What is an NFT and how did it start?
A non-fungible token (NFT) is a digital record that is on the blockchain ledger. The majority of NFTs come from the Ethereum blockchain and use blockchain technology to uniquely identify digital objects and verify their authenticity and origin. An NFT token can be essentially anything digital, ranging from an image, video, gif to items in digital games. The current craze is around NFT being the answer to selling digital art and collectibles, and many artists and celebrities have joined this exploding industry by selling their own collectibles.
So how did this idea of a digital authenticator begin?
The phenomenon of NFTs was first introduced on the Ethereum blockchain back in 2017 with Cryptopunks (collectible digital characters). Another of the first uses of NFTs was CryptoKitties, a game where users can trade virtual kittens. In 2018, the cryptocurrency kitten Dragon was purchased for an astonishing 600 Ether. This is worth over 1 million USD in today’s value!
How crazy is that…but I mean, who doesn’t love cute pink kittens with a bit of an attitude?
There are also games where you can purchase in-game items as NFTs, for example, a virtual reality game called Decentraland which offers NFTs representing virtual plots of land in the game.
NFTs is a rapidly growing market. NFTs blew up (and is currently blowing up) early this year. Just two months ago in February, a one-of-a-kind Nyan Cat animation NFT optimized by original Nyan Cat meme creator Chris Torres was sold in a bid for 300 Ether.
Hey, I guess people really do love their cats and kittens. But where are all the dog people…?
Just opened up the flood gates to the future of meme economy in the Crypto universe, no big deal~
But seriously, thanks for believing in Nyan Cat all these years. I hope this inspires future artists to get into #NFT universe so they can get proper recognition for their work! pic.twitter.com/JX7UU9VSPb
— ☆Chris☆ (@PRguitarman) February 19, 2021
What are Fungible Assets?
Fungible assets are any goods or assets where each unit is interchangeable. This means that one unit of a fungible asset is equivalent to another. Cryptocurrencies, pure gold, precious metals, company shares, and bonds are considered fungible assets. For example, one unit of Ethereum (ETH) is equivalent to another unit of ETH; after trading, you will end up with the identical thing.
It would be interesting to note that the cryptocurrency New Economy Movement (NEM) would deviate away from the general categorization of a fungible asset. This is because its developers have created an automated system where special tags are put on hacked coins to indicate to traders and exchanges not to use or trade the coins.
To put it simply, a non-fungible token is unique and irreplaceable by anything else.
How might NFTs affect the future? Are NFTs becoming mainstream?
Usage of NFTs in the online gaming world has already been introduced through games like Decentraland and our all-time favorite kitten game Cryptokitties. However, NFT has been envisioned to boost gaming potential even further. There are various exciting features that NFTs could bring to the gaming industry.
Firstly, NFTs would allow records of ownership for purchased in-game items to be kept. I know you might be thinking here:
‘but what if I quit the game or the developers close the game. Do I just lose my money and investment?’
The answer is no.
In theory, the in-game items are valuable not only within the game world but also in real life, meaning that items themselves could outlive a game. Players who decide to stop playing a game could alternatively sell their NFT (and maybe even make a profit due to the selling point of NFTs being one-of-a-kind). What is the most exciting however is that according to Decentraland, NFTs allow for items to be moved to different games, even if they aren’t from the same developers.
Like wow, just how incredibly exciting is that? You could purchase an NFT skin in one game and flex your unique skin in another!
Secondly, player records can be stored on blockchains and transferred in the same way as items through NFTs. This would mean that it would also be possible to maintain and be recognized by a single identity across gaming platforms, simplifying login and account creation.
Future of NFT not limited to gaming
As we can see, NFTs could potentially bring countless benefits to the online world, but hold on! The future of NFTs is not only limited to gaming. This phenomenon has also been speculated to revamp the music and movie industry. Many of us have experienced the frustration where music or movies purchased from a streaming platform becomes unavailable due to loss of distribution rights or being unavailable in another country.
Like excuse me, I bought this movie but why do I not have access to it now?
This sparks the question of whether purchased digital content is truly yours to own due to the control that content sellers have. NFTs on the other hand could potentially solve this problem and allow the owner of the NFT access to the music or movie where and whenever.
Furthermore, NFT can potentially be applied to non-digital, tangible assets. There are already ongoing projects looking at using NFTs in real estate and unique fashion items. Think about having a limited-edition fashion item that can easily be verified as original through NFTs.
So why buy NFTs? What is the point?
The main advantage of NFTs would be that they are used to represent and authenticate ownership of a unique asset as they are fully embedded in the blockchain. The record cannot be modified nor replicated by a new NFT. This one-of-a-kind nature of NFTs allows assets to be considered valuable.
Buying an NFT generally gives you basic usage and ownership rights, however, artists and creators typically retain all intellectual and creative rights. This means that buyers are essentially just purchasing the bragging rights of being the official owner. But I mean, some people might find some things really cool to brag about.. maybe like the bidder who bought Jack Dorsey’s (Co-founder and CEO of Twitter) first tweet for over USD $2.9 Million?
Another important point is that NFT purchases would help directly support content creators because as we all know, digital art can now spread easily and freely across the web.
just setting up my twttr
— jack (@jack) March 21, 2006
Where can I buy NFTs
To give you a better idea, the recent Nyan cat NFT was sold on Foundation, whilst popular NFT games including CryptoKitties and Decentraland operate off Opensea. Currently, the majority of marketplaces accept only Ethereum (ETH) for payment. However, platforms like Nifty Gateway have allowed for credit card payment in an attempt to help non-crypto users to ease into the crypto world.
The NFT industry is growing like crazy with NFT markets witnessing millions of dollars in sales and transactions. Demand is exploding and many artists and celebrities have jumped onto this trend to sell their own NFT collectibles. What are your thoughts on this new NFT craze? Do you think this craze will keep growing or do you this it is all a hype?
Disclaimer: The information on this website is purely for information. Elbaite is not a financial adviser, and nothing stated here is to be taken as financial advice. You should seek independent legal, financial, taxation or other advice relevant to your financial situation before making any investment decisions.