How would you react if someone tells you that you can sell a simple tweet or a picture and become a millionaire, if not a billionaire? You probably will joke or ignore this foolish thing, right? Anyone would do the same!
However, this all seemed like a joke until people actually started selling jokes for a million dollars. Sounds bizarre, but it is true!
You may or may not have heard about the term ‘NFTs’, aka (Non-Fungible Token) and the hype they have created in the world. If you are not aware of that and want to know the actual story of NFT, this article is for you!
Continue reading till last to know about NFTs. So that next time you hear your friends talking about NFT, you have authentic opinions about NFT to share.
What Are NFTs?
NFT stands for Non-fungible Tokens, but that is literally nothing to know. For your understanding, you can refer to NFTs as digital assets owned by anyone.
For example, the first tweet of Jack Dorsey- Co-founder of Twitter, is a digital asset. ‘It is an NFT because it has been sold for 2.9 million dollars.’
Technically, NFTs are digitally traded tokens using cryptocurrency like Ethereum (ETH)- a cryptocurrency similar to Bitcoin or Dogecoin. The only difference is that the blockchain of Ethereum supports NFTs and has the ability to store additional information which is different from others like ETH coins.
These digital assets come in any form; they just do not have any physical appearance. They can be in the form of music, photo, art, or even a simple meme, GIF or tweet. The reason why they are being sold at such huge amounts is that they have a very subjective value, which means they cannot be exchanged with anything. NFTs have their unique authentication, and the person who owns it has the sole ownership with no similar asset existing.
How Do NFTs Work?
NFTs existed long ago in 2014, but the current hype of selling and buying digital art for the past few years has increased the popularity of these digital tokens. More than 174 million U.S dollars have been spent on NFTs to date. Basically, NFTs have unique identification codes. These tokens have digital scarcity, which other creations available on the internet do not have.
The limited the availability of NFTs, the higher their demand is, and the greater their asset value becomes.
The trading of NFTs is done on specialized platforms, just like the trading of cryptocurrencies. The topmost NFT trading marketplace is OpenSea. The trading involves no physical thing exchanged; instead, the buyer receives a certificate of ownership in the exchange of tokens.
For instance, a painting sold as NFTs will not be something to decorate on the wall, but only the ownership will be switched in the form of a digital file. The buyer might get a JPG file or a GIF among with the certificate.
Where to Buy the Most Traded NFTs?
There are multiple digital platforms where the selling and purchasing of NFTs are done. Some of them are as below:
1. OpenSea
The first-ever marketplace for NFTs is the OpenSea. It is considered the largest platform for browning and trading 30+ million NFTs through different categories. This marketplace can support different types of blockchains like Ethereum, Polygon, and Klaytn.
2. Axie Infinity
This is a very different marketplace for NFTs. Actually, it is a metaverse where you play a card game or you can breed your own pets. The pets are termed Axies. All the axies created are distinctive from each other and they can be sold or purchased.
3. Rarible
Another platform for NFT trading is rarible where digital art is traded with non-fungible tokens. This platform also owns different types of NFTs ranging from music art to games and domains. In order to get access to rarible, one must have an Ethereum wallet.
4. Mintable
Mintable is also one of those marketplaces where you can put your best-selling art on auctions. Art can be in any form or of any type.
What Gives NFTs Value?
For the common people who do not have a deep understanding of cryptocurrencies and blockchain and all, the simplest formula to understand the value of NFT is:
“Value of an NFT = Utility + Ownership History + Future Value + Liquidity Premium”
An NTF’s value revolves around these four components on the right-hand side.
- Utility Value is determined by how and where the NFT will be used.
- Ownership History tells about the previous records of the NFT owned by previous owners. The value of NFTs, which have sound ownership history, is considerably higher and is purchased by world-famous artists or companies with a good name.
- Future value depicts the valuation changes and the future cash flow of that particular NFT.
- Liquidity Premium is what decides that tokens that are created on-chain should have a higher value than off-chain assets.
How Many NFTs Are There?
According to the current stats, after the boom of NFTs in the past two years, the number of total NFTs has reached 6.1 million. These NFTs vary from art, music, games, and collectibles.
Below mentioned are the top 5 NFT tokens and protocols based on their market capitalization (See Image).
Source- Coinsrush
Final Thoughts
The world of NFTs is not as complex as it seems. Anyone can be a part of this digital purchasing and selling of art. All you need is to have something very great to sell or some good amount to be a potential buyer.
