Non-fungible Tokens (NFTs) caused a stir in 2021, and it is difficult to imagine the crypto sector without them today. From art and music to tacos and toilet paper, digital goods are selling like rare 17th-century Dutch tulips, with some fetching millions of dollars.
Are They Worth the Fuss?
But are NFTs worth the money — and the hassle? According to some experts, digital goods are a bubble that could burst at any time. Others believe that NFTs are here to stay and will forever change the investing world.
If that sounds like an exaggeration, rest assured that it is not. NFTs have proven to be one of the most significant contemporary innovations in technology, finance, fashion, sports, and the arts in recent years. Since entering the mainstream in 2021, NFTs have been the source of hype, confusion, and drama as the latest cultural phenomenon. If you’re new to digital assets and cryptocurrencies, it can be difficult to keep up with what is going on in the NFT space.
What is a non-fungible token?
Non-fungible means not replaceable or interchangeable. And a token is a unit of value. The term first appeared in the field of cryptocurrencies.
A “non-replaceable token” is a digital asset representing real-world objects such as art, music, in-game items, and videos. The tokens are bought and sold online, often with cryptocurrency, and they are typically encoded with the same underlying software as many cryptos.
How long have NFTs existed?
NFTs have existed since 2014. However, it is only now that they have gained prominence, particularly in the field of art. Among connoisseurs, works of art such as pictures have recently been sold digitally. Since November 2017, a staggering $174 million has been spent on NFTs.
NFTs tend to be unique, or at least very limited editions, and have unique identification codes. Essentially, NFTs create digital scarcity. This increases the value if there is a corresponding demand.
How does an NFT work?
NFTs exist on the so-called blockchain, a public register (ledger) that records transactions. You may already be familiar with the blockchain from the world of cryptocurrencies. In particular, NFTs are typically held on the Ethereum blockchain, although other blockchains also support them.
Where are NFTs used?
Blockchain technology and NFTs provide artists with a one-of-a-kind opportunity to monetize their work. Artists no longer have to rely on galleries or auction houses to reach out to consumers, thanks to NFTs. This eliminates the need for the artist to pay brokerage or intermediary fees. Artists can also program royalties so that they receive a percentage of sales when their work is sold to a new owner. This is an appealing feature because most artists do not receive future proceeds after their work is sold for the first time.