Last weekend, an outfit called Afterparty set out to establish that NFTs have real-world utility. They held an event named Afterparty NFT Art & Music Festival in Las Vegas, gathering nearly 6,000 people. According to reports, 40 musical acts, DJs, and digital artists were on the line-up. What does that tell you?
NFTs are still gaining notoriety since they exploded out of ether earlier this year. These digital assets sell like the 17th-century exotic Dutch tulips on anything from art and music to tacos and toilet paper for millions of dollars.
The developers of NFTs typically used the same programming like that of cryptocurrency. So why is everyone so eager to jump on the NFT bandwagon? Is it worth the hype, or is it a bubble poised to pop? Here is all you need to know about non-fungible tokens.
What Are NFTs?
Non-fungible tokens (NFTs) are digital assets that are not interchangeable. These digital assets represent real-world objects such as art, music, in-game items, and films. You can buy and trade them online, often using cryptocurrency since they’re usually encoded with the same software as many other cryptos. NFTs include a unique code string kept on a digital ledger known as a blockchain, and their value changes depending on the demand.
In the digital world, NFTs are “one-of-a-kind” assets that may be purchased and sold like any other piece of property but have no physical form of their own. But, anyone can still check out the artists’ work online. So why are people willing to spend millions on an item they could easily download?
Buyers want to claim ownership of the original item, which was previously impossible with digital art before the invention of NFTs in the mid-2010s.
Today, each token comes with built-in authentication, which acts as proof of ownership. The “digital bragging rights” are almost as valuable as the item itself to collectors.
Even though they’ve been there since 2014, NFTs are currently gaining popularity as a popular means to buy and sell digital artwork. Since November 2017, a whopping $174 million has gone into NFTs.
Dieter Shirley, CTO of Dapper Labs, the company behind numerous popular blockchain platforms, told CBS News that “NFTs are the first-way blockchain technology has engaged with many people. With NFTs, we can have meaningfully scarce or unique treasures as part of our digital lives for the first time.”
This stands in sharp contrast to most digital products, which are nearly always available in endless quantities. If a particular asset is in demand, cutting the supply should theoretically increase its value. In short, creators of these types of NFT collections incorporate different traits of varying degrees of rarity further to increase the value and scarcity of their pieces.
Artists worldwide are ecstatic: NFTs allow them to earn significant money from their work, reach a global audience, and link a digital file to its creator, guaranteeing authenticity.
For example, acclaimed digital artist Mike Winklemann, better known as “Beeple,” created a composite of 5000 daily drawings to create “EVERYDAYS: possibly the most famous NFT today, which sold at Christie’s for a record-breaking $69.3 million.
According to Max Moore, who oversaw the first NFT auction at Sotheby’s, “As contemporary society absorbs and integrates technology into every part of life, it’s only natural for artists who are commentators on society to respond and use the media at their disposal to explain what’s going on.” He adds, “I believe it is simply a part of natural evolution.”
Other Summarized Features of NFTs
Non-fungible – blockchain-based cryptographic assets with unique identifying codes and metadata that separate them. Users cannot trade or exchange them for equivalency, unlike cryptocurrencies.
Indestructible– Each token cannot be destroyed, withdrawn, or reproduced because the platform saves all NFT data on the blockchain via smart contracts. The ownership of these tokens is likewise unchangeable, implying that players and collectors own their NFTs rather than the firms that create them.
Verifiable– Another advantage of maintaining historical ownership data on the blockchain is that buyers can trace items like digital artwork back to their original creator, eliminating third-party verification.
How Do NFTs Work?
NFTs get stored on a blockchain, a decentralized public ledger that keeps track of transactions. Most people are familiar with blockchain as the underlying technology that allows cryptocurrencies to exist without a centralized authority.
NFTs are essentially digital versions of tangible collector’s artifacts. As a result, the customer receives a digital file rather than receiving an actual oil painting to put on the wall.
When an NFT is transferred, the blockchain updates to reflect the new ownership. This makes it possible to track the movement of digital assets and prevents them from being double-spent. Each token also has its unique metadata, including the description of the asset, title of a work, and artist’s name.
This data is stored on the blockchain in a tamper-proof way, meaning it can’t be changed or removed without being detected. This makes it possible to verify the authenticity of an NFT and track its ownership history.
NFTs, unlike all other cryptocurrencies, cannot directly be listed on centralized or decentralized exchanges. Instead, users must participate in the listing and selling these assets through custom-built NFT marketplaces. OpenSea and Rarible are two of the most popular. However, other options are available depending on which NFT collection you’re interested in.
Why Do NFTs Matter?
The comparatively basic concept of cryptocurrency has evolved into non-fungible tokens. Modern financial systems include complex trading and lending systems for various asset categories, including real estate, lending contracts, and artwork. NFTs are a step ahead in the reinvention of this infrastructure since they enable digital representations of physical assets.
Artists and content creators have a one-of-a-kind opportunity to monetize their work thanks to blockchain technology and NFTs. Artists, for example, no longer have to sell their work through galleries or auction houses. Instead, the artist can sell it as an NFT straight to the consumer, allowing them to keep a larger portion of the profit.
Additionally, artists can integrate royalties into their programs to receive a share of sales when their work gets sold to a new owner. This is a desirable feature because most artists do not receive subsequent proceeds after their first sale.
William Shatner, who played Captain Kirk in “Star Trek,” entered the digital collectibles market in 2020, issuing 90,000 digital cards on the WAX blockchain with various photos of himself. Each card initially went for around $1 and now generates passive royalty income for Shatner every time one gets a new buyer.
Making money using NFTs isn’t limited to art. For instance, brands like Taco Bell and Charmin auctioned off themed NFT art to raise funds for charity. Taco Bell’s NFT art sold out in minutes, with the highest bids at 1.5 wrapped ether (WETH)—equal to $3,723.83. On the other hand, NBA Top Shot generated more than $500 million in sales in March.
How Do You Buy NFTs?
You can purchase NFTs on Ether, but you’ll need to buy a digital wallet that can hold both NFTs and cryptocurrencies. After that, you can buy NFTs from any online NFT marketplaces, such as OpenSea, Rarible, or SuperRare. When researching your alternatives, keep fees in mind. Most exchanges charge at least a percentage of your transaction when purchasing crypto.
NFT Market Places
The largest NFT marketplaces include;
- Opensea– This peer-to-peer marketplace offers to sell “rare digital products and collectibles.” To get started, create an account and browse the NFT collections. You may also sort pieces by sales volume to find new artists.
- Foundation– In this platform, artists must get “upvotes” or an invitation from other creators to upload their work. Because of the community’s exclusivity and high admission cost—artists must also acquire “gas” to mint NFTs—it is likely to attract higher-quality work.
- Rarible– Rarible is a democratic, open marketplace that lets artists and producers issue and sell NFTs. RARI tokens allow members to select features such as fees and community regulations.
Note: The verification methods for creators and NFT listings vary by platform, some being more strict than others. For NFT listings, OpenSea and Rarible, for example, do not require owner verification. Buyer safeguards appear to be limited at best. Therefore, it’s wise to remember the adage “let the buyer beware” when buying NFTs.
The Future Of NFTs
NFT technology is still in its early stages, and companies and projects are now “throwing things at the wall to see what sticks.” Various situations have employed NFTs, which is essential for any technology’s development. Soon, we should have a clearer understanding of how humans will use NFTs in the future. But, for the time being, we’ll have to settle for NFTs getting utilized in as many projects and industries as possible.
Final Thoughts
NFTs are risky because their future is unknown, and there isn’t enough data to gauge their performance. As a result, treat NFTs the same way you would any other investment. So, do your homework, be aware of the hazards, and proceed with caution if you decide to take the plunge.