What Are NFTs?
Another powerful store of value looming on the horizon
The quiet but explosive entry of Bitcoin and other cryptocurrencies into the financial world drove people to go gaga over the Satoshi Nakamoto-led revolution. Not only that, the underlying blockchain technology was the main reason other defining technologies came into existence. Taking the case of DeFi, decentralized finance suddenly boomed this 2020, with developers and investors openly locking up to take the technology to greater heights. But underneath the radar was another piece of digital asset trailblazing its way into the mainstream.
Nifty, that is
Non-Fungible Tokens is taking the world by storm and is being flaunted as the future of the art industry, gaming industry, real state, virtual assets, identity, and many more. Last September 0f 2020 alone, NFT sales suddenly blasted to a near-million dollars in volume. Exciting use cases included the blockchain-based fantasy soccer card game Sorare raking in sales of over $221,000 in only seven days. Sorare makes players collect “limited edition digital collectibles” as they manage teams, too. Cryptopunks, an Ethereum-based blockchain project with 10,000 collectibles of unique characters with proof of ownership, added $182,619 to its volume in a week alone. Digital artworks marketplace Superrare was able to sell 493,733 worth of NFTs in only seven days.
Fungible vs. Non-Fungible
Fungible is a word rarely heard but its application is very much in the real-life as well as in the digital world. The dollar and the bitcoin are both fungible assets, meaning, that they can be replaced or paid back with any identical value. The dollar has trillions and trillions of identical money; Bitcoin has 21 million identical coins. But it all changes with a non-fungible asset. Each non-fungible token carries unique individual characteristics that set them apart from any cryptocurrency.
NFTs are Unique. The asset contains metadata describing its uniqueness from all the others with a permanent and unalterable record of what that NFT represents. You can compare it with a certificate of authenticity for a painting in all its rarity.
NFTs are Rare. What makes NFTs an attractive store of value is its scarcity. There is not an infinite supply of this kind of asset and so it is but natural that its value can shoot up as it runs out of supply.
NFTs are Indivisible. There is no way NFTs can be divisible into smaller denominations. Its either you buy or sell it as a whole, or not at all. That is the principle of being non-fungible. You cannot own 10% of a painting or 50% of a collectible character.
NFTS can represent almost anything
For the most part, NFTs can represent crypto-collectibles, digital artworks, tickets to an event, items in a virtual universe, or real-world assets. The list can go on and on.
Why is the NFT craze?
Non-fungible tokens best represent the tokenization of things. Tokenizing proofs of ownership through blockchain technology means that what you own can never be taken or stolen away from you. NFTs will help you enshrine your ownership rights. And what more, you can go anywhere you like with your digital assets. Non-fungible tokens can also be traded and proof of ownership can be transferred. It has also solved the problem of fraud. Counterfeits cannot flourish on the blockchain that is why NFTs carry a badge of authenticity that acquirers count on getting what they paid for.
Conclusion
The invention of blockchain technology gave way not only to trustless coins but also to tokenomics as well. The idea that “nifty” brought is turning the way things are owned even from thousands of miles away and tagging the digital scarcity concept with a lofty price. That alone is already opening floodgates of funds flowing through. Don’t you look now but big businesses and top-tier clubs are seriously looking into these nifties and started dabbling in it. The NFT industry is proving its worth.
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