Wondering what exactly NFTs are, and why they’re such a big part of the blockchain universe right now? Let’s take a look…
You might have heard a fair bit about non-fungible tokens (NFTs) recently, but what is it that makes them so appealing, especially to crypto owners? Will they stick around?
What is an NFT?
A non-fungible token, or NFT, is essentially a digitized collectable, a piece of memorabilia that lives on the blockchain. Non-fungible relates to something that is unique and one of a kind — it cannot be swapped for something else the same. Even if NFTs look the same, they’re not identical.
Although NFTs are blockchain-based, they’re also different to cryptocurrencies and tokens. Similarly to many tokens, most NFTs live on the Ethereum blockchain. However, they are not a form of currency. You can trade them, similar to old skool Pokemon cards. Again, the difference is that non-fungible tokens are unique rather than simple reproductions. The idea is both simple and complex, and if you want more details on exactly how NFTs work, take a look at our previous post exploring what an NFT is.
Why are NFTs so popular?
NFTs have technically been around since 2017. That year, they had a market cap of $30 million, which grew ten-fold to over $300 million by 2020. And if you want some more stats to show the increasing popularity of these digital assets, CoinDesk indicates that NFT sales totalled $13.7 million in the first half of 2020. That number soared to $2.47 billion in the first half of 2021!
But what is it about non-fungible tokens that appeals to people? Well, for many, it’s the fact they can prove their ownership of a unique, ‘original’ asset. Works of art, music and video games have all been digitized as NFTs, along with many other items. And because they live on the blockchain, an NFT’s ownership is verified and recorded in a way that cannot be tampered with.
Some people also compare NFTs to having an autographed print — many others may well have a copy of the same print, but nobody will have one with that exact autograph.
Artists, celebrities and NFTs
So, if consumers and collectors enjoy the exclusive nature of NFTs, having the opportunity to own something one-of-a-kind, what about the people creating the tokens? How do they benefit?
For artists in all industries, there can be greater profit with digital work. Visual artists, for example, can reach greater audiences and sell their work without having to spend on materials. And because trading on the blockchain is instant, more people can access the work.
What’s more, smart contracts protect assets from forgery, removal, or destruction.
In the past few months, artists, musicians, athletes and all sorts of other celebrities have been launching NFTs — from NBA Top Shots to Damien Hirst’s art experiment, ‘Currency’, and Katy Perry’s collaboration with Theta Labs.
Can non-fungible tokens be copied?
Technically NFTs are digital copies of items… So you may think that surely you can just copy them over and over again. However, each individual NFT also has a distinct value tied to it and comes with a certificate of authenticity. So even though it isn’t a physical object, the asset cannot be easily duplicated over and over again.
Can you copyright NFTs?
A non-fungible token is a digital representation of an asset. While the original asset itself can benefit from copyright protection, can NFTs? Essentially, yes. The NFT copyright remains with the artist or the creator of the original asset.
As with all cryptocurrencies, there have been concerns over the energy consumption and environmental impact of NFTs. To mine any kind of cryptocurrency, you need a vast amount of electricity.
Some cryptocurrencies, like Bitcoin, use a Proof of Work protocol that consumes huge levels of energy. Other cryptos are switching to Proof of Stake models, which use up less electricity. If NFTs were to run on Proof of Stake blockchains, would this reduce their carbon footprint?
Are they here to stay?
NFTs have certainly seen a sharp rise in popularity over the past year and some people speculate their run may be nearly over. However, other people suggest that non-fungible tokens are revolutionizing the art world and are sure to stick.
What do you think? Are they just digitized trading cards or do they hold real-world value?
You may also be wondering how to store NFTs. Ultimately, you can treat non-fungible tokens in the same way as ERC-20 tokens and store them on a cryptocurrency storage platform, like Gridlock. And if you don’t have any NFTs but are keen to know more, join our Discord server and watch this space for some exciting Gridlock developments…