What Is an NFT (Non-fungible Token)?
What is an NFT?
Kevin McCoy and Anil Dash developed the first one-off NFT on May 3, 2014, live at the Seven-on-Seven conference at the New Museum in New York City. This is the first time a non-fungible, marketable blockchain marker has been expressly connected to a unique work of art using on-chain information (allowed by Name coin), in contrast to the multi-unit, fungible, metadata-less “colored coins” of other blockchains like Counterparty.
Just three months after the Ethereum blockchain was released, the first fully-fledged NFT project, Etheria, was created and presented live at DEVCON 1, Ethereum’s inaugural developer conference, in London, UK. Until March 13, 2021, when increased interest in NFTs triggered a purchasing frenzy, the majority of Etheria’s 457 purchasable and tradable hexagonal tiles went unsold for more than 5 years. All tiles from the current and previous versions, each hardcoded at 1 ETH ($0.43 cents at the time of introduction), were sold for a total of $1.4 million in less than 24 hours.
A digital asset that reflects real-world elements like art, music, in-game goods, and movies is known as an NFT. They’re bought and traded online, often using cryptocurrency, and they’re usually encoded with the same software as many other cryptos.
Despite the fact that they’ve been available since 2014, NFTs are rising in popularity as a more popular means to buy and sell digital art. Since November 2017, almost $174 million has been used on NFTs.
NFTs are likewise one-of-a-kind, or at the very least one of very small runs, and contain unique identification codes. “Essentially, NFTs generate digital scarcity,” explains Arry Yu, managing director of Yellow Umbrella Ventures and head of the Washington Technology Industry Association Cascadia Blockchain Council.
This is in sharp contrast to the vast majority of digital works, which are virtually always available in unlimited quantities. If a particular asset is in demand, cutting down the supply should theoretically increase its value.
However, many NFTs have been digital works that already exist in some form elsewhere, such as classic video clips from NBA games or securitized copies of digital art that are already floating around on Instagram, at least in these early days.
NFT and Cryptocurrency, different?
The term “non-fungible token” refers to a token that is not fungible. It’s usually programmed in the same way as cryptocurrencies like Bitcoin or Ethereum, but that’s where the similarities end.
Physical money and cryptocurrencies are both “fungible,” which means they may be traded or exchanged for each other. They’re also worth the same amount: one dollar is always equal to another dollar, and one Bitcoin is worth another Bitcoin. The fungibility of cryptocurrency gives it a secure way to perform blockchain transactions.
NFTs aren’t like other materials. Each contains a digital signature that prevents NFTs from being substituted for or compared to one another (hence, non-fungible). Simply though they’re both NFTs, one NBA Top Shot clip isn’t the same as every day. (For that matter, one NBA Top Shot footage isn’t necessarily comparable to another NBA Top Shot clip.)
Let’s explain, the way it works?
NFTs are stored on a blockchain, which is a decentralized public ledger that keeps track of transactions. Most people are known to the blockchain as the underlying technology that allows cryptocurrencies to exist.
NFTs are most often kept on the Ethereum blockchain, although they can also be stored on other blockchains.
An NFT is made up of digital objects that represent both tangible and intangible objects, such as:
- Digital Art
- Highlights from sporting events and videos
- Skins for video graphics and online characters
- Designer sneakers
Even tweets are taken into consideration. Jack Dorsey, a co-founder of Twitter, sold his first tweet as an NFT for more than $2.9 million.
NFTs are essentially digital versions of actual collector’s artifacts. As a result, rather than receiving a real oil painting to put on the wall, the customer receives a digital file.
They also acquire exclusive rights to the property. It’s true: NFTs can only have one owner at a time. Because NFTs include unique data, it’s simple to verify ownership and transfer tokens between owners. They can also be used to hold particular information by the owner or developer. Artists, for example, can sign their work by adding their signature in the metadata of an NFT.
NFTs Can Be Used for:
Artists and content creators have a one-of-a-kind chance to monetize their work thanks to blockchain technology and NFTs. Artists, for example, no longer have to sell their work through galleries or auction houses. Instead, the artist may sell it as an NFT straight to the consumer, allowing them to keep a larger portion of the profit. Additionally, artists may build royalties into their software so that they get a share of revenues when their work is sold to a new owner. This is a desirable feature because most artists do not earn further revenue after their initial sale.
Making money using NFTs isn’t limited to art. To raise money for charity, companies like Charmin and Taco Bell have auctioned off themed NFT paintings. Taco Bell’s NFT art sold out in minutes, and Charmin’s product was nicknamed “NFTP” (non-fungible toilet paper).
In February, Nyan Cat, a 2011 GIF depicting a cat with a pop-tart body, sold for over $600,000. As of late March, NBA Top Shot had grossed more than $500 million in sales. NFT sold for more than $200,000 for a single LeBron James highlight.
Snoop Dogg and Lindsay Lohan are among the celebrities who have jumped on the NFT bandwagon, offering unique experiences, artwork, and moments as securitized NFTs.