Blockchain has always kept the world at its toes. Efficient and fast, the word disruption is a very big understatement of defining what the technology is doing to modern life. Cryptocurrencies, deflationary economy and super growth of value was just being understood by the masses when DeFi hit.
The world hasn’t recovered from the realization of what decentralized finance offers and then you suddenly read about NFTs and how artists are making millions by selling it.
photo credit: Rob Bulmahn/Flickr
The above image is the infamous Nyan Cat meme by Chris Torres – sold for $590K (300 ETH) as an NFT. Feeling intrigued? So, what exactly is NFT? Let’s find out.
Non Fungible Tokens
Non Fungible Tokens, or NFTs, are a class of crypto asset that is similar to cryptocurrencies and digital assets, but with one major difference: Each token is unique. Take Ethereum, for example. If you own 1 ETH and exchange it for another one, you would not be able to differentiate it in any manner. 1ETH is 1ETH.
NFTs change the whole concept of this. The crypto token has an asset linked to it that is unique and differentiates it from its brethren. The asset can be anything, from real estate to digital art. The concept has been around for a few years now, but only recently has it gained traction.
In short, an NFT is a digital certificate that reflects authenticity or ownership of anything.
How do NFTs Work?
As said before, NFTs are just like cryptocurrencies. They are powered by blockchain, the decentralized ledger technology underpinning every kind of cryptos today. Normally, cryptocurrencies and tokens are created in an ecosystem and the value is determined by the market demand. Each token is has equal value.
In NFTs, the same procedure applies, but each written in the DNA of each token is a specific asset it represents. Where normal tokens are given value by the supply and demand of the whole lot, each NFT is given its own value depending on what asset it reflects and since each asset is unique, the NFT is unique and its value differs from another NFT in the same ecosystem.
The ownership of the NFT is defined by the same blockchain principles. If your wallet holds and NFT, you own it. You can transfer the ownership of the asset by sending the NFT to the new owner, the record written permanently in the blockchain.
Real Life Applications of NFTs
NFTs kicked off on the Ethereum blockchain as digital game of trading cards. Just like their real life counterparts, each token is a digital card. Remember CryptoKitties that caused the Ethereum network overload in 2017? That was the first ever use of NFTs.
NFTs have, however, exploded recently. The digital alternative to representing real life assets has opened up a whole new world of applications, especially artists. 3LAU (pronounced as Blau) is a digital electronics music artist who made waves last week with him selling off 33 different albums, each represented by an NFT, with one token going for as high as $3 million. What did the buyer get? An opportunity to collaborate with the artist on a new single.
💥 History has been made! The auction for the world's first tokenized album has finished.
This is a new record in a single #NFT auction. 🎉
— Origin Protocol (@OriginProtocol) February 28, 2021
Grimes is another artist that sold off $6 million worth of digital art and other artists are catching up quick on the mania.
🗡️The "War Nymph" collection is dropping tomorrow, February 28 @ 2pm EST.
— Nifty Gateway (@niftygateway) February 27, 2021
It’s just not the artists, though. NBA Top Shot – one of the most successful mainstream NFTs – is booming in the midst of the growing popularity of sports collectibles – previously driven by the shoe culture and sports cards. This digital collectible platform allows users to buy and sell ‘Moments’ – a collection of NBA video highlights, which prices are influenced heavily by the players popularity, rarity and add-on enhancements. The most expensive Moment? LeBron James’ slam dunk sold at $208K.
👑ALL HAIL THE KING👑@YoDough scooped up this Legendary LeBron James Moment from our Cosmic Series 1 set for $208,000‼️ This Moment is from our first Legendary set ever minted 💯
The top acquisition for any NBA Top Shot Moment … so far.
Congrats on the nice pickup! 👑 pic.twitter.com/rFLMzbwXN7
— NBA Top Shot (@nba_topshot) February 22, 2021
Today, it’s even going beyond the ‘typical’ crypto collectibles. Jack Dorsey, the billionaire behind Twitter has jumped the bandwagon and has his first tweet (the first on the micro social media, to be exact), up for sale.
just setting up my twttr
— jack (@jack) March 21, 2006
Are NFTs Worth it?
Well, the truth is, yes and no. The answer actually stems from a couple of facts.
Firstly, as blockchain based asset, NFTs are very young and need a lot of maturity time. And this is coming from a technology that’s still said to be in its infancy. Everybody is rushing to use it, but it will be years before it can be used to a level where it becomes the norm. Perhaps it will fade out, replaced by another concept or simply not catch traction.
On the other hand, the technological and real life applications are unlimited. Why not use an NFT for your car? Simply exchange the token for money or any crypto when you sell it off, transferring the token to the new owner’s wallet? Or how about that vintage vase your grandma gave you? Everything can be represented by an NFT and put up on the market.
NFTs have enabled artists and generally everyone to monetize their stuff, creation and even themselves. But regulation is also a key part in it. Unless and until regulatory authorities step and create legislations that legalize the use of NFTs, I am afraid you will still need to do a proper paperwork to buy that Honda you have always wanted.
In short, NFTs have the potential to be the next big thing in the crypto sphere, or can collapse as a fad, with people moving on. Whatever the future holds for it, 2021 is going to be an interesting year to follow Non Fungible Tokens.