You might have heard about the new buzzword, NFT. NFTs have recently become a big hit. Last month, a famous digital artist, called “Beeple” sold an NFT of his workfor $69.3 million! Yes, someone paid that much for a digital token. But what is NFT? Is it really worth it?
What is NFT?
NFT stands for non-fungible token. These tokens are digital content pieces that are linked to the blockchain. Blockchain is the digital ledger that underpins cryptocurrencies like bitcoin and Ethereum. Unlike cryptocurrencies, NFTs are non-fungible. It means that they are unique and cannot be duplicated. For example, you can trade one bitcoin for another, and they are both the same. But NFTs are one of a kind and each one is different from the other. Cryptocurrencies are also divisible into smaller units but NFTs are not.
NFTs are digital files with verified identity and ownership. NFTs are used to represent ownership of unique items. Digital wallets are where NFTs are kept. When you purchase an NFT, you purchase the right to transfer the token to your digital wallet. This token proves that your copy of a digital file is the original one, as if you own an original painting. NFTs can be anything from Jack Dorsey’s tweet to William Shatner’s dental X-ray photo. But the NFT file does not include the digital asset itself. It is simply a contract stating that the person who owns this NFT, also owns the digital asset.
NFT is still in its infancy. Not every NFT application has ever gotten the opportunity to develop beyond an idea or a small project. Here, we will see some of the most popular use cases of non-fungible tokens.
1. Digital Content
NFTs to art are like Bitcoins to currency. NFTs help the artist have control over the ownership of their art and sell it in a good market. Another benefit for the creators is that they can track their work and earn money each time it is resold. As mentioned earlier, NFT provides several benefits for creators. But why should someone buy it? We can make as many copies of a digital content as we want. Also, the copies are literally as good as the originals. So, what’s the point of investing in NFTs? One reason is to support your favorite artist. Another one is that you have the right to use it wherever you want. Well, you can brag about it too.
NFTs provide digital asset ownership, opening up new possibilities for collectors and investors. A non-fungible token is a digital representation of collectible items including uniqueness, or digital scarcity for collectors. Collectibles can be digital assets or real-world objects. Yes, NFTs can represent the ownership of a tangible asset too. Non-fungible token collectibles can be an excellent investment. NFTs can function similarly to any other asset that you buy, and the value may rise. Since these tokens are rare, they’re quite valuable. Maybe that’s why, collectors are flocking to NFT collectibles.
When it comes to gaming, unique items that can be traded and purchased are in high demand. Their scarcity has a direct impact on their value. Gamers are already familiar with the concept of valuable, digital items. NFTs enable in-game items or elements to be tokenized and traded with other gamers. Non-fungible tokens have also sparked a lot of interest among game developers. NFTs can provide ownership records for in-game items, fuel in-game economies, and provide a slew of other advantages for players. Game developers can also earn royalties every time an item is resold in the open market.
4. Virtual Worlds
There are lots of virtual worlds existing right now. Decentraland, Cryptovoxels, Somnium Space, and The Sandbox are the most famous ones. You can buy virtual lands in these worlds. You don’t have to pay rent or tax if you own a piece of property in a virtual world. This is considered as an investment. These lands are sold as NFTs. Virtual worlds are not just lands. Virtual fashion shows and concerts are held in virtual worlds. They sell tickets as NFTs. Sebastien Borget, co-founder of The Sandbox, believes that within ten years, the NFT-based economy will outnumber the real-world economy.
5. Domain Names
One of the most intriguing applications of blockchain protocols is the use of blockchain domain names. Domain owners use private keys to control their domains in a blockchain domain system. Unlike traditional domain names, these domains are not overseen by any organization. Blockchain domain names are indelibly recorded in a public registry. They cannot be purged, modified, or censored by anyone else. Therefore, they enable websites to defend against censorship. Blockchain domain non-fungible tokens combine the convenience of NFT trading with customizable blockchain-based domain names. Users can also buy and sell blockchain domain names and crypto addresses as NFTs.
With the growing popularity of NFTs, there seems to be widespread concern about it. It’s undeniable that NFTs are compelling. However, investing in NFTs has some significant disadvantages. One of the most important downsides of NFTs concerns environmental problems. People trade NFTs using cryptocurrencies. Cryptocurrency mining produces millions of tons of planet-warming carbon dioxide emissions. Therefore, non-fungible tokens are partially responsible for climate change. The average NFT transaction consumes the same amount of electricity as a typical American family consumes in 2.6 days. Another problem is the unknown future of NFTs. It’s like opening a Pandora’s box. There are security issues too. The security of your digital token depends on the way it is stored. It’s true that NFTs are hard to steal or flip but they are not 100% safe.