What are NFTs?

This year, non-fungible tokens (NFTs), which are a type digital asset, have seen a surge in popularity. NFT artworks were selling for millions of Dollars.

This trend may be confusing to those who might be wondering why so much money is being invested in items that are only available digitally and can be viewed freely by everyone. NFTs are viewed by supporters as the next stage in art collection.

So what are NFTs?

An NFT, or digital asset, is one that is stored on a blockchain. This record keeps track of all transactions on connected computers. The blockchain acts as a public ledger that allows anyone to verify and identify the authenticity of an NFT.

Each NFT is unique and unlike other digital items that can be reproduced endlessly, it has a digital signature.

NFTs can be bought in dollars or cryptocurrencies. The blockchain also keeps track of transactions. The NFT can be viewed by anyone, but only the buyer has the right to view it – a digital badge of honor.

The copyright to the image or video is not usually transferred to the buyer when an NFT is purchased.

The NFT Universe

You can sell and buy all kinds of digital objects, including images, videos and music.

The most prominent sales of digital art have been in digital art, and fans can trade NFTs related to specific players or teams.

On the National Basketball Association TopShot website, fans can purchase collectible NFTs as video highlights of games.

The highlights are free to be seen on YouTube and other platforms, but people are purchasing the right to own a specific NFT. This is possible due the digital signature.

NFTs could also refer to digital clothing or patches of land in virtual environments.

The first tweet by Twitter boss Jack Dorsey, “Just setting up my twttr”, was sold as an NFT for $2.9million in March.

Market growth

NFTs have been traded since 2017, and then saw a surge in popularity around 2021.

According to DappRadar data, sales volumes soared to $10.7 million in the third quarter 2021. This is eight times more than the previous quarter.

OpenSea was the largest NFT marketplace and saw $2.6bn in October sales. This is a huge increase on the $4.8m that October 2020 had.

The rise of NFT popularity

Some attribute the frenzy and lockdowns that force people to spend more time online to the fact that they are forced to do so at home.

NFTs can be used to acquire possessions online or in virtual environments. This can be used to communicate social status, personal taste, and financial ability.

Others are lured by the promise of high returns and rapidly rising prices. Some buyers “flip NFTs”, selling them off within days or hours to make a profit.

Recent price increases in cryptocurrency such as bitcoin have created a new class of crypto-rich investors who use their cryptocurrencies to buy NFTs.

What problem does NFTs solve?

NFTs are the future of ownership, according to NFT enthusiasts. They believe that all kinds of property, from houses to event tickets, will eventually be able to have their ownership status formally tokenized in this manner.

NFTs can be a solution for artists who want to make money from digital artworks. NFTs can provide more income for artists, since they can earn a royalty every time the NFT is sold after the initial sale.

NFTs, according to NFTs proponents, could also transform music and sports, as well as gaming.

Beware of Scams

Like cryptocurrency, NFTs are not regulated. Anyone can create an NFT, and it is not guaranteed that its value will be maintained. If the hype dies, losses can pile up.

Fraud and scams can also be a problem in a market with many participants using pseudonyms.