What is an NFT?


NFT, you’ve heard it, somewhere, or - more likely - everywhere. You might not know what it stands for but you know it’s something related to digital art, somehow connected to crypto and people are going crazy about it. 

Despite the NFT’s popularity, it still seems impossible to understand what it actually is? If it’s digital pieces of art being sold online, how do you justify people buying memes? If you say, memes are graphics too, what’s the deal with a Twitter founder selling his tweet for millions? 
 
Is it all just a bunch of billionaires obsessively spending on meaningless stuff or is there more to it? 

What is an NFT, Is it worth the money or the hype? Let’s decode the NFT madness. 

What does NFT stand for? 

NFT is the acronym for Non Fungible Tokens. Big word? Let me break it down for you. Token here can be any data or digital asset whereas non-fungible is any item that can not be replaced by an identical item because it’s unique. 

When something is fungible, like a dollar bill or a bitcoin, it is equivalent to, and can thus be exchanged for, any other of its kind. However, a non-fungible token is a unique asset in digital form that cannot be exchanged for any other NFT, making every NFT a ‘one-of-a-kind’ item.

How do NFTs work?

NFTs exist on a blockchain, which is a distributed public ledger that records transactions. NFTs are unique because every NFT has a specific encrypted number assigned to it that makes it one of a kind. 

When an NFT is put up on a blockchain, it is saved with additional information of the owner. As the owner sells the NFT, the data of the buyer (new owner) is saved and the information gets updated with every trade. Thus NFT comes with proof of ownership, thus making trades and transactions transparent. 

Characteristics of NFTs

Every time you hear someone explain NFT, they would repeatedly say unique. Why all this focus on uniqueness? Well, this uniqueness actually represents the authenticity of the asset. For example, even if someone “creates” 100 pieces of the same digital art as NFTs, each one will be tracked separately on the blockchain. 

The history ownership of these NFTs is recorded on a public ledger and is visible to everyone. This transparency makes it difficult to copy or steal and relatively simple to prove authenticity. NFTs are not always bought for passion or love for an art piece or a collectable. NFTs, like other crypto assets, are also tradable. 

What can be an NFT? 

Pictures, Videos, graphic designs, and digital art pieces are comparatively famous in the NFT world but they can be any data or collectable. In the past year, we have seen a diverse range of things being sold as NFTs. 

While we were still figuring out what an NFT is, Mike Beeple sold a collage called “Everyday: The First 5000 Days” for a record-breaking $69 million. Soon after that, Twitter co-founder Jack Dorsey sold his first-ever tweet as an NFT for more than $2.9 million.
 
NFTs received bulging popularity when celebrities came to the market introducing their NFTs. Snoop Dogg partnered with the Harlem Globetrotters to release an NFT sitcom that he starred in with the team. He’s been an active collector and creator since March of 2021 with more than $19 million in assets he’s bought.

However, that is not all you could do with NFTs, recently Brands like Charmin and Taco Bell auctioned off themed NFT art to raise funds for charity. Charmin dubbed its offering “NFTP” (non-fungible toilet paper), and Taco Bell’s NFT art sold out in minutes, with the highest bids reaching up to $4000.

How do NFTs benefit the artist?

Blockchain technology and NFTs enable artists and content creators to monetize their artefacts. Earlier, artists relied on galleries or auction houses to sell their art and they didn’t get to keep all their profits. The NFT technology empowers artists to sell their pieces directly to the consumer as an NFT. In addition, artists can program in royalties so they’ll receive a percentage of sales whenever their art is sold to a new owner. This is an attractive feature as artists generally do not receive future proceeds after their art is first sold.

NFTs have transformed the digital art world and people have started to take digital art almost as seriously if not more than physical art pieces. Yet, in the technical sense of reality, NFTs cannot be regarded solely as art because they are much more than images and diagrams. The rising trend of NFT as collectables is not the only market it’s exploring, NFT is now diversifying itself as a tradeable financial asset.
 
Despite NFT’s apparent simplicity and transparency, this too like any other investment requires a good understanding of the market before putting in your money. There also exist doubts and uncertainty regarding NFTs in the longer run, however, most believe NFT is a transformational technology and it’s here to stay.

If you wish to support a digital artist, boast the ownership of a collectable/art piece or anything else or simply increase your crypto spending, NFT has a lot to offer. Want to learn more about NFTs but don't know where to start? A community where you can discuss, ask questions, and gain experience always helps.

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