You might not be into the world of gaming, blockchain, and cryptocurrencies but have certainly come across the term NFTs or Non-Fungible Tokens. This article will demystify NFTs and examine why they have become so popular.
What are NFTs
NFTs is an acronym that refers to non-fungible tokens. To begin with, let’s clarify that NFT is not a cryptocurrency. Still, just like crypto, NFTs utilize blockchain technology to determine ownership of digital assets like works of art or collectibles. One can replicate digital assets such as works of art, but NFTs ensure that only the original work retains real value. Nowadays, NFTs are also making inroads into the decentralized finance sector. NFTs contain unique numerical identifiers that cannot be duplicated and make it possible to trade on assets using blockchain technology.
No one ever thought there would come a time when the world would consider digital assets like paintings, pictures, GIFs, videos, and even tweets as crypto investments. The average price of an NFT was $ 807.52 for the year 2021, as recorded by Non-fungible.com. During the same period, the Global Non-Fungible Tokens Market value stood at 15.70 billion dollars. The projection is that by 2028 the value of Global Non-fungible Tokens will hit 122.43 billion dollars. There is a perpetual rise in demand for digital art collectibles, and we shall look at some factors responsible for this trend.
Why is NFT Gaining Popularity?
NFTs are great support for digital creators. Through NFTs, players in the digital economy, such as artists, musicians, and gamers, have a way to copyright their work and make a decent income. For instance, Jack Dorsey, the CEO of Twitter, used his first ever tweet about Twitter to create an NFT that sold for 2.9 million dollars. NFTs are growing in popularity because digital creators can earn an income for their work.
Before NFTs, digital creators struggled to get recognition for their work. This is because once you create a digital piece of art, it becomes challenging to sell the original unless you discard the original file. NFTs, give digital creators a way around this challenge so they can now sell their works, similar to how artists can sell their art pieces on canvas. Digital creators can also control how many pieces of their work they want to sell, limiting supply and making their work more valuable.
By their very nature, NFTs can be like digital receipts showing that you are the owner of some collectible piece. Because of this feature, NFTs are a digital symbol of status. In a more traditional setup, the elite would buy precious metals like diamond or pieces of art to show their position in society, but now NFTs opens new avenues to achieve the same. In this way, purchasing NFTs for perhaps thousands or even millions of dollars shows you are an endowed person without taking up any physical space.
NFTs are an investment tool. Like valuable pieces of art that cost a dime can sell for a profit, the value of an NFT can grow with time and allow the owner to sell it at a profit. The value of an NFT is determined by its utility, for instance, as a token in gaming. The ownership history of an NFT could also affect its value, especially if it belongs to a famous person or a well-known brand. Speculation of an NFT’s future value and its liquidity premium are other factors that could determine its value.
NFTs have brought a significant shift in the world of blockchain technology by enabling artists, musicians and gamers to copyright their work. The evolution in the NFT marketplace will continue, so if you are interested in NFTs, this is the right time to hop in.