During this year, NFTs (non-fungible tokens) have taken off like a rocket. These digital assets are being sold like 17th-century exotic Dutch tulips-some for millions of dollars-ranging from art and music to tacos and toilet paper.
Is the hype or the money worth it for NFTs? Like the dot-com boom or the Beanie Baby craze, some experts say they’re a bubble destined to burst. Others believe NFTs will forever change investing.
NFTs – What are they?
An NFT is a digital asset like art, music, in-game items, or videos representing a real-world object. A cryptocurrency is a digital asset bought and sold online, frequently with cryptocurrency, and is typically encoded with the same underlying software as many other cryptos.
Although they have existed since 2014, NFTs are becoming more well-known since they are becoming increasingly popular for buying and selling digital artwork. As of November 2017, NFTs have been used for $174 million.
In addition, NFTs tend to be one of a kind, or at least limited, and have unique identifying codes. According to Arry Yu, managing director of Yellow Umbrella Ventures and chair of the Washington Technology Industry Association Cascadia Blockchain Council, NFTs create digital scarcity.
Most digital creations, on the other hand, are almost always available in infinite quantities. Assuming the asset is in demand, cutting off the supply should increase its value.
However, many of these NFTs have already existed somewhere else in some form, such as video clips from NBA games or sanitized versions of art from Instagram.
One of the most famous NFTs ever created was “Every day: The First 5000 Days,” painted by digital artist Mike Winklemann, who sold the painting for a record-breaking $69.3 million at Christie’s.
Individual images can be viewed online for free – or the entire collage of images. So why would people spend millions on something they can just screenshot or download for free?
Because an NFT allows the purchaser to own the original item, proof of ownership is also built-in, as is built-in authentication. Almost as much as the item itself, collectors value those “digital bragging rights.”.
What is the Difference Between NFTs and Cryptocurrencies?
It is “fungible” to trade or exchange physical money and cryptocurrencies. Similarly, a dollar is always worth another dollar and a bitcoin is always worth a bitcoin. Because of its fungibility, crypto is a trusted way to conduct blockchain transactions.
It is different from NFTs. They each have a digital signature that prevents them from being exchanged for one another or equal (hence, non-fungible).
Just because they’re both NFTs, one NBA Top Shot clip is not equal to the next.
NFTs: how do they work?
Ethereum is home to the majority of NFTs. Bitcoin and Dogecoin are cryptocurrencies, but Ethereum’s blockchain also supports NFTs, storing extra information, are so they work differently from an ETH coin. Other blockchains can also implement nFTs.
NFTs: What Are They Used For?
Content creators and artists can monetize their products through blockchain technology and NFTs. The sale of art is no longer dependent on galleries or auction houses. Artists can instead sell their work directly to consumers as an NFT, allowing them to keep more profits. Additionally, artists can program in royalties, so they’ll receive a percentage of sales whenever their art is sold. Artists are generally not entitled to future proceeds after their first sale, which is an attractive feature.
NFTs don’t just make money through art. Several brands have auctioned off themed NFT art to raise funds for charity, including Charmin and Taco Bell. NFT art from Taco Bell sold out in minutes, with the highest bid coming in at 1.5 wrapped ether (WETH) – equivalent to $3,723.83 at the time of writing.
The 2011-era Nyan Cat GIF, depicting a pop-tart-shaped cat, sold for nearly $600,000. By the end of March, NBA Top Shot had generated sales of more than $500 million. Over $200,000 was paid for a single LeBron James highlight in the NFT.