In recent years, the terms blockchain, cryptocurrency and so on have found their way into our everyday vocabulary. Technology and many other diverse applications have slowly made their way into our lives and are a prime example of our rapidly approaching, dominantly digital future.
With cryptocurrency rising rapidly up the ranks, this is another application of the technology that has taken the market like a storm. A multi-million dollar concept that has caught the eye of many around the world. Today we’re going to decipher NFTs and discuss what exactly made them so popular.
What are non-fungible tokens (NFTs)?
Essentially a digital asset that is viewed as the digital equivalent of a physical ledger, an NFT is therefore a blockchain ledger. NFTs represent real objects like art, music, videos, etc.
They enable people to trade ownership of digital entities in the form of a “token”. Since these are supported by blockchain technology, the records of these transactions are permanent and cannot easily be changed or modified.
Each token has its own unique identification and due to this concept no two tokens are the same and therefore no two digital entities have the same token. It can be thought of as a digital certification or even a digital signature attached to a particular digital asset.
This is exactly what all these headlines that keep paying the millions that are normally paid in cryptocurrencies refer to – this certificate. Buying an NFT doesn’t necessarily mean you are the owner of the music, video, or anything else.
An NFT only grants the person copyrights or rights of use if this is clearly stated in the license. By that we mean that an NFT will only give you the right to digital brag if you have an express license that says you have the rights.
What is the difference between an NFT and a cryptocurrency?
A non-fungible token was developed using the same technology that is responsible for cryptocurrencies like Bitcoin and Ethereum, and has only that in common with them.
Fungible means something that can be exchanged for something else, similar to physical money, as well as cryptocurrencies. Also, its value never changes, which means that a dollar is always a dollar and, in a similar way, one bitcoin is the same as another bitcoin. This fungibility makes it so easy to trust and conduct transactions securely.
But NFTs are different. As already mentioned, every digital signature is unique, and therefore an equal exchange is not possible. Hence it is not fungible. So a token that represents a meme is not the same as another token that represents another meme.
How do NFTs work?
These tokens exist in a blockchain. It is a distributed public ledger that keeps track of all transactions and most of us are familiar with how how it works as it is the underlying technology that has made all cryptocurrencies possible.
More specifically, NFTs are usually present on the Ethereum blockchain, although there are other blockchains that can support them as well. When an NFT is created with digital objects, it represents both tangible and intangible objects. Some of them are:
– Videos and sports highlights
– Designer sneakers
… and so on.
Do you know that even tweets count? In fact, Jack Dorsey sold his very first tweet in the form of an NFT for more than £ 2 million. So NFTs can also be viewed as collectibles, only in digital form.
Just like in the real world, people get the actual oil painting; in the virtual world, they get the digital file that contains it. In addition, the person also receives exclusive property rights and the interesting thing is that only one person can own one at a time.
Each token has its own unique data and this makes it very easy to identify and verify the owner. Transferring tokens between owners is also a straightforward process.
Owners or creators can also save any specific data they want to keep in it. Artists who want to sign their works of art, for example, can simply do so by including their signature in the metadata of the NFT.
What are NFTs used for?
Source: Euro News
With the help of these tokens and the support of blockchain technology, artists and content creators now have a unique opportunity to monetize their work and get what they deserve for it.
Now artists no longer have to rely on art galleries or auction houses to showcase their art. You can simply sell it direct to potential buyers as an NFT and be even more profitable than if they had used the traditional method.
In addition, artists can program in royalties and receive a specific portion of the sale when the art finds and is sold to a buyer. This has proven to be the most attractive feature among all of the others, as artists typically are not paid future revenue once their art is sold.
While NFTS has caused quite a stir in the digital world this year with the growing number of NFT owners, this is a very personal decision. There are risks, and since this is a fairly new practice, it is not entirely easy to assess its stability. Do your research before making a choice.
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