Every now and then you might be hearing these words “So and So NFTs sold or bought for millions of dollars” and you might have wondered what it even is. So here I am with this blog with everything you would need to know about it. So you won't have to scratch your head for hours anymore.
NFT stands for Non – Fungible Token.
That doesn’t explain a lot now.. Does it?
A non-fungible token is something that is one of its kind. Non-fungible is an economic term that you could use to describe things like your furniture, a song file, or your computer. These things are not interchangeable with other items because they have unique properties.
So how does NFT Work?
To understand what or how NFTs work, you first need to understand what is meant by a blockchain. According to Definition: “Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.”
Basically, It stores the data of transactions that are processed in such a way that they can never be changed and are accessible by anyone who wants to see them. Blockchain is ideal for delivering information because it provides immediate, shared and completely transparent information stored on an immutable ledger that can be accessed only by permissioned network members. A blockchain network can track orders, payments, accounts, production and much more.
So now that you understand what Blockchain is let's see how NFT Works.
NFTs give the ability to assign or claim ownership of any unique piece of digital data, trackable by using Ethereum's blockchain as a public ledger. An NFT is minted from digital objects as a representation of digital or non-digital assets.
So, Let me simplify it even more. You can buy any piece of digital data and claim ownership of it. It will only have one original piece and will belong to you due to the maintenance of data in Ethereum’s Blockchain and it being completely transparent as a public ledger for you to see the proof of transactions.
The digital data can be of any form:
• Digital Art:
• Real World Items:
Deeds to a car
Tickets to a real-world event
• Lots and lots more options to get creative with!
The question of Copies:
Naysayers often bring up the fact that NFTs "are dumb" usually alongside a picture of them screenshotting an NFT artwork. "Look, now I have that image for free!" they say smugly. Well, yes. But does googling an image of Picasso's Guernica make you the proud new owner of a multi-million dollar piece of art history?
Ultimately owning the real thing is as valuable as the market makes it. The more a piece of content is screen-grabbed, shared, and generally used the more value it gains and you can easily prove the ownership of the original by using a token given to you by Ethereum.
So how does the trade work ?
Like cryptocurrencies, NFTs are bought and sold on specialised platforms. OpenSea is the best-known NFT marketplace. A sale does not necessarily involve the transfer of the object depicted by the token. NFTs of famous paintings have been sold, for example, but the buyer does not receive the painting. What changes hands is a certificate of ownership of the NFT, registered on the blockchain? The certificate must be kept safe in a digital wallet, which can take various forms. The wallet might be accessed via Metamask, a free internet browser extension, or a secure physical device. It might also take the simple form of a code printed on a piece of paper. You can then sell or keep it just as you do for real estate or paintings in real life.
How did it suddenly get so Popular ?
March was when NFTs really started making headlines. It was all down to auction house Christie’s record-breaking NFT sale: a piece of digital art, called “Everydays: The First 5,000 Days”, created by Mike Winkelmann, a graphic designer better known in the online art world as “Beeple”, sold for $69.3m. It was a collage of 5,000 pieces of digital art that Beeple has been producing on a daily basis since 2007.
It was the first time that Christie’s had listed an entirely digital piece of work in its 250-year history, and was one of the first milestones that triggered the incredible rise of “non-fungible tokens”, or NFTs. a renewed interest in cryptocurrencies and a boom in digital art have thrust NFTs into mainstream consciousness. It’s not just obscure digital artists getting in on the act – earlier this year visual artist and musical performer Grimes, better known today perhaps as Elon Musk’s ex-partner, made $6m in minutes, by selling digital art backed by NFTs.
Jack Dorsey, co-founder and – until recently – chief executive of Twitter, also got involved by auctioning off the first tweet ever to appear on the social media website. The tweet – from Dorsey’s account – simply said "just setting up my twitter”. It sold for $2.9m.
The winner of the auction received a “digital certificate” of Dorsey’s first ever tweet. What does that actually mean? The tweet remains publicly available on the platform under Dorsey’s account. And the “owner” – as certified by the NFT – won’t be able to delete it or do anything with it. They will merely have been recorded as being the owner. Having the right to sell the tweet to anyone who wants it,
So Whats the Future for NFTs ?
There certainly seems to be no shortage of interest in NFTs. A number of crypto exchanges are keen to get involved. Brian Armstrong, CEO of America’s largest cryptocurrency exchange Coinbase, expects the NFT market to surpass the size of Coinbase’s cryptocurrency business, which recently reported third-quarter revenue of about $1.3bn.
In October, Coinbase signalled its intent to enter the NFT place by launching its own NFT marketplace. In early December, another such platform, Blockchain.com, announced it is launching its own NFT marketplace in the coming weeks. Exchanges like Binance and FTX.US have already launched NFT marketplaces of their own.
But even with NFTs gaining popularity, as with any other asset class, there is always the risk that the bubble bursts. NFTs may be the white-hot phenomenon of the moment, but, as with any new technology, they still have some way to go before they are widely accepted and become truly mainstream.
Despite the eye-watering sums changing hands in headline-grabbing transactions, they are still very much a niche product, and may well turn out to be a passing fancy – digital tulips, perhaps (or Cryptokitties, even). Holders of tokens could end up sitting on a surplus of NFTs with little buying interest if there is a slump in their popularity, in the same way as numerous bubbles have burst over the last several years.
However, as with the wider use of the blockchain, it does seem clear that because of NFTs’ usefulness as records of ownership in the business, they could well be here to stay in one form or another.