What is an NFT? – Small business trends
Non-Fungible Tokens (NFT) are digital assets such as collectibles, games, art and virtual assets that are exchanged over blockchain platforms such as Ethereum, OpenSea, Rarible, Axie Marketplace or NBA Top Shot Marketplace and come with their digital signature indicating ownership of the asset. Thanks to the growing popularity of NFTs, creators, businesses, and celebrities are now buying and selling NFTs in an effort to explore ways to commercialize their brand and generate revenue through NFT collections.
What exactly is an NFT?
Non-Fungible Tokens (NFT) are fungible digital assets traded over the internet. NFTs are generated and traded in cryptocurrency which is digital cash with an encrypted key often in the form of a random string of numbers. NFTs are popular today because they offer a unique marketplace for digital assets with even companies creating their own NFTs as part of their marketing mix. In addition, these NFTs allow users a flexible way to store, control and protect the information related to their identity. NFT Advertisers may also receive royalties from their NFTs and receive a percentage of future sales of their NFTs.
What does NFT stand for?
Simply put, NFT stands for Non-Fungible Token, which is a unique digital resource that belongs only to its owners. To create an NFT, one must create an NFT from a digital asset. Popular NFTs include digital works, digital collectibles, videos, and anything that can be digitized.
How do non-fungible tokens work?
Essentially, a non-fungible token transforms a piece of digital art and other collectibles into a unique, verifiable digital asset that can be traded on the NFT market or NFT blockchain technology. Many NFTs come with their own unique information, including ownership and transaction details stored under its smart contract. NFT creators can also add details to their NFTs such as creator identity, secure links to files and more during transactions,
Those interested in collecting or investing in non-fungible tokens need a digital NFT wallet. A digital wallet is a cryptocurrency wallet that supports the blockchain protocol on which NFTs are built. Users often use Bitcoin, Ethereum network and Dogecoin as cryptocurrencies which are the medium of exchange.
NFT vs. Cryptocurrency
Cryptocurrencies as digital versions of physical money that are controlled by a private cryptographic key that often involves a series of random numbers. Like paper money, cryptocurrencies offer the same values and help power the digital economy that acts as currency. Ownership of cryptocurrency is determined by holding a private key and using that private key to make transfers. Cryptocurrencies help convert a digital file into a non-fungible token referred to as “minting”, in addition to acting as a transaction medium for NFTs.
Like cryptocurrencies, NFTs are issued on blockchains, each NFT comes with its unique digital signature that allows owners to prove ownership as well as the authenticity of the NFTs.
What can be done to an NFT?
Most NFTs come with unique features and can be created from any kind of digital content such as photographs, art, music, GIFs or a video clip, they are so versatile that they can even include tweets and memes in the NFT market. Thanks to the NFT marketplaces that act as auction houses, they have made it easy to trade in NFTs and offer support on how to sell an NFT.
Music
If you are musically creative, you can create music NFTs on a number of marketplaces including Rarible, OpenSea, Mintable, Ethereum blockchain, Axie Infinity Market and others. All you have to do is register on the marketplace and decide whether you want to create a single collectible or multiple collectibles. With a single collectible, you have the ability to craft a single collectible that produces outstanding NFT. In the case of multiple collectibles, you have the option of issuing multiple copies of the same collectible.
Digital artwork
To sell digital artwork, it is easy for artists to create their digital art with their computer or smartphone, convert their digital art from a variety of formats such as JPGs, PNGs or MP4s and convert them to NFTS to sell them .
Game
You can also earn money by selling in-game items such as virtual avatars, video game skins, weapons and even armor. Players who collect more items throughout their gaming experience with a particular game can sell them for a profit.
Videos
Video clips are another popular NFT trade. For example, NBA Top Shots NFTs offer highlight videos of moments in NBA history. Besides real highlights, classic movie scenes, as well as video art created by artists, are also for sale at OpenSea.
Physical artwork
Artists can create a digital copy of their physical art such as photographs or paintings and sell it on the NFT market. When the sale of NFTs comes over a blockchain network, you help cut out the middleman, where artists can deal directly with buyers and enjoy full profits from their work. They can even set up their own royalties for future sales.
Collectibles
The digital scarcity that NFTs offer makes them attractive to collectibles such as playing cards, digital artist art collectibles, game collectibles, celebrity memorabilia and more as their value commands high prices due to limited supply. Collectable NFTs can be traded on CryptoKitties3, CryptoPunks4 and NBA Top Shot.
Tweets and memes
Not surprisingly, tweets and memes provide high value in the NTF universe. The first tweet ever by Twitter co-founder Jack Dorsey was sold for close to 3 million. Influencers also create memes and sell them as NFTs and make a tidy sum of money.
Virtual property
NFTs have also penetrated the world of virtual reality as well. The power of NFT now allows users to buy virtual property, decorate their virtual homes, create their own avatars, meet up and make friends. Decentraland, is an online real estate environment that simulates the real world where people explore the world and interact through their avatars.
Advantages of NFT
Non-fungible tokens come as tradable and unique digital objects thanks to smart contracts. Their unique metadata acts as a digital deed offering authenticity of ownership and traceability. Some of the benefits of NFTs include:
Cost- and time-friendly: NFTs can be created relatively easily and valuations are easy thanks to the existing NFT marketplaces that make it cheap to mint, sell, price and bid on NFTs.
Increase engagement: NFTs, besides being more than a collectible or piece of art, can be used by businesses to increase brand recognition by better connecting with customers and fans by offering them access to exclusive offers, and the opportunity to earn rewards.
Customer manager: Unlike physical goods, NFTs are traceable and help identify their owners and help businesses gain valuable insight into their owners. These come in handy for segmentation and engagement strategies for your brands. In addition, they offer a nice gateway to target tech-savvy customers.
Potential income streams: because NFTs are driven by digital scarcity, creators can sell these exclusive, limited digital assets that can net them a handsome sum.
Disadvantages of NFTs
Although NFT trading is an exciting phenomenon, many people are now learning how to make money with NFTs, but it has its own challenges:
Physical assets still dominate: as much as owning NFTs is tempting, NFTs remain a digital asset that pales in comparison to unique physical assets like a painting or a sculpture.
Environmental impact: Minting and transacting NFTs comes with a significant data processing process that requires huge amounts of energy.
Price volatility: Prices for digital collectibles are subject to volatility which opens up the risk of losing money on the investment of NFTs and damaging your personal finances.
Is NFT worth it?
The NFT market is booming with the craze for turning digital images into assets. There is no sure answer when it comes to whether NFTs are worth it. These are early days for the phenomenon because NFTs are new, there is limited legal and regulatory clarity on how laws might apply to them. legal issues related to contracts, property rights, intellectual property rights, privacy and securities laws have not yet been addressed in relation to the NFTS. NFT marketplaces operate globally over the internet across multiple jurisdictions, making them difficult to manage.
What is an example of an NFT?
NFT artwork by digital artist Beeple’Everydays: The First 5000 Days’ is by far the most popular NFT that brought the discussion of NFTs into households around the world. The digital artwork was auctioned off by auction house Christie’s and sold for a whopping $69,346,250. In fact, price-wise, NFTs are estimated to offer the same value as real-world goods.
Image: Depositphotos
