NFTs, or non-fungible tokens, are one of the key trends in the blockchain world in 2021. People buy and sell funny images, virtual lands, and even tweets linked to NFT tokens. The singer Grimes recently made nearly 6 million dollars with NFT in just 20 minutes.
This sounds rather promising, and there are many enthusiasts who believe that NFTs will launch a revolution in marketplaces and digital trading.
The most important property of NFTs is their non-interchangeability. Unlike regular tokens, they are unique. If you exchange a dollar for a dollar or Bitcoin for Bitcoin, then you will receive an absolutely equivalent replacement. Some value can be attributed to an NFT token, for example, as a cryptocurrency, but there are no two equivalent tokens, and by exchanging one token for another, you will receive another unique token.
How do NFTs work?
NFT tokens are created based on a blockchain, such as Ethereum. Ethereum is a cryptocurrency, but its blockchain also supports the storage of additional information, and therefore it can power NFTs. There are also NFTs based on other blockchains.
With NFTs, you can make digital goods from almost anything – drawings, music, videos, virtual objects in computer games. All of this can be assigned an NFT token, thus creating a unique signature for each object. Many see the main potential in the possibilities of NFTs for selling and collecting digital art.
Many people think it’s strange to pay huge sums of money – thousands and even millions of dollars, for example – for a digital copy of a video or picture. But this is already a reality. Canadian singer Grimes received $390,000 for a 50-second video, and one buyer paid $6.6 million for a video made by the digital artist Beeple.
“But digital art objects can be downloaded as a file,” many might think. This is usually true. But the point of tokenizing art is not to restrict its distribution, but to make it possible to own a digital object, in the same way as we own physical objects. NFTs prove ownership, regulate royalties from sales, but copying a digital file is just as easy. Distribution and popularization of files signed by NFTs only play into the hands of their owners: the more popular their property, the more expensive it is.
It works almost the same way as with real pictures. Only instead of a digital signature, art critics confirm their authenticity. The originals of the paintings are kept in museums, galleries and private collections. But anyone can buy or even download a reproduction for free.
Another use for NFTs is as a kind of authentication method. Nike has already patented this NFT technology for its sneakers, which it calls CryptoKicks.
If you decide to make a career as an artist or a musician, then at some point you will consider how you can monetize your art.
NFTs provide real opportunities for independent artists who simply would not be able to enter the market any other way. In essence, NFTs remove the middlemen that connects the artist and the buyer, similar to how cryptocurrencies did in the financial world. Non-fungible tokens bring the artist closer to his or her audience.
In addition, NFTs have a very useful feature that implements the royalty system. The artist receives a percentage of each resale of the work. That is, if your work becomes extremely popular and its price increases, you will definitely get a profit from it.
One of the obvious benefits of buying art is that you can provide financial support to the artists you like. With NFTs, you can buy any artist’s work, whether they’re working in the mainstream or in the underground, creating complicated compositions or drawing stickers for social networks.
Additionally, NFTs open up many opportunities for collectors. You can collect anything – from digital art to game objects. Digital collections can be admired in virtual exhibition galleries that support VR and AR technologies.
NFTs can work like any other speculative asset when you buy it and hope for a rise in value in order to sell it at a profit.
Today, there are many marketplaces that support NFTs: OpenSea, Rarible, Nifty Gateway and others. Many marketplaces accept Ethereum. Technically, anyone can sell an NFT and ask for any cryptocurrency for it.
Who will pay hundreds of thousands of dollars for NFTs?
Some people perceive NFTs as a diversion for very wealthy people who collect a variety of expensive trinkets. However, the interesting thing about NFTs is that they can be used to tokenize almost anything. The range of goods and prices is practically unlimited. Thus, this financial instrument is available to people of different incomes.
NFTs in games
NFTs first became technically possible when they became supported on the Ethereum blockchain as part of a new standard. Of course, one of the first applications was a game called CryptoKitties, which allowed users to trade and sell virtual cats.
This example demonstrates the potential for NFT applications in games. Players can buy a unique game weapon or helmet, virtual lands, etc. In this case, the virtual object will truly belong to the player, and he or she will be able to resell it in the future without being tied to the game marketplace and the developer.
Can you steal an NFT?
Using NFTs is as safe as using cryptocurrencies. NFTs are stored in digital wallets (iwhich must be NFT-compatible). This means that everything is tied to how securely your encryption keys and passwords are stored.
The appeal of the blockchain is that it keeps records of every transaction, making it harder to steal. However, history already knows many cases of cryptocurrency theft. Therefore, everything depends on how carefully the owner treats the storage of NFT tokens. As in the case of cryptocurrencies, if you lose the key to your wallet, then it will be absolutely impossible to restore access.
The future of NFTs
NFT tokens are a practical technology that is at the center of a new industry, connecting cryptocurrencies, digital art, marketplaces, and investments. The popularity of NFTs will likely depend on the popularity of cryptocurrencies. In 2021, blockchain technologies are again widely discussed not only by IT specialists and crypto enthusiasts, but also by ordinary people. Tesla invested in Bitcoin, and its exchange rate broke a record, new areas of cryptocurrency use have already appeared, ICOs are being replaced by STOs, PayPal and other financial companies are starting to implement cryptocurrency instruments in their products, and so on … Thanks to this news, blockchain technologies are gradually becoming a common part of our life. NFT tokens are another element of the ongoing blockchain revolution. It seems that this is such a natural application of the blockchain that ordinary users will not have time to be surprised by the new financial instrument, but will simply start using it.