The latest thing creating waves on the Internet… “No, we aren’t talking about Dogecoin or any other cryptocurrency again”… is NFT. The abbreviation appears now and then, usually around fascinating topics, around names that are popular. If you’ve been getting the same feeling, you’re not alone. So, what exactly is an NFT?
The gif of 2011’s iconic Nyan Cat is one, and so is this artist’s creation of Beyonce as Jean-Étienne Liotard Portrait of a Young Woman. The former was sold for a whooping $500,000. Jack Dorsey, co-founder of Twitter, participated too, selling his autographed First Tweet for $2.9 million in March.
Yes, it sounds as outrageous as it really is. Why would anyone spare a fortune of something that can be barely recognized as a real thing? Anyone could take a picture, save it, download, or even easily create a copy. The only thing that makes it unique and real is actually the amount of bucks shelled out to purchase them.
Whatever it is, this new concept is turning tides and getting more interesting day by day. But what does it mean for a regular buyer? Does it hold a future? Let’s explore.
What is NFT?
Short answer: Non-fungible Token.
Long answer: When a digital asset gets certified as unique, original, and interchangeable, it can be described as a non-fungible token. Usually, it will be stored in blockchain, also known as a digital ledger.
The most important term to understand here is “non-fungible.” Fungible means something that is mutually interchangeable; able to replace or be replaced with an identical twin. For example, if you can trade 5 old hundred dollar bills with 5 new hundred dollar bills, you will be left with the same thing.
However, when you trade one thing and receive something entirely different, it is non-fungible.
So, an NFT is a unique, authenticated, digital file with unique identification codes stored on a blockchain that identifies each unit separately.
Almost anything – photo, video, art form, music, cards – that can be saved as a digital file can be considered as a non-fungible token.
Why have they become so popular and important lately?
Deacon Hayes, a financial expert and founder of Well Kept Wallet, says, “For the artist, this has created a new source of revenue and outlet for their art or music. For the consumer or the investor, it gives a new opportunity for you to purchase or invest in a new asset class.”
One can see it as a form of digital art whose value can depend on a lot of factors.
“You have the album, it’s something that can stay there forever, it’s never going to be scratched or destroyed. It can be a memorabilia that you can sell in 10, 20 years if the album becomes a hit,” says Merav Ozair, a PhD and blockchain expert.
People in several industries are finding different ways to cash in or come into the limelight using this trend while it is hot. Buying and selling digital items just like collectibles might introduce a new market for people who are already obsessed with Ethereum, Bitcoin, and other cryptocurrencies.
Is it worth buying?
Experts are currently evaluating the potential of things that can enter the market as non-fungible tokens. If a tweet and gif can sell for millions of dollars, there is definitely an endless list of items that carry a high weightage and significant historical value.
For an art collector, this would be like storing an art piece and waiting until it increases in value.
For an artist, it will give you a new way to sell your creations.
And a regular buyer may have a lot of choices, including the right to brag that you own that piece.
Does it really have a future?
Whether NFTs are a good or a poor investment is largely a question of how invested you are into the idea. Some ideas require a lot of time and patience to reach their destined value.
Not many thought there would be a future for Bitcoin and see where it is now.
Ozair says, “You have to give it some time to know its value. You won’t know until time passes. To tell you now whether it’s a good investment or a bad investment, I don’t know.”
What are some really potential risks associated with NFTs?
Like every investment, this comes with a few risks too, such as the popularity of the trend going down. If demand for them goes down, the value of your invested amount will do too.
Another risk is ‘authenticity.’ A digital art is easy to replicate. Therefore, it might get difficult to track down who truly owns the item.
Besides all the risks and rewards associated with this unique trend, it is definitely something worth investing your time and effort – if not money at the moment.