A Complete Guide to NFTs
In the past few months, you might have heard about digital arts being sold for millions of dollars. Not only art, but music videos, tweets, and even memes. But how are they connected to NFTs? And why is this trend becoming so popular? Let’s check out!
What is NFT?
Before proceeding to why NFTs are getting famous, it is crucial to understand what it is. NFTs stand for Non-Fungible tokens, meaning they cannot be exchanged for anything else. Cryptocurrency, however, is fungible; 1 Bitcoin can be broken down into two half bitcoins. In the case of NFTs, however, these are unique, having unique digital signatures, and therefore, cannot be broken down.
NFTs are assets, which are real-life items, in a digital form. These can be bought and sold for cryptocurrency. Nowadays, Ether is the most used crypto involve in the purchase of NFTs.
Still not clear? Well, let’s look at an example. An artist creates an art that is in digital form. She registers an NFT with her artwork. Doing such will prevent anyone from plagiarizing or seeking it as their own, though they can view it and save it on their phones for free. But the ownership rights still remain with the artist.
If the artist wants to sell her art, she can sell the NFT (token) to the buyer, and the buyer can add his digital signature and claim the ownership. Note, the NFT token will still possess the signature of the artist. After purchase, the NFT will have two signatures, and the process will go on as long as there’s a demand for that art.
If you bought the art, for example, you could sell it for a higher price only if anyone wants to buy it; if the demand rises. If no one does, well, then you don’t earn anything but a piece of the file. NFTs, therefore, are a risky investment.
Where are NFTs used?
NFTs can be inserted with digital artworks, game features such as skin or costumes, YouTube or any videos, Instagram posts, etc. Typically, anything on the internet can be copied and supplied in bulk amounts. However, since NFTs create digital scarcity and ensure there’s only one kind of that asset, it increases the value of the item. With an increase in value and short of supply, the demand is predicted to rise.
Even though you can take a screenshot of the art by Beeple sold for millions, the ownership credits will not be yours; unless you buy it, of course.
NFTs are used in blockchains, the record keeper of all crypto exchanges and transactions. They have only one owner at a time, and this ownership is verified. To purchase an NFT, you have to possess a digital wallet and some crypto.
What is the future of NFTs?
Although it is uncertain how NFTs will proceed with time, business researchers and investors are willing to spend some to find out. It is true that NFTs have shown success in some areas, but will its demand keep rising? Will people be willing to spend on something fortunes for getting a file under their name? What ensures its security?
These questions are still unanswered, but with the world, changing, and NFT popularity rising, we can hope to discover the unknown very soon.
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