An NFT, or non-fungible token, is a digital asset that represents real things such as music, art, video, paintings, games, etc. NFTs are both purchased as well as sold online and are encoded with the underlying software that’s used for cryptocurrencies.
Non-fungible tokens are not new, rather, they have been around since 2014. However, they have gained popularity in recent years since they enable the purchase and sale of digital artwork.
A digital signature accompanies each NFT, which is the reason exchanging these tokens is not possible. Also, this is why all NFTs differ from one another.
How do NFTs work?
Non-fungible tokens are developed via minting, a process wherein details related to the NFT are stored on a blockchain. Minting requires the integration of smart contracts that allocate possession besides handling the transportation of the NFT.
Since tokens are minted, they have an exclusive identifier that is connected to a blockchain address. For every token, there’s an owner whose information is available publicly.
No matter how many non-fungible tokens of the same item are minted, every token’s identifier is unique and can be differentiated from the rest.
Various categories of NFTs
Initially, the NFT market was all about collectibles and digital art; however, the options have evolved with time. Some of them are:
It is possible for photographers to tokenize their work and provide either partial or complete ownership.
These NFTs contain digital art related to sports personalities, historic moments, virtual memorabilia, trading sports cards, etc.
These NFTs represent the ownership of a virtual building or piece of land. Such NFTs can be utilized as an element of online gaming or service offerings.
While some digital trading cards are collectibles, others are possible to trade in video games.
These NFTs offer ownership of anything ranging from digital property to avatar wearables.
This category is quite popular and is based on NFTs related to abstract art and related forms.
Some of the best examples of NFTs in the collectibles category are Pudgy Panda, BAYC, and Crypto Punks.
Under this category, artists can tokenize their music and offer buyers the rights they are interested in offering.
These NFTs represent the ownership of an event’s ticket. With these non-fungible tokens, it is possible to handle ticket sales as well as distribution digitally.
Artist, buyer & collector
NFTs are created by artists, purchased by buyers, and acquired by collectors. Let’s understand these terms in a better way.
Artists or creators can sell their art or work in the NFT market. If their NFT is unique or impressive, it has a high chance of earning millions.
Certain marketplaces allow artists to earn a specific percentage whenever their NFT is sold further. If the work becomes popular, the artist can enjoy phenomenal profits.
Buying art means financially helping artists one is fond of. Buyers also get certain benefits, such as the right to post the art online or use it as their profile picture on social media.
Just like other investments, NFTs also function like a speculative asset. When their value increases with time, collectors can sell them and make huge profits.
Best NFT marketplaces
There are infinite marketplaces available nowadays, but the best ones are:
Introduced in December 2017, OpenSea offers a range of tools that allow creators to mint as well as list their collections. Its interface is minimalistic, and a number of payment options are supported.
Launched in September 2021, the marketplace is home to the highest number of users in terms of SOL NFT markets. Magic Eden is the choice of collectors who are interested in the latest and upcoming items.
Launched in early 2020, Rarible has its own token, “RARI,” and allows its owners to vote on proposals based on new features, trading fees, as well as governance proposals. Which NFTs will be displayed is also decided by token holders.
Celebrities, influencers, and brands are fond of this marketplace that was launched in 2018. Nifty Gateway has hosted unique drops for popular artists and celebs like Lil Yatchy, Carl Cox, Trevor Jones, and more.
The marketplace allows users to buy mystery boxes that contain many curated collections. There is a premium and a standard collection listing. Binance NFT has conducted NFT drops for renowned entities and celebrities like the Uganda National Museum, Paulo Del Valle, Parimatch, and more.
MakersPlace, SuperRare, and Foundation are other leading NFT marketplaces that are a hit among NFT enthusiasts.
How to Buy NFTs
A few steps have to be followed if one is looking forward to buying NFTs. These steps are:
- Having a digital wallet to store NFTs and cryptocurrencies.
- Buying some crypto which depends on which currency the NFT provider accepts.
- After buying the cryptocurrency, it has to be transferred from the exchange to the wallet.
NFTs that hit milestones
A number of NFTs have surprised the world from time-to-time with their unbelievable selling prices, but some of them that have made it to the headlines include:
Beeple’s digital collection of 5,000 images shocked everyone when it was auctioned for $69 million in March 2021.
Canadian musician Claire Elise Boucher, popularly known as Grimes, sold a total of 10 digital images for $5.8 million in the same year, i.e., 2021.
Twitter founder Jack Dorsey sold an NFT of his own tweet in 2021 for $2.9 million.
Banksy’s screen print from 2006 is known as one of the most controversial digital sales. Injective Protocol, a blockchain company, bought it for $95,000 and later burned it, selling the live streamed video of the burning event for $380,000 in 2021.
William Shatner sold 10,000 packs of trading cards that had 125,000 digital images, with a number of them being repetitive. In only nine minutes, the packs were sold out for 2020.
Use cases of NFTs
With NFTs evolving day-by-day, a number of uses are associated with them. Check out a few of them:
Organizations and brands can issue and sell non-fungible tokens related to products, voting rights, collectibles, etc. with respect to the future development of products or services to boost fan or customer engagement.
With NFTs, it is possible to develop a varied ecosystem related to in-game items for the purpose of buying, selling, and exchanging on secondary markets.
People and organizations with a well-developed brand can develop non-fungible tokens that are possible to sell as collectibles on the open market to not only fans but loyal customers too.
NFTs allow tracking fractional ownership or royalty entitlement for content, art, or media.
Are NFTs safe?
Non-fungible tokens deploy blockchain technology; hence, they are impossible to hack. But the key to an NFT is the weakest link.
Bad actors can hack the software that stores the keys. The devices on which the keys are held can be damaged or lost as well. On that note, as long as the keys are safe, the NFTs are safe too.
NFTs have definitely come a long way in recent years. Previously, only celebrities and influencers were capable of creating and selling them, but things have changed today.
Though slowly, NFTs are becoming a crucial element in everyone’s life. Artists, collectors, and buyers have developed sheer interest globally and achieved remarkable milestones.
No doubt the future of NFTs has always been a matter of debate, but considering the fact that NFTs allow creating and trading of digital assets without as much volatility as crypto, things look favorable. But, of course, caution is recommended since the market has been going through a downfall since last year.