LONDON, Nov 17 (Businesshala) – Non-fungible tokens (NFTs), a type of digital asset, have exploded in popularity this year, with NFT artifacts selling for millions of dollars.
This trend is baffling to those who may wonder why so much money is being spent on items that only exist in digital form and can be viewed by anyone for free. Supporters see NFTs as the next step in art collection.
What is NFT?
An NFT is a digital asset that exists on a blockchain, which is a record of transactions held on networked computers. The blockchain acts as a public ledger from which anyone can verify the authenticity of the NFT and who owns it.
So unlike most digital objects that can be reproduced endlessly, each NFT has a unique digital signature, which means it is one of a kind.
NFTs are usually bought in cryptocurrencies or dollars and the blockchain keeps a record of the transactions. While anyone can watch NFTs, only the buyer has the status of being the official owner – a kind of digital bragging rights.
Buying an image or video NFT does not normally mean that the buyer acquires the copyright of the underlying item.
What kind of NFTS is there?
All kinds of digital goods – pictures, videos, music, text and even tweets – can be bought and sold as NFTs.
Digital art has seen some of the most high-profile sales, while in sports, fans can collect and trade NFTs belonging to a particular player or team.
For example, on the National Basketball Association Top Shot platform, enthusiasts can purchase collectible NFTs in the form of video highlights of moments from the game.
While these highlights can be viewed for free on other platforms such as YouTube, people are buying status as owners of a special NFT, which is unique because of the digital signature.
NFTs can also be patches of land in virtual world environments, digital clothing, or the exclusive use of the name cryptocurrency wallet.
Twitter boss Jack Dorsey’s first tweet – “Just setting up my Twitter” – sold for $2.9 million as NFTs in March.
How much has the market grown?
Traded since around 2017, NFTs surged in popularity in early 2021, then another explosive surge occurred around August.
According to data from market tracker DappRadar, sales volume increased to $10.7 billion in the third quarter of 2021. This was eight times more than the previous quarter.
The largest NFT market, OpenSea, saw sales of $2.6 billion in October this year, a massive increase from $4.8 million in October 2020.
Why has NFTS increased?
Some attribute this frenzy to the lockdown, forcing people to spend more time on the internet at home.
NFTs are seen as a way to hold assets in online and virtual environments, which can communicate social status and personal taste – for some, it is the digital equivalent of buying an expensive pair of sneakers.
For others, the attractiveness lies in rapidly rising prices and the potential for big returns. Some buyers “flip” the NFTs, selling them within a few days or hours for a profit.
The recent price increase in cryptocurrencies like bitcoin, which grew by nearly 300% in 2020, has also created a new group of crypto-rich investors who spend their cryptocurrencies on NFTs.
Why are NFTS important?
Enthusiasts see NFTs as the future of ownership. Property of all types – from event tickets to homes – will eventually have their ownership status marked as such, he believes.
For artists, NFTs can solve the problem of how they can monetize digital artworks. They can get more income from NFTs, as they can get royalties every time the NFT changes hands after the initial sale.
Proponents of NFTs say that NFTs could even replace music, games and gaming.
what are its dangers?
Like cryptocurrencies, NFTs are largely unregulated. Anyone can make and sell NFTs and there is no guarantee of its value. If the hype dies down the damage can pile up.
In a market where many participants use pseudonyms, fraud and scams are also a risk.
((Reporting by Elizabeth Howcroft; Editing by Janet McBride))