Sun, 15 May 2022 09:56 AM IST
New Delhi | Ashita Singh: NFT, which stands for non-fungible token, have exploded on digital markets over the last couple of years. From music to art to videos to tweets, these digital substances are selling like anything on the internet and some even for millions of dollars. Reportedly, the sale of NFTs surged to USD 25 billion in 2021, thanks to the rising interest of celebrities and tech enthusiasts.
But, what is all the hype about? What are NFTs and how did they become so big? What is the use of NFTs? To answer these questions, we at English Jagran have brought you every single detail 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, photos, videos, GIF, music, in-game items, selfies, and even a tweet can be turned into an NFT, which can then be traded online. But, here non-fungible means that it’s unique and can’t be replaced with something else. They are bought and sold online, along with a cryptocurrency, and are generally encoded with the same underlying software as many cryptos.
NFTs usually exist on a blockchain that is a distributed public ledger that records transactions. These NFTs are typically held on the Ethereum blockchain. For the unversed, a blockchain is a distributed ledger where all transactions are recorded. It is like your bank passbook, except all your transactions are transparent and can be seen by anyone and cannot be changed or modified once recorded.
We can say that NFTs are like physical collector’s items, only digital. Now, people instead of getting an actual oil painting to hang on the wall, the buyer gets a digital file instead.
The owners of NFTs have exclusive ownership rights for the original asset. This means that NFTs can have only one owner at a time. NFTs’ different and unique information 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 them. For example, artists can sign their artwork by including their signature in an NFT’s metadata.
Rise of NFTs
For the unversed, NFTs have been around since 2014, but have been gaining some popularity since 2017, when approximately USD 174 million were spent on them. The very first NFT was Terra Nulius on Ethereum blockchain, although this project was merely an idea. Then came Curio Cards, CryptoPunks and CryptoCats in 2017, before NFTS slowly moved into public awareness, then expanding into mainstream adoption in early 2021.
What is use of NFTs?
Blockchain technology and NFTs provide artists and content creators with a unique opportunity to monetize their art. An artist publishing work on a social network makes money for the platform and sells ads to the artist's followers. They get exposure in return, but exposure doesn't pay the bills. But when they sell their art or content as an NFT, funds go directly to them. If the new owner then sells the NFT, the original creator can even automatically receive royalties. And each time that NFT is sold the creator gets funds as the creator's address is part of the token's metadata – metadata which can't be modified.
NFTs can provide records of ownership for in-game items, fuel in-game economies, and bring a host of benefits to the players. In a lot of regular games, you can buy items for you to use in your game. But if that item was an NFT you could recoup your money 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 securitized NFTs.
What is the difference between an NFT and cryptocurrency?
NFT stands for non-fungible token and it is 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 that store extra information that makes them work differently.
Cryptocurrencies are "fungible", which they can be traded or exchanged for one another. They’re also equal in value—one dollar is always worth another dollar; one Bitcoin is always equal to another Bitcoin. Because Cryptos are fungible they are a trusted means of transaction. However, NFTs are different as each of the non-fungible tokens consists of a unique signature that makes it impossible to be exchanged for or equal to one another. Every art is different from others, making it non-fungible, and unique.