.8 million
- LeBron James “Cosmic Dunk #29” video clip which lasted only for about twenty seconds was sold for $208,000
- An NTF of Jack Dorsey (Twitter CEO) first tweet was auctioned and sold for $2.9 million.
How Does NFTs Work?
Like cryptocurrencies, the underlying process that makes NFT possible is the blockchain. Meaning that it functions or exists on a blockchain. In fact, most NFTs are created and as such, stored on the Ethereum network. Which is the distributed public ledger responsible for every record of the transaction. Ethereum is a cryptocurrency like the popular bitcoin, but its blockchain gives ultimate support to NFTs. Other blockchains like Tezos and Flow also offer support to NFTs.
One of the largest marketplaces for NFT is the NBA top Shots. Different digital goods such as artworks, GIFs, virtual avatars, videos and sports highlights from live broadcasts can be “tokenized”. NFTs can also be created from tangible items such as designer sneakers.
The file size of any digital piece doesn’t count once the NFT that indicates ownership is included in the blockchain. Because the blockchain can be reviewed by anyone. The owner of an NFT can be traced and easily verified. But the person who owns the token can still be pseudonymous.
When it comes to owning any digital items, buyers get exclusive ownership rights. Which implies that only one owner can own NFTs at a time. Also, only the owner has the right to save specific information inside the NFTs. An artist might decide to sign his artwork by putting his signature in an NFT’s metadata. However, NFT’s unique data makes it possible for token transfer between owners and verification of ownership comes easy as well.
What Benefits Does NFTs Serve?
The artists, buyers and collectors stand to reap some benefits, NFTs seem to pay off anyways.
For artists, NFTs pave the way to easily sell off artworks that there otherwise might not be much of a ready market for. NFT is so beneficial that if an artist is creative enough to create a piece that gains popularity. Every time the work changes hands or is sold the artist gets a percentage.
As a buyer with NFTs, you can financially support and cheer for the artist you like. Plus, of course, you get some basic rights to use or post these arts as images online or even set them as profile pictures without the fear of being penalized. Hence, you have digital bragging rights.
And as a collector, NFTs can work like any other asset you could think of, once you own it, you live with the hope that the value appreciates over time. You can sell it in the future for a profit.
Critically looking at the underlying technology and the concept of NFTs going forward. There is a possibility that they might go beyond the world of art.