What is the art and science behind a collection of ape pictures selling at millions of dollars? Or, in that case, a single tweet fetching around 3 million USD? Well, both the examples mentioned above are NFTs- the latest buzz in the blockchain world soaring to newer heights with each passing day. The tweet noted in the second line is the first tweet ever made by one of the celebrated co-founders of Twitter. In both the cases, you have absolutely “unique” pieces backed by the promise of non-fungibility which serves as leverage for the NFT collections. Check out more at Multibank.io.
The NFT market is predicted to grow up to 147. 24 billion USD by 2026.
NFTs are the acronym for Non Fungible Tokens. These tokens represent digital assets which can be anything from art to music to GIFs to memes and so on. These digital assets are very much like physical assets- the only thing is they are available on the virtual plane. For example, say you buy a NFT art. If you had bought a physical painting from a gallery, you would have got a physical piece that you could have hung on the walls of your drawing room. But, in case of NFTs, you will receive a digital file.
Concept of non-fungibility
The key aspect of NFTs is that these are non-fungible. It implies a NFT collection or art cannot be interchanged or replaced. Each NFT, even every single NFT in one NFT collection, is exclusive and carries unique properties. The creator’s signature will be in-built into the NFT metadata and no one else would be able claim the rights of creation of the NFT.
How do Non Fungible Tokens work?
Akin to cryptocurrencies, NFTs are programmed on blockchain. The most popular blockchain for NFTs as of now is Ethereum. A few other blockchains too have started making space for NFTs of late. NFTs are purchased with cryptocurrencies. It’s self-explanatory why Ether (ETH) is the most common cryptocurrency used for investing in NFTs.
Although NFTs are programmed on blockchain just like cryptocurrencies, they are not the same. In fact, there is a fundamental difference between the two. A cryptocurrency, a BTC or ETH, is always fungible. If you hold 1 BTC, any other Bitcoin investor too holds BTC of the same value and worth.
But, it’s not the case with NFTs. As mentioned previously, each NFT is unique. So, if you own a NFT piece today, no one else will be able to hold ownership of the same NFT. It’s because, again, there can’t be two same NFTs anywhere in the world.
Certificate of authenticity
Every NFT is backed by a digital certificate of authenticity which serves as a provenance for the NFT piece or collection. The certificate acknowledges the creator of the NFT art (or any other collectible for that matter) and serves as an identity proof of the NFT.
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This authentication certificate is created on blockchain technology and is backed by advanced cryptography. Much like any other data on blockchain, the digital certificates of NFTs too are immutable and cannot be manipulated by any 3rd party.
There are online NFT marketplaces where NFT creators can put up their NFT arts or other creations for sale. Otherwise, you can also put up your NFT content on an auction site.
Why are people investing millions into NFTs?
Uniqueness and pride of ownership
Well, there are two most significant underlying reasons behind the growing interest and current hype around NFTs.
One is the quotient of “uniqueness” of NFTs and the other is the guarantee of ownership rights. When you purchase a NFT, you can be rest assured that “you” are the exclusive owner of that NFT piece, unless you decide to sell it off to someone else.
Now, of course, one might say that since NFTs are available over the internet only, we can very well browse, check, and even save them in our personal devices. But, that doesn’t imply you can “own” them.
There is a special pride in “owning” a collectible; there is something more to materialistic monetary calculations and that is called “personal satisfaction”. Ownership of a rare and unique NFT collectible extends that satisfaction for true blue collectors and they are more than willing to pay up to millions for it.
As mentioned previously, NFTs are backed by proof of in-built authentication that cannot be tampered with. This factor single-handedly adds a superior layer of security to NFT investments and for NFT investors.
Other benefits of NFTs
Easy monetization abilities for creators
The NFT ecosystem extends a grand opportunity for the NFT content creators to monetize the NFT creations. Good thing is, unlike the traditional process, a NFT artist won’t need to wait for auction houses or galleries to sell their creations. Now, they can sell their NFTs directly to consumers or NFT collectors. This way, the artist will be able to hold more profits.
The artist of the NFT piece will always have the copyright of the asset.
The royalty factor
NFT artists are encouraged to program royalties in their NFTs. If your NFT carries royalty in your name, you will receive a percentage every time the NFT is being sold off to some new owner. This is not the case with physical arts that are traditionally sold in galleries or auctions. Physical arts do not offer future proceeds to original artists on future selloffs, after the first selloff.
Should you invest in NFTs?
First of all, it must be stressed here that NFTs are always high-risk investments. The price and value of NFTs are mostly determined by demand and hype around it. You can expect to fetch a higher price for a NFT you own after a year – or else, there is also the risk of not being able to fetch even the buying price.
If you are really passionate about a particular NFT and if you have some extra money to spare, you might opt for it. Monitor the market closely. If you get a moderately higher price, you can choose to sell it off. Just proceed with caution.
On a final note, not just NFTs but every investment involves risk. If you can afford to take the risk without hurting your essential finances, NFTs are worth a shot.