NFTs - Taking the world by storm
Non- fungible tokens, or NFT are hotter than a barbeque right now. The idea that you can buy links to JPEGs on the internet is repellant to some, NFTs are currently taking the digital art and collectibles world by storm. Many celebrities are joining in as they spot a new opportunity to connect with fans. For example, Stephen Curry (Basketball player of the Golden State Warriors) has entered the digital asset boom with an approximately $180,000 (55 Ether) purchase of an NFT from the bored Yacht club. He also made the announcement by updating his twitter profile photo with his new asset. The bored Ape Yacht club is a collection of 10,000 unique ape NFTs, that are built on a the Ethereum blockchain. The purchase of digital objects online is part of an emerging new market, that is called NFT, but what precisely is an NFT and what makes it so unique?
Introduction:
The acronym NFT stands for non-fungible tokens that can be used to define ownership of unique objects. They are meant to give you something that cannot be copied: ownership of a work that cannot be directly replaced by another token. They identify things like art, collectibles, or even real estate. An NFT can only ever have one official owner and is secured by the Ethereum blockchain, meaning no one can change the record of ownership and copy a new NFT into existence.
Until the introduction of NFTs, digital art did not have the same value as a masterpiece by Picasso or Monet. Simply because digital art could be replicated with the click of a mouse, making it almost impossible to recognize the original.
What is a Non- Fungible Token?
Non- fungible stands for an economic term that is used to describe things like your furniture, a song file or computer. These things are not interchangeable for other items as they have unique properties.
What is a Fungible Token?
A fungible token can be characterized as being non-unique and replaceable/exchangeable. For example, you can lend a bag of corn to a friend and they can return any bag of corn to you because they are all the same. The same applies to Bitcoin, which is a fungible token. You can lend someone a bitcoin and receive another bitcoin later to replace the original one.
The Blockchain Technology behind NFTs
NFTs are created using blockchain technology, which means they cannot be hacked, modified or deleted. All NFTs are stored in the blockchain and have unique records of authenticity and chain of ownership, which protects them from misuse and theft. When data is added to a chain, it cannot be modified, deleted, or added. This means that the rarity and authenticity of each NFT is preserved.
How do NFTs work?
Most NFTs are part of the Ethereum blockchain, which was the first to be widely used and support these NFTs. They are visually represented by a series of unique cryptographic hashes that are programmed into a digital object. The cryptographic hash created on the blockchain network is the coin itself, but for NFTs, the hash must first be programmed into a digital file. The NFT must then be created by associating the hash with the digital file and registering ownership of the file and unique properties on the blockchain network. This transaction cannot be edited and is visible to all. Once an NFT is purchased, the new ownership is recorded in the blockchain.
How to make NFTs:
- Choose the asset — Specify the asset you want to convert into NFTs. It can be anything such as art, video, music, meme etc.,
- Select a Blockchain: To be able to mint the asset, you need to choose a Blockchain technology you would like to use for your NFTs.
- Set up a digital wallet — Set up a digital wallet as you would require cryptocurrency for funding your investment.
- Choose a marketplace — NFT marketplace is equivalent to the stock exchange for buying, selling and trading with NFTs. You have to choose a marketplace just as a company would choose which stock exchange, they want their shares to be listen on.
- Upload your file: The NFT marketplace you have chosen will have 5. upload your file: the NFT marketplace you choose includes instructions on how to upload your digital art to the platform and then convert it into an NFT.
- Determine the selling strategy: you have the option of selling the file at a fixed price or holding an auction. The auction can be time-limited, or you can leave the time limit open and decide when you want the auction to end. instructions on uploading your digital art to the platform and then convert it to a NFT.
The pros and cons of NFTs:
+ NFTs can change the way we think about property — making it possible to own a real asset thousands of miles away.
+ NFTs could introduce millions of people to cryptocurrencies.
+NFTs can provide diversification benefits to an investment portfolio, as they are different from traditional investments like stocks or bonds.
+They could create new revenue streams in gaming, sports, arts, and technology.
+A single NFT can be bought and sold multiple times, but the buyer must pay the original creator/owner a royalty, typically 10%.
-Developing decentralized applications for non-fungible tokens can be complicated and time-consuming. Simplification is needed for people unfamiliar with NFTs.
-NFTs can seem like a “hot potato” when you buy an asset hoping to sell it for a big profit. However, when the market collapses, they can cause large losses.
-Unlike stocks, which pay dividends, or real estate, which generates rental income, NFTs offer no income potential. Returns are associated with price appreciation, which should not be counted on.
-Environmental problem: NFTs consume tons of energy: Ethereum, where most NFTs live, uses roughly the same amount of energy per year as an entire company.