Ownership of an NFT art or any item can cost you a fortune, and some people think the idea is crazy.
Now, even celebrity tweets can be purchased as an NFT. As crazy as it may be, the NFT hype seems to make a lot of sense, especially as it’s linked to crypto or blockchain technology. So, is crypto the same as NFT? Are we dealing with the same assets?
What is NFT?
An NFT or also called Non-Fungible Token is a single token that is encrypted on the blockchain network. As it is known, bitcoin is a changeable coin, but NFTs cannot be changed. The most crucial feature of NFT is that it is a unique and proprietary asset. In the simplest terms, tokens are different from regular coins because they are produced in different values and originality that cannot be interchanged.
NFTs, also known as immutable tokens, use Blockchain infrastructure. With this technology, digital storage of all visual, written, and audio works in digital can be achieved. NFT is used to describe assets created using blockchain technology.
Most NFTs are part of the Ethereum blockchain. Ethereum is a currency like bitcoin and dogecoin, but the blockchain also supports NFTs. What makes an NFT unique is that it is tied to the token. NFTs have metadata processed through a cryptographic hash function, an algorithm that computes a unique string of letters and numbers. NFTs are also used to create the possibility of asset interoperability across multiple platforms.
NFTs are a new type of collection. However, unlike a stamp or ticket, it is entirely digital. NFTs are certificates of authenticity created by the blockchain for digital assets such as artwork, music, or video. It is a digital market. The market has attracted much attention, with a digital painting sold for $ 69.3 million at Christie’s auction.
With that being said, does buying an NFT mean you own the asset? The answer is, unfortunately, no. The person who buys the NFT is not the owner of the asset. The token owner owns a record and hash code that shows ownership of the unique token associated with the particular digital asset. People can download the asset or use it on social media, but they will not have the token.
Where Are NFTs Used?
Non-Fungible Tokens are often used in collections and areas that require digital ownership. Crypto can be found in artworks, digital collectibles, and digital items in online games. NFTs can be items such as a work of art, stamp, basketball card, or even a dunk by Lebron James.
NFTs can be anything that exists in digital, even tweets.
Are NFTs the Same as Cryptocurrencies?
NFTs are not cryptocurrencies. Cryptocurrencies, such as Bitcoin or Ether, are the native payment currencies of a blockchain, a chain of blocks produced by miners that represents an incorruptible ledger of transactions.
However, unlike NFTs, cryptocurrencies are deemed fungible, interchangeable, and indistinguishable, like any commodity or traditional currency. You can trade one Bitcoin for another, and both Bitcoins will always be worth the same as each other.
On the other hand, an NFT is a unique token conceived, for the large majority, on the Ethereum blockchain. Ethereum intelligent contracts govern nFTs, and transfers of ownership are written into the blockchain.
These smart contracts are made up of a specific code that contains all the essential information and handles all the critical actions relating to an NFT, such as its transfer and verification. The uniqueness of an NFT is defined by the data stored within the NFT’s metadata, among which is a token ID that points to an image, web domain, artwork, or any valuable digital resource.
Simply put, an NFT is an untampered and tamperproof certificate of authenticity and ownership.
How Crazy is NFT?
The NFT craze is a phenomenon that is shaking the traditional art, game, sports, and insurance sectors, with the markets being accessible to anyone ready to open an Ethereum wallet and connect to the blockchain.
Art collections are launched and often sold in batches and distributed randomly to investors. The first NFT project that went viral and met an outstanding success was the Cryptokitties game, established in 2017.
The game lets Cryptokitty owners collect, buy, and sell unique creatures that ‘live’ forever on the Ethereum blockchain. Cryptokitties went viral soon after the launch, sending the price of some Cryptokitties into the hundred thousand dollars. The volume of exchanges clogged the Ethereum blockchain at the time, sending the transaction fees to a record high.
The NFT market is more efficient and more liquid than the traditional one. It is structured around digital art marketplaces, and in terms of fees, it’s lower than what is paid to conventional art brokers.
The first cryptocurrency HODLers have turned into millionaires over the past five years of impressive sector growth. This crypto-wealthy generation is mainly made of young risk-takers who like to experiment and afford to do so. In fact, despite extreme price volatility, studies have shown that the public is growing increasingly favorable to the widespread adoption of cryptocurrencies. Their risk appetite is widening the possibilities within the crypto-economy.
Although there are already a few up-and-coming applications for the technology in the luxury and gaming industries that should gradually reach maturity over the next three years, some would argue that the craze around NFTs will be short-lived, especially in the art sector.
The audience there is undoubtedly quite different from the one involved in traditional markets. So perhaps the NFT craze itself will be short-lived, but more importantly, it could represent a more significant shift in where the digital economy is headed. It is first and foremost disruptive, for better or worse.
Investing in NFT
Investments in NFT are made in such works of art as precious metals, company shares, and cryptocurrencies because unique products can maintain their value for decades or even centuries.
Art, in essence, is an investment tool for aesthetic pleasures and providing prestige. The same conditions apply to the digital version.
You might be thinking now, how can a digital artifact, such as a tweet or a photograph, be unique if it can just be copied in one click over the internet?
This is where the difference in NFTs becomes essential. Blockchain technology is the factor that adds value to digital products from rarity. The blockchain’s unique cryptography features offer actual ownership of the product to its owners. In other words, the product you buy is a “real digital copy,” and nobody can claim NFT.
If it still doesn’t make sense, think about it this way. As a result, gold, diamonds, or US dollars have no value. The dollar is a piece of paper. But can we purchase a new car with just any paper? No, we need dollars for that.
So what separates these two products with the same raw material? It is the society valuing it. The logic of NFTs is the same. In essence, it’s mainly about putting up for sale digital products that society valued and wanted to have.
The future of NFT and crypto is genuinely something to look forward to. Who knows, maybe even TikTok or YouTube videos will be available in the future in the market where only products such as art or tweets are sold now. The possibility is limitless, making NFT and cryptocurrencies a fascinating duo now and in the future.