2 - NFTs: an Exploding Market
What are NFTs?
Non-Fungible Tokens (NFTs) refer to unique, non-transferable digital assets stored in blockchains. This one-of-a-kind asset is something that cannot be tinkered with but can still be traded as an asset or bought with a cryptocurrency such as Ether (ETH), USD Tether (USDT). Essentially, this makes an NFT a digital certificate of authenticity: The token serves as a unique code irrevocably associated with a digital file, allowing to distinguish the original file from copies floating around on the Internet. This relatively new technology allows for various applications.
NFTs are used to represent ownership of unique items. They let us tokenize things like art, collectibles, even real estate. They can only have one official owner at a time, and they're secured by the Ethereum blockchain – no one can modify the record of ownership or copy/paste a new NFT into existence. NFT stands for non-fungible token. These things are not interchangeable for other items because they have unique properties. Fungible items, on the other hand, can be exchanged because their value defines them rather than their unique properties. For example, ETH or dollars are fungible because 1 ETH / $1 USD is exchangeable for another 1 ETH / $1 USD.
Several famous examples of where NFT was used include the Beeple’s image auction sale worth $69M USD. Twitter founder Jack Dorsey sold his very first tweet through NFT marketplace Valuables, sports platform Top Shot - where basketball fans can buy and collect packs of NBA highlights. NFT is also used for investments, with an investor specialising in this technology ranking among Europe's biggest Fintech investors in the seed stage. The NFT world is relatively new. Theoretically, the scope for NFTs is anything that is unique that needs provable ownership.
The Characteristics & Advantages of NFTs
Limited: The value of NFTs comes from their scarcity. NFT creators can create an unlimited volume of non-fungible tokens; they often modify the underlying digital file to increase interest.
Indivisible: Most NFTs are indivisible into smaller units, impossibly buying a fraction of them.
Unique: NFTs have a strong information tab that explains their uniqueness. This information is fully secured and genuine by blockchain.
Easily Transferable: NFTs are purchased and sold on special marketplaces, normally via the medium of cryptocurrencies (e.g. ETH, USDT). The use of NFTs depends on their originality.
Trustworthy: Blockchain technology provides the framework for non-fungible tokens. Therefore, you know that your NFT is accurate since it’s hard to create counterfeits with a decentralised and permanent record.
Maintain Ownership Rights: This refers to an NFT’s worth of decentralised platforms where no purchaser can change the data later.
NFTs Booming
The market cap of NFT, or non-fungible tokens, shows a fast-moving development, growing nearly ten-fold between 2018 and 2020. The source of these figures states that coming up with a market capitalization for a market this young is "a tricky exercise" and even mentions this particular estimate is "conservative". The volatile nature of developments in this new market can also be seen in the transaction volume of NFT for various segments as well as the market size of NFT within the same segments: Transactions declined for gaming, whilst value grew for arts. This latter aspect was demonstrated in early 2021, when an NFT digital artwork was sold in an auction for roughly 69 million U.S. dollars - making it the third-most-expensive art piece ever sold by a living artist.
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