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Non Fungible Tokens, you most likely have heard about them but do you understand the concept of art selling in the digital space for a tiny fortune. If you understand what NFTs are, the reason why they exploded out of the block and became insanely popular might be harder to come by.
2021 was the year NFTs exploded but like all things crypto, the period they go mainstream is usually distant from when they started gathering momentum. In this piece, we will look at NFT holistically and also try to demystify its insane popularity.
What are NFTs?
NFT is an abbreviation for Non-Fungible tokens. So, what are Non-Fungible tokens, and why is everyone getting crazy about them?
A non-fungible token (NFT) is a type of cryptographic token on a blockchain that represents a class of unique assets. These can either be entirely digital assets or tokenized versions of real-world assets. As NFTs are not interchangeable with each other, they may function as proof of authenticity and ownership within the digital realm.
I'm sure that doesn't really make it clearer but I will break it down a little:
Fungibility implies that an asset's units are interchangeable and essentially indistinguishable from each other. For example, fiat currencies are fungible because each unit is interchangeable with any other equivalent individual unit.
The ability that makes money to be interchangeable and a legal tender are referred to as fungibility. For every time you take out fifty units of your currency and you are given five pieces of ten units of the same currency, you have fungibility to thank for that.
Today, there is increasing attention being paid to Non-fungible tokens and the potential it holds in revolutionizing the arts and systems of ownership. Non-fungible tokens (NFT) have become digital assets that represent a wide range of unique tangible and intangible items, from collectable sports cards, trivia items to virtual real estate and even digital sneakers.
The Underlying workings of Non-Fungible Token
What this then implies is that an item referred to as an NFT is hosted and housed on the blockchain and only one piece of that item can be made. The blockchain makes sure of this. NFTs follow the same protocol as other cryptocurrencies and as such their creation, existence and ownership are proven by the blockchain.
It must be said at this point that if you purchase an NFT, you are not purchasing the digital asset as it were. This is because your NFT can still be downloaded depending on how the NFT is tokenized. Think of it as purchasing an album off Spotify, yes, you can listen to the album, but someone owns it. It is the same way when someone uses a digital copy of an NFT that is owned by someone else.
What you are purchasing then is a digitally-authenticated note that the asset is owned by you and you alone. It is that right that is transferrable and that is what you are really purchasing when you buy an NFT.
NFT addresses the issue of ownership in the digital space. By purchasing an NFT, the blockchain records you as the one who has the token. It does not mean that the artwork cannot be used elsewhere; in fact, you will most likely see the artwork you own on the internet if it is popular enough. What matters is that you own it. That is what NFT is about.
What can be NFT?
Anything can be NFT; literally, anything, from music, Virtual furniture to Times Magazine Covers NFT is an interesting field. Already, we have seen crazy auctions for NFT arts, from Beeple Insane sale of a $69 million NFT art to the Gucci Ghost that was purchased for $3,600
Why are NFTs insanely popular?
NFTs are not new, the first set of NFTs to hit the market was called Colored Coins; they were basically bitcoin tokens that had the functionality that could allow them to represent other tokens and assets on the blockchain. This was in 2012. However, Coloured Coins are not considered true NFTs for everyone.
The first recognized NFTs were released as part of Etheria, a 33-by-33 3D map of 457 purchasable and tradable hexagonal tiles upon which small structures can be built with Lego-like bricks. Version 1.0, with internal trading mechanisms that appear to be non-functional, was deployed to the Ethereum main net on October 21st, 2015. Version 1.1, released on Oct 29th. According to OpenSea most of the NFTs went unsold.
It would take another five years before NFTs would come yet again to the public consciousness. This was via cryptopunks and cryptoKitties, they were so popular that they ended up clogging up the Ethereum Blockchain. That was not the only part though – people made a lot of money flipping cryptokitties.
It was until the global lockdown of 2020 that NFT came again to the mainstream and now, we can be certain that it is not going anywhere again. More than any other thing, the boom of NFTs have shown us that there is an unpredictable adoption culture when it comes to new technologies.
NFTs became insanely popular on the premise of scarcity, like several other components of crypto and other technological business models, NFTs feed off emotions. During the lockdown, the digital shift happened and with it the rise of NFT. During the lockdown, the interest in trading cards boomed and with it NFTs. The digital collectible market of NFTs grew a whopping 26 Times based on Year on Year growth compared to Q1 2020. It did an entire $1.4 Billion in sales.
With the advent of GameFi and other play-to-earn structures within the metaverse, forecasts are clear enough to show that while sales might drop, NFTs are not going anywhere. It will always be a part of our world as we have come to know it at this present time. Even the Forbes Tech Council agrees.
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