NFT “Non Fungible Token” contains the digital format of anything ranging from drawings, GIFs to video games and songs. In March 2021, NFT artworks were sold for millions of dollars and Indian Cricketer Yuvraj Singh has also launched his NFT collection to share with his fans. People have spent approximately $9 billion in NFT sales to date which is expected to be $17.7 in the coming days. Many celebrities are growing interested in NFTs to earn profit with their popularity.
Difference between Fungible and Non Fungible tokens
Fungible tokens such as cryptocurrencies like bitcoin, Ethereum, etc. are tradeable and the value of these remains the same once exchanged but NFTs cannot be exchanged directly with one another.
Fungible means you can exchange it for the same value. Nonfungible assets include songs, furniture, artwork, texts, house, or paintings. These things cannot be interchanged as they have unique properties. Though artworks can be copied original remains the same and do not lose its value. Thus NFTs represent ownership of these assets. There can be only one official owner of NFT at a time. The blockchain secures the ownership information and no one can modify this record.
What is NFT?
Nonfungible asset in economics is those which cannot be interchanged. These assets can be artwork, house, or anything that have unique properties, characteristics, and qualities. For example, You can take print or photos of the Mona Lisa painting but the original will only be one. You can buy or sell NFTs like other properties but it happens digitally. All NFTs have a digital signature and they can buy with dollars or cryptocurrency. Objects on the internet such as photos, music, videos, tweets, and texts can be converted in NFT through a special process.
Creators can tokenize their artwork available in digital format. For creating NFTs, creators create a signature of ownership along with a digital certificate. Every NFT is unique and it keeps a transaction history record. Although the buyer does not possess digital art physically but gets proprietary rights to the specific artwork. The buyer gets a license allowing to post on social media, virtual museums, or the game world. NFTs are easily verifiable as each NFT has specific information related to the name of the buyer, event date, and venue.
How NFTs are different from Cryptocurrency?
Cryptocurrencies can be exchanged with one another but NFTs cannot be exchanged. Cryptocurrencies can split into smaller units but NFTs are whole and cannot be broken down.
Features of NFTs
- Blockchain stores NFT data and these tokens cannot be replicated or destroyed.
- NFTs are undivided means; they cannot be divided into small denominations.
- The original owner can be traced as blockchain has all the information and there is no requirement for third party verification
- Any number of NFTs can be created by NFT developers however to keep their value high they are purposely limited.
What is Blockchain?
Blockchain is a collection of data or information so we can say it is a type of database. It is a series of linked data blocks. This creates a digital ledger that keeps records of information and activity in the blockchain. Thousands of servers across the globe store each blockchain ledger. Thus anyone on the network can see entries but it is impossible to tamper with the information within a block.
How do NFTs work?
Generally, NFTs are made and stored on the Ethereum blockchain. The ownership of NFT can be traced through the owner can remain pseudonymous. At a time an NFT has only one owner and metadata and unique ID manages the ownership so no replication can take place. They are minted through contracts assigning ownership and NFTs transferability is also managed. This information is added to the blockchain.
The process goes like this: Creating a block, information validation, and addition of information on the blockchain. Unique ownership certificate comes with tokenized artwork which you can buy or sell online. As it is stored in blockchain, there is no possibility of replication.
Why some people do not like NFT?
- Computing power for blockchains generate a large carbon footprint
- High prices at current do not ensure its value will increase or remain the same over time
- People do not want anything that is owned by others
What are the popular NFTs?
NFTs can be of anything such as music, texts, art, and tweets. When talking about sports fans collect and trade NFTs related to a specific team or player. For instance: People buy special moments of games or highlights in the form of videos.
NFT digital artwork: Everyday: the first 5000 days was sold for $2.9 million
“Charlie Bit Me” NFT was sold for approx. $761,000
NFT enabled article of New York Times was sold for $563000