Unless you’re living under a rock, NFTs may have entered your mind at least once over the last few years. Today, every celeb or tech scion owns a non-fungible token that can represent both tangible and intangible items. The market of NFTs is on the rise as well. Globally, NFTs transactions notched up over $17 billion in 2021. The number accounts for a 21,350% increase from ~$82.5 million in 2020.
But what gives this tailwind to NFTs? And what is a non-fungible token, anyway? Let’s address this question further in the article.
Basic of non-fungible tokens
In simple words, NFTs serve as a unique way to transform your real-world assets into digital ones. They are record units used to create a digital cast for any unique item. Your NFT can stand for any collectible you have in real life – from paintings and photos to videos. In layman’s terms, these digital collectibles represent your asset’s value in the blockchain world.
Each digital asset is assigned its own identification code and metadata. The latter stands it apart from other NFTs and allows the owner to track the asset. These tokens aren’t interchangeable and cannot be divided into small pieces, unlike bitcoins.
NFTs are of great value among collectors, gamers, and art lovers, and are bought and sold through auctions.
NFTs and blockchain: a match made in heaven
Blockchain and NFTs have become an integral part of the metaverse. Blockchain holds both cryptocurrencies and NFTs that can be used in the metaverse as the means to make transactions. However, NFTs are different from coins. Unlike crypto assets, NFTs are unique and traceable. And it’s the blockchain that provides proof of ownership for non-fungible tokens.
Moreover, non-fungible tokens can be minted on various blockchains. As of today, Ethereum and Solana are the go-to platforms for NFT development. Based on smart contracts, blockchains securely store NFTs and record them immutably on the blockchain.
How do NFTs work?
Let’s say you’re an artist that is looking to move your works into the digital space. First of all, you should choose a unique item that will be transformed into an NFT. It can be any piece of art or anything you have the intellectual property rights for. Then, you should decide on the blockchain platform to store your digital collectible on. Once all is set, you should set up a crypto wallet and buy some cryptocurrency to pay for the listing fee. All you have to do is to upload your digital file into the blockchain and wait for it to convert into the NFT. After that, your NFT can be put up for sale.
How much are NFTs worth?
According to NonFungible.com, an NFT is sold for an average price of $807.52. Top-grossing collections like OpenSea allow your NFT to rake in hundreds of thousands of dollars. Less popular collections can be put up for around $50.
The main differentiator of NFTs is that anybody can tokenize their work. However, it’s the hype that can put your NFT collection on a pedestal. For example, an animated Gif of Nyan Cat made waves as an NFT and was sold for over $500K. Musician Grimes sold some of her digital art for over $6m.
Therefore, non-fungible tokens are close in their value to real-world art. They derive their worth from the credibility of the artist, the story behind the artwork, and the social currency of the creator.
What are the unique benefits of NFTs?
Despite the ballyhoo around this phenomenon, NFTs do boast a bag of unique benefits that can make them a valuable investment. Below, we’ve curated the main advantages.
Just like any other technology based on the blockchain, NFTs are decentralized and don’t require any middleman to monitor the selling process. Traditionally, artists used to hire an agent to sell and market their work. Blockchain allows creators to take full control over the transaction with no additional costs. Moreover, artists get a commission each time the token changes its owner.
Non-fungible tokens are unique digital certificates, stored in the blockchain. The immutable nature of blockchain makes it difficult to forge. Moreover, smart contracts guarantee the authenticity of the asset and give exclusive rights to the owner.
The value of NFTs increases over time based on market demand and saturation. Therefore, owners can hold onto NFTs for their value to go up. Being a long-term investment, digital collectibles have made it into the assets of a great number of investors. The resale value is another differentiating factor that adds bonus points to NFT investments.
Unlike physical collectibles where a work’s copyright is transferred to the new owner, digital collectibles allow the creator to retain their full copyright. What’s more important, artists get regular revenue when the NFT changes the owner.
Where are NFTs used?
According to CNBC, the NFT trading volume peaked by 704% between Q2 2021 and Q3 2021. On OpenSea, around 250K+ people actively trade NFTs every month on the platform. CoinBase even has a waiting list of 2 million users for its upcoming NFT marketplace. However, the NFT adoption goes beyond marketplaces. The NFT world has acquired exposure among gamers, artists, luxury consumers, and other enthusiasts.
Today, anyone can develop a game that incorporates NFTs and makes them an integral part of the gameplay. Non-fungible tokens empower play-to-earn models in games where users are rewarded for their gaming progress.
Usually, these rewards are ERC20 tokens that can be sold on cryptocurrency exchanges. However, the main thing about NFT games is the ability to collect unique NFTs. The longer a user plays, the more profit they can get. Genres of play-to-earn games include adventure action, strategy, online multiplayer arenas, sandboxes, and many others.
NFTs have been a buzzword in the world of blockchain and gaming, with applications such as CryptoKitties and Decentralized leading the charge. Beyond the hype, non-fungible tokens also act as a lucrative investment that thrills the minds of investors. While the future of NFTs still seems blurry, they have certainly made a dent in the market and disrupted the gaming field.