What are NFTs: The Latest Cryptocurrency Trend in 2021
A look into one of the leading cryptocurrency trends in 2021: Non-Fungible Tokens.
Non-fungible tokens (NFTs) are the latest trend at the forefront of the cryptocurrency industry. In this article, we explore what NFTs are and why they’re taking the crypto sphere by storm.
What are Non-Fungible Tokens or NFTs?
NFTs are cryptocurrencies that represent digital assets, rather than money. They are unique digital tokens that prove ownership of a specific digital asset. NFTs use blockchain technology to authenticate the ownership rights of digital content or assets. A digital asset in this case can include text, graphics, paintings, sounds, or any other multimedia, and is stored in a digital wallet.
In the case of NFTs, interchanging the units is not possible because each one is unique. There may be hundreds of copies of an asset, but there will always be one original copy despite duplication attempts or concept copying. This lack of interchangeability is what differentiates NFT from cryptocurrencies.
However, just like other properties, non-fungible tokens can be sold and bought. NFTs transfer the ownership of assets to the actual buyer. On the other hand, the buyer also owns a token of the original copy but cannot reproduce or duplicate it.
How do NFTs Work?
NFTs turn original digital artwork into tokens to curb duplication of the digital asset. The digital ledger gives the history of the asset, as well as the creator and ownership proof. In short, NFTs are more than just copyright for one-of-a-kind digital assets.
There are online marketplaces that enable the creation, buying, and selling of digital arts. Blockchain technology allows the creators to attach a royalty agreement that entitles them to a certain percentage of the gains acquired upon secondary sale of ownership of their NFTs.
The question here is, isn’t the copy just as good as the original? The thrill of buying NFTs is the knowledge that one owns an authentic piece. Thus, collectors, fans, and investors rely on the provable scarcity of non-fungible tokens, rather than the high prices.
Aside from owning an original asset piece, the buyer obtains basic use rights. And if its market value hikes, then the buyer can sell it at a profit. Some of the popular platforms facilitating a marketplace for NFTs in include OpenSea, Rarible, Nifty Gateway, Grime’s choice, amongst others.
NFTs: The Latest Trends in Crypto Industry in 2021
NFTs have been around as long as cryptocurrencies. But why the sudden rise in interest? Initially, people were less concerned about the worth of the digital products they owned, be it duplicated or pirated. It solved the issue of authenticity by giving the digital assets a unique ID when first minted.
The demand for fine original art has led to the popularity of digital tokens. Artists have created their collectibles as NFTs, and collectors and fans have accepted the means. One of the most famous instances is the NBA TopShot and Dapper Lab. NBA players sell their videos to fans in the form of editions with unique token IDs. Lebron James’ dunk painting went for the highest-known price, and most sales, in 2021. The high-profile interest in NFTs helped it garner the publicity that it deserved. The market value of NFTs tripled in 2021 to $250 million, and in the first quarter of 2021.
Another factor that may have triggered the increasing publicity is the mainstream adoption of the cryptocurrency industry. The willingness of investors to pay high prices for the unique assets makes the demand stable. New technologies have even been proposed to tokenize assets that are believed to be profitable in the future, like Nike’s CryptoKicks, to verify their sneakers’ authenticity.
Security of blockchain has made it more desirable than assets in physical form. This is mainly because the digital ledger stores the records of every transaction made.
However, NFTs also have challenges to face. Similar to assets in physical form, digital assets like graphics and image quality deteriorates over time. There is also the possibility of bit rot where websites die and file formats no longer open. Users are also prone to losing passwords to their wallets, thus losing their assets.
With regards to brands and artists, NFTs could be a game-changer in the art world. Its continuing acceptance will show that standardization, provenance, and programmability are achieved to curb copying, pasting, and replications. Therefore, the NFT is speculated to self-correct the existing flaws in its system.
Will the excitement over NFTs be over before long? Different people have conflicting views. Some believe that the wave is nothing but a bubble. Others believe that NFTs are the next Mona Lisa – priceless. The first tweet as an NFT was sold at $2.9 million. The future is unknown, however, their inherent applications suggest that they are here to stay. In the short while that NFTs have dominated the internet, they have shown great potential. The first instance of NFTs in gaming, KryptoKitties, paved the way for game development using digital assets.
All in all, the concept of non-fungible tokens holds potential applications in several industries.