NFTs: What are they? What to do with them?
As we move further into the digital age, more and more people are looking to invest in digital assets. One of the most promising asset classes right now is non-fungible tokens, or NFTs. These tokens represent unique digital assets that have real-world value.
In this blog post, we will discuss why NFTs are such a compelling investment, and we will look at some of the biggest projects that have made it big in the NFT marketplace!
What is an NFT?
Before we take a leap and talk about investing, let's start with the basics. What is an NFT?
Simply put, a non-fungible token (NFT) is a digital asset that represents something unique. Unlike traditional cryptocurrencies like Bitcoin and Ethereum, which are fungible, meaning they can be divided and traded without affecting the value of the whole, NFTs cannot be subdivided. Each individual NFT is unique and has its own value.
NFTs are created through "tokenization." This means that the asset is turned into a digital token that can be stored, traded, and verified on a blockchain. In many cases, NFTs represent real-world assets such as artwork, rare collectibles, or even virtual in-game items.
The key advantage of NFTs over traditional cryptocurrencies is that they can be easily tracked and verified. This makes them ideal for verifying the ownership of digital assets and preventing fraud. Because each individual NFT is unique, it's also possible to create markets where they can be traded like stocks or commodities.
An NFT showcases exclusive ownership by conferring complete control over the asset to one specific user. To put this into perspective, let's say that you purchase an NFT of a Picasso painting. You would be the only person in the world who could sell or trade that painting, as no other user would have a valid claim to it. This is in stark contrast to traditional cryptocurrencies like Bitcoin, where anyone can own and trade them without restriction.
But how exactly do NFTs work, and how are they related to cryptocurrency?
What's interesting is that while NFTs are often bought and sold using cryptocurrencies, like Bitcoin and Ethereum, they are, in fact, not cryptocurrencies themselves. NFTs are built on top of existing blockchains, using the technology behind cryptocurrencies to create and track digital assets.
This means that NFTs can be used with a variety of different blockchains, each with its own strengths and weaknesses. For example, Ethereum is well-suited for creating complex NFT contracts, while Bitcoin is better for transferring value quickly and cheaply.
What item can you own with an NFT?
When you purchase an NFT, you basically get exclusive ownership of a particular digital asset. However, others can still view and share that particular artwork.
Let's talk about the most expensive NFT Beeple's Everyday: the First 5000 Days, which sold for $69.3 million on 11th March 2021. This NFT was a collage of 5000 digital images bought by Vignesh Sundaresan, the founder of the Metapurse NFT project.
While Sundaresan is the owner of the NFT, the image has been copied, viewed, and shared by millions of people over the world. So, what you need to understand is that when you buy an NFT, imagine that you have bought an autographed print wherein, though it has been signed to you, anyone can view the work.
How many kinds of NFTs exist?
There is an ever-growing variety of NFTs being created on a daily basis. Some popular examples include digital art, virtual in-game items, and rare collectibles. However, the possibilities are endless and limited only by the creator's imagination.
Let's take an overview of these different NFTs that are the most popular
One of the most popular applications for NFTs is collecting rare and unique items. One well-known example of collectible NFTs is CryptoKitties, which are digital cats that can be collected and bred.
Another popular application for NFTs is artwork. This can include anything from digital paintings to collages and sculptures. One of the most famous examples of an NFT artwork that we covered earlier in the $69.30 million Beeple's Everyday: The First 5000 Days.
Tickets to events, such as concerts or sports games, can also be stored and traded as NFTs. This allows fans to buy and sell tickets without having to worry about losing them or not being able to get into the event.
Music and Media
NFTs can also be used to store and distribute music and media. The legendary band Kings of Leon released their new album 'When You See Yourself' as an NFT in March 2021. These will include three types of tokens that will provide different accessibilities called the golden ticket and raised almost $1.4 million!
Virtual In-Game Items
Another popular application for NFTs is virtual in-game items. These items can range from cosmetic upgrades to powerful weapons and armor.
One of the more interesting applications for NFTs is their ability to represent real-world assets. For example, many NFT projects focus on the tokenization of real estate alongside luxury goods. This allows for a much more secure and efficient way to trade these assets.
Believe it or not, there is actually an NFT market for memes. This allows users to trade and collect their favorite internet memes.
Domain names are another type of asset that can be stored and traded as NFTs. Decentralized Domain Name Services like Unstoppable Domains and the Ethereum Name Service (ENS) are the top examples of domain name NFTs.
This is just a small sampling of the different types of NFTs that are being created. As blockchain technology continues to evolve, so too will the variety of NFTs that are available. So keep your eyes open for new and exciting applications for this emerging technology!
One thing to keep in mind is that not all NFTs are valuable. Just like any other type of asset, some NFTs are more prized than others. It's important to do your research before investing in any particular project or token.
And that leads us to the question -
So, are NFTs the right choice of investment for you?
Well, that depends on a few factors. Here are some things you need to consider:
What kind of investor are you? Are you looking for short-term or long-term gains?
How much risk are you willing to take? NFTs can be quite volatile in the early stages of their development.
What kind of return are you expecting? NFTs can provide high returns, but they also come with a higher risk.
That being said, if you can answer these questions and are comfortable with the risks, NFTs could be a great investment for you! Remember, do your own research, ask around in the community, and make an informed decision!
On the same line, Sif has launched an unique platform for kids, where kids can collect free NFTs just by doing their homework, and these NFTs can be used as a way to multiple Web3 games on the Metaverse. Checkout the Homework NFT app now. Happy collecting!!