You’ve probably noticed that NFTs seem to be taking the digital world by storm recently. Although a relatively new phenomenon, the concept has actually been making blockchain news headlines for a while. As a result, everyone from blockchain and tech enthusiasts to celebrities and pop stars is after a piece of the action.
Like most people, you are probably wondering why all this hype? But, first things first.
What Does NFT Stand For?
NFT stands for Non-fungible Tokens.
Make any sense? Probably not. Well, let’s break down NFTs for beginners.
In economic terms, fungible refers to an item that you can exchange or replace with another identical item. An easy to understand example would be a one-dollar bill that you can exchange for another one-dollar bill, as it will still retain its original value/spending power.
On the other hand, non-fungibles refer to objects with unique qualities that you cannot swap for another item. Therefore, a non-fungible token (NFT) is a unique, non-interchangeable digital asset stored in a secure digital ledger (a blockchain) that you can sell or buy online.
The Emergence of Crypto and NFTs
NFTs might be the craze right now, but the concept is not as new as you might think. Its origin is traceable to a paper released on Dec. 4, 2012, by Meni Rosenfeld, which introduced the idea of “Colored coins.” This theory recommends a class of methods to differentiate, represent, and prove ownership of real-world and crypto-assets.
While the concept of “Colored coins” was never fully realized, it was the foundation for NFT experimentation. On May 3, 2014, the first-known NFT, famously called “Quantum,” was minted by digital artist Kevin McCoy.
Since then, there has been significant development and experimentation with NFTs, leading to their current popularity.
What Do You Need to Know About NFTs?
NFTs cannot be properly explained without mentioning blockchain technology, which is the bedrock this digital asset is built upon. The decentralized databases that power cryptocurrencies allow for the creation of unique and uncopyable digital files/tokens.
Arguably the biggest “win” for NFTs was the introduction of the Ethereum blockchain, which supports smart contracts. Essentially, smart contracts enable packets of code to be attached to a digital asset, allowing for digital tokens to be owner-protected, traceable, and verifiable. This creates a secure channel that allows for the buying and selling of NFTs from authentic sources.
Currently, the biggest future trend that most NFT enthusiasts are banking on is the use of these digital tokens in the metaverse. The metaverse refers to a connected and persistent digital ecosystem.
This “digital world” will be immersive and can blend with the physical world through technologies like virtual reality (VR).
In this digital ecosystem, you will be able to display NFTs as art/print galleries and other assets. There will also be more room for greater trading and use of NFTs in various micro-environments.
Still struggling to see the potential real-world value behind NFTs? Picture this. In the metaverse, let’s say your favorite sports team’s stadium is a “digital world” you can explore with your avatar (a digital depiction of a person). Pieces of real estate within that “digital world” may be available as NFTs. What sports apparel brands, for example, might see value in having signage or even a digital store within that stadium? NFT enthusiasts would argue that the potential for high-visibility branding and sales to people exploring these “digital worlds” with their avatars is limitless.
To appreciate the potential of NFTs further, it is important to understand how widely adopted this is in other mediums already. Video games are a great example. Many gamers are already accustomed to spending real-world dollars in games to, for example, buy a sword, a hat, or a superpower for the character or avatar they are playing within the game. NFT enthusiasts foresee exponential growth in this type of commerce.
How to Purchase NFTs
The primary channel for buying, selling and creating NFTs are online exchanges/marketplaces. Typically, the creator/owner will set a specific price or have an auction where the highest bidder wins. The most popular exchanges today are:
- Foundation. This platform provides creators who use the Ethereum blockchain with a marketplace for building connections with their supporters and fellow enthusiasts.
- Nifty Gateway. This art-focused marketplace brings together NFT creators and buyers from across the globe.
- OpenSea. This platform is famous as the first NFT marketplace that continues to attract a lot of buyers and sellers.
- Rarible. This NFT marketplace places an emphasis on art tokens that members can explore, buy, and trade as they deem fit.
- SuperRare: Similar to Rarible, this marketplace offers digital NFT art.
Why are NFTs Important?
While NFTs have become synonymous with digital art collectibles being sold in popular exchanges, there is more to this concept. Currently, tech and business industries are exploring ways to use the underlying technology of NFTs to improve the uniqueness, transparency, and security of transactions in the real world.
Primarily, the idea is to attach a digital identifier to a physical product, brand asset, or creation to help trace their movement and maintain authenticity along the supply chain. Some excellent examples of the practicality of this concept have been:
- The NBA tokenization of sports tickets and digital collectibles
- Nike’s 2019 CryptoKick patent, which connects pair of sneakers to an NFT, entirely redefines the meaning of “authentic kicks”
- Taco Bell’s GIFs, which are based on dishes from their menu
- Glenfiddich’s 46-year-old whiskey (a total of 15 bottles) that were accompanied by NFT impressions of the bottle
- Ditto Music’s creation of a blockchain platform that allows you to purchase shares in songs
It is not just businesses and tech leaders that have embraced NFTs. Celebrities and influencers have also been eager to get on board. For example, beauty influencers are now using avatars to create hype around their products and fashion senses.
Why NFTs are in the Mainstream
It is no secret that NFTs are a craze right now. This is evident from how much people are spending on these digital assets. A good example is Beeple’s “Everydays: The First 5000 Days,” which was auctioned for a whopping $69 million.
Therefore, the primary reason why so many people are currently interested in NFTs is their potential value.
Still, this leads to several questions, including.
Is NFT a Bubble?
Regardless of some of these very real use cases, right now, these digital assets are essentially thriving because of a lot of speculation. This is visible from the crazy market prices that some NFTs command. For this reason, even a good percentage of seasoned crypto heads and investors are giving these digital assets a wide berth. At a minimum, investing in NFTs should generally be viewed as high-risk and potentially very volatile.
Will the NFTs That People are Paying Crazy $$ For Ultimately Crash?
NFTs are a speculative asset. The underlying drive is that the value of a digital asset you buy will grow in value so that you can cash in. As such, whether it will be sustainable or not, in the long run, is dependent on factors beyond the control of art creators, buyers, and fans. Most NFTs should and do expect fairly dramatic swings up and down, similar to what we’ve seen in the cryptocurrency markets.
There is no denying that NFTs are here in a big way and poised to make a transformative impact. As an individual or business who wants to stay ahead of the curve in tech and in business, it makes total sense to be curious about these digital assets.
Luck for you, you do not have to walk this journey alone and risk making costly mistakes.At Tyrannosaurus Tech, we are here to help you advance in the digital age by providing you with powerful solutions and advice. Get in touch with us today, and let us help you understand the world of NFTs.