Non-Fungible Token (NFT): What is NFT, What is Important for NFT, What is Risk: 6 Points Explained
NFT is seen as a way to acquire assets in online and virtual environments
Non-fungible tokens (NFTs), a class of digital assets, have exploded in popularity this year, with NFT artworks selling for millions of dollars.
This trend is confusing those who might wonder why spend so much money on items that only exist digitally and can be viewed by anyone for free. Advocates see NFT as the next stage in the art collection.
What is NFT?
NFT is a digital asset that exists on a blockchain, a record of transactions kept on networked computers. Blockchain acts as a public ledger, allowing anyone to verify the authenticity of the NFT and who owns it.
So unlike most digital items that can be continuously copied, each NFT has a unique digital signature, which means it is one of a kind.
NFTs are typically purchased with cryptocurrency or dollars, and the blockchain keeps a record of the transactions. While anyone can view the NFT, only the purchaser is officially the owner – a kind of digital bragging rights.
Buying an NFT of an image or video usually does not mean that the buyer acquires the copyright of the underlying item.
What types of NFTs exist?
All types of digital objects – images, videos, music, text, and even tweets – can be bought and sold as NFTs.
Digital art has seen some of the highest sales, while in sports fans can collect and trade NFTs associated with a specific player or team.
For example, on the National Basketball Association’s Top Shot platform, enthusiasts can purchase collectible NFTs as video highlights of in-game moments.
While these highlights can be seen for free on other platforms like YouTube, people are buying status as the owner of a particular NFT which is unique due to the signature digital.
NFTs can also be pieces of land in a virtual world environment, digital clothing or exclusively using the name of a cryptocurrency wallet.
The first tweet from Twitter boss Jack Dorsey – “just set up my twttr” – sold for $2.9 million as NFT in March.
How much has the market grown?
Traded since around 2017, the NFT surged in early 2021, then had another explosive jump around August.
According to data from market tracking company DappRadar, sales grew to $10.7 billion in the third quarter of 2021. This was an increase of more than eight times from the previous quarter.
On the largest NFT marketplace, OpenSea, had $2.6 billion in sales in October of this year, up sharply from $4.8 million in October 2020.
Why is the NFT rising?
Some attribute the frenzy to the lockdown forcing people to spend more time at home on the internet.
NFTs are seen as a way to acquire assets in online and virtual environments that can represent social status and personal preferences – for some, the equivalent of buying an expensive pair of sneakers. money.
For others, the attraction lies in rapidly rising prices and the prospect of large profits. Some buyers “flip” NFTs, selling them within days or even hours for a profit.
The recent price increase of cryptocurrencies like bitcoin, which is up around 300% in 2020, has also created a new group of crypto-rich investors who spend their crypto on the NFT.
Why is NFT important?
Enthusiasts see NFT as the future of ownership. All types of property – from event tickets to houses – will eventually have their ownership status encrypted this way, they believe.
For artists, NFT can solve the problem of how they can monetize digital artworks. They can receive additional income from the NFT, as they can receive royalties every time the NFT changes hands after the initial sale.
Advocates of NFTs can also transform music, sports, and gaming.
What are the risks?
Like cryptocurrencies, the NFT is largely unregulated. Anyone can create and sell NFTs and there is no guarantee of its value. Losses could pile up if the hype subsides.
In a market where many participants use pseudonyms, fraud and scams are also a risk.
