‘Everydays: The First 5000 Days,’ a work of art, sold for $69 million at Christie’s Auction House in March 2021. The sale of artworks for such a high price is not uncommon, but this one caught the public’s attention because it was sold as a non-fungible token (NFT), which is an electronic record that corresponds to an image that exists solely in the digital realm.
Since then, NFT has begun to percolate into popular culture in a variety of ways. It has been made word of the year by Collins Dictionary. Millions of dollars are being paid for digital assets ranging from art and music to tacos and toilet paper.
Each week, public marketplaces like Foundation, OpenSea, and Nifty Gateway, as well as custom-built applications like NBA Top Shot and VeVe, sell hundreds of millions of dollars in NFT.
Despite the fact that the NFT has been around since 2014, it is now gaining popularity as a fashionable way to buy and sell digital artwork. Since November 2017, a whopping $174 million has been spent on various NFTs.
What is NFT?
NFT stands for non-fungible token, a type of digital asset that can be used to represent real-world objects such as art, music, in-game items, and videos. They’re bought and sold online, often with cryptocurrency, and they’re usually encoded with the same software as many other cryptos.
Money, for example, is fungible, meaning that one rupee is equal to another rupee. A non-fungible token is not equivalent to another non-fungible token by definition. This means that each NFT is one-of-a-kind or part of a very small run, and has its own identifying code.
In today’s world, where everything is being digitised, purchasing an NFT provides the buyer with proof of ownership of a specific digital asset. This means that on the specific blockchain network where the NFT operates, everyone knows and can see who owns the NFT.
Furthermore, it includes built-in authentication, which serves as proof of ownership. Collectors value “digital bragging rights” nearly as much as the item itself. Because ownership can be transferred to another person.
What’s the difference between NFT and cryptocurrency?
As mentioned above, fungible assets, such as currency notes, can be easily interchanged. Crypto assets, such as bitcoin, which were designed to function as currencies, are fungible, meaning that any two bitcoins are identical and thus interchangeable.
NFT is a crypto asset that exists on blockchains (cryptographic digital ledgers), but each token is completely unique, unlike bitcoin and other cryptocurrencies. Of course, this renders it useless as a medium of exchange, but it is extremely useful for things like certifying digital art.
Earlier no one could have sold a jpeg, which could be easily and endlessly copied by anyone over the web, for millions of dollars before NFT because there was no way to prove which of the millions of copies was the original.
An NFT cannot be copied, whereas a jpeg can. Furthermore, NFT can be programmed via so-called smart contracts to automatically do things like give the artist a cut every time their digital art is sold, which means that whenever the piece sells again, a portion of the sale will always go to the artist. This is truly novel in the concept of art and has the potential to be a game changer for artists.
It’s generally built using the same kind of programming as cryptocurrency, like Bitcoin or Ethereum, but that’s where the similarity ends and its unique value takes precedence.
How does an NFT work?
NFT is stored on a blockchain, which is a decentralised public ledger that keeps track of transactions. Blockchain is also the underlying technology that allows for the creation of cryptocurrencies.
It is most commonly held on the Ethereum blockchain, but that doesn’t mean it cannot be held on other blockchains.
An NFT is made up of digital objects that represent both tangible and intangible items, such as art, GIFs, videos, and sports highlights, collectibles, virtual avatars and video game skins, designer sneakers, and music, among other things.
NFT is essentially digital versions of physical collector’s items. As a result, rather than receiving an actual oil painting to hang on the wall, the buyer receives a digital file.
Owners of NFT also get sole ownership rights as it can only have one owner at a time. Because NFT has unique data, it’s simple to verify ownership and transfer tokens between owners. It can also be used to store specific information by the owner or creator. Artists, for example, can sign their work by including their signature in the metadata of an NFT.
NFT-backed digital art has proliferated throughout the world, and a slew of celebrities, from Eminen and Paris Hilton to Amitabh Bachchan and Salman Khan, have launched their own NFT-backed digital collectibles.
However, according to some reports, the majority of NFT is not worth millions of dollars, and many are simply useless because there is an unfathomable amount of digital content available for sale every day. However, there aren’t enough ‘new buyers’ to keep up with this incredible output.
Stability in the NFT market would necessitate increased public awareness and comfort with cryptocurrencies in order to attract traditional investors. This development will most likely take years, but there may be some surprises along the way.
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