New Delhi | Ashita Singh: NFT, which stands for Non-Fungible Token, has exploded in digital markets over the past couple of years. From music and art to videos and tweets, these digital substances sell like anything on the internet and some even for millions of dollars. Reportedly, the sale of NFTs soared to $25 billion in 2021, driven by growing interest from celebrities and tech enthusiasts.
But, what is all this hype about? What are NFTs and how did they become so important? What are NFTs used for? To answer these questions, we at English Jagran have brought you all the details you need to know about an NFT:
What are NFTs?
NFT or non-fungible token is something that can be converted into a digital form. For example, any art, drawing, photo, video, GIF, music, game items, selfies, and even a tweet can be turned into NFTs, which can then be traded online. But here, non-fungible means that it is unique and cannot be replaced by something else. They are bought and sold online, with cryptocurrency, and are usually encoded with the same underlying software as many cryptos.
NFTs typically exist on a blockchain which is a distributed public ledger that records transactions. These NFTs are usually held on the Ethereum blockchain. For the uninitiated, a blockchain is a distributed ledger where all transactions are recorded. It’s like your bankbook, except that all your transactions are transparent and visible to everyone and cannot be changed or modified once recorded.
You could say that NFTs are like physical collectibles, only digital. Now, instead of having a real oil painting to hang on the wall, the buyer gets a digital file instead.
NFT owners have sole ownership rights to the original asset. This means that NFTs can only have one owner at a time. The different and unique information of NFTs makes it easy to verify their ownership and transfer tokens between owners. The original creator or the person who owns the art can also store specific information inside. For example, artists can sign their works by including their signature in the metadata of an NFT.
Rise of NFTs
For the uninitiated, NFTs have been around since 2014, but have been gaining popularity since 2017, when around $174 million was spent. The very first NFT was Terra Nulius on the Ethereum blockchain, although this project was just an idea. Then came Curio, CryptoPunks, and CryptoCats cards in 2017, before NFTS slowly moved into public awareness and then grew into mainstream adoption in early 2021.
What are NFTs used for?
Blockchain technology and NFTs offer artists and content creators a unique opportunity to monetize their art. An artist posting a work on a social network brings money to the platform and sells advertisements to the artist’s followers. They get exposure in return, but the exposure doesn’t pay the bills. But when they sell their art or content as NFTs, the funds go directly to them. If the new owner then sells the NFT, the original creator may even receive royalties automatically. And every time NFT is sold, the creator receives funds because the creator’s address is part of the token’s metadata – metadata that cannot be changed.
NFTs can provide ownership records for in-game items, fuel in-game economies, and bring a host of benefits to players. In many classic games, you can buy items to use in your game. But if that item was an NFT, you might get your money back by selling it when you’re done with the game.
Even celebrities like Amitabh Bachchan and Salman Khan are jumping on the NFT bandwagon, releasing unique memories, artwork, and moments as secure NFTs.
What is the difference between an NFT and a cryptocurrency?
NFT stands for non-fungible token and it’s usually built using the same kind of programming as cryptocurrency, like Bitcoin or Ethereum, but that’s where the similarity ends. At a very high level, most NFTs are part of the Ethereum blockchain. Ethereum is a cryptocurrency, like bitcoin or dogecoin, but its blockchain also supports these NFTs which store additional information that makes them work differently.
Cryptocurrencies are “fungible”, they can be exchanged or exchanged for each other. They are also of equal value: a dollar is always worth another dollar; one bitcoin is always equal to another bitcoin. Because cryptos are fungible, they are a reliable means of transaction. However, NFTs are different because each of the non-fungible tokens consists of a unique signature that makes it impossible to swap or tie with each other. Each art is different from the others, which makes it non-fungible and unique.