Non-fungible tokens, known as NFT, seem to be the most popular thing this year. Let us understand what exactly it is.
What is NFT?
NFT is a digital asset that shows art, music, videos etc., from the real world. All the buying and selling of these is done through cryptocurrency. Generally, the software followed by these platforms is the same as crypto. NFT has been there since 2014, but recently they have gained a lot of popularity as a way to buy and sell artworks. It allows the buyer to enjoy full rights and claim the original artwork, and it gives you proof of ownership, too, in the form of built-in authentication.
The Pak’s Merge is one of the expensive NFT sold on 2nd December 2021 for $91.8 million. In September 2021, Amitabh Bachchan became the first Bollywood actor to launch his own NFT. In November 2021, the celebrity Kamal Hassan said he would launch his own collections. He has collaborated with a digital platform called Fantico to launch his NFTs.
How is NFT unique from cryptocurrency?
The programming used to build NFT is similar to cryptocurrencies like bitcoin or ether, but that is the only similarity they have. Cryptocurrency is fungible; hence it can be traded or exchanged. For instance, the amount of one bitcoin is always equal to the amount of another bitcoin. However, NFTs are non-fungible. It has a unique digital signature which means it cannot be exchanged or equal to another one.
How does it work?
They are based on a blockchain which is like a public ledger that records all transactions. Most of them are based on the blockchain of Ethereum, although other blockchains can support them too. There can be only one owner of a non-fungible token at a time, and its data makes it very easy to track the ownership and token transactions between the buyer and seller. The creator or owner can even add specific information to their artwork.
How can you buy them?
• You need a digital wallet to be linked so that you can store cryptocurrency and NFT
• You will have to purchase cryptocurrency like ether, looking upon what currency your provider is accepting.
• Keep the fees in mind as your search your options.
After setting up your wallet and funds, you will have to use an NFT platform. Before choosing it, you need to decide your interest: buying, selling or creating.
The most popular NFT platforms are as follows:
• OpenSea: It is the most used platform for NFT sales. It is entirely free to sign up and browse the offers. It has all kinds of digital artwork available on the platform. Furthermore, it has an easy-to-use process if you want to mint your artwork, i.e. create your own non-fungible token
• Foundation: This platform was simply created to bid on digital art, and all the sales are made using Ethereum. But if you are searching for a quick and easy way to create NFT, this won’t be the best platform for you.
• Rarible: It is a large platform like OpenSea. All kinds of music, art, videos are sold, bought and created on this platform. But you will have to use the marketplace’s own token, i.e. Rarible.
• Nifty gateway: Nifty Gateway has made the sale of some most popular non-fungible tokens of digital artists like Beeple and Grimes. The platform allows you to purchase and sell NFT in fiat currency like the US dollar.
• SuperRare: Collectors can purchase available artworks using Ethereum, but recently SuperRare has announced its token based on the Ethereum blockchain. Similarly, like Rarible, SuperRare can also be sold and bought on OpenSea.
Uses of NFT
It has become a very nice opportunity for creators to monetize their artwork and content through blockchain technology. Especially in the COVID era, artists are not bound to rely upon galleries or auctions to showcase their work. In addition to that, creators can also enjoy royalties, which means they will be sold to a new owner and will receive some percentage of the sales. So, this attracts a lot of artists and gives a unique benefit.
Even brands like Taco Bell and celebrities like Snoop Dogg use NFT to raise funds for charity and release old memories.
Should you buy NFTs?
NFTs are being sold digitally, but does that mean you should invest your money in it?
Investing in Non Fungible Tokens is entirely a personal choice, but it is significant to understand that they are risky because there are not many records of analyzing the performance. Also, their future is quite uncertain. It is better to invest a small amount. Buying them may be worth it if the artwork holds meaning for you in life.
Another aspect to keep in mind is that the their price depends upon how much the buyer is willing to pay. So, it might be possible that a non-fungible token would resale at an amount lesser than what you paid. “Some researchers say that NFT is a bubble which is bound to pop up one day. However, the supporters says that NFTs are going to change the investing format, and they will stay in the long run”.
Before investing, do your research, try to understand the risks involved and if you decide to invest, do it with caution and a limited amount.
Edited by Prakriti Arora