NFTs — Decoding the Newest Crypto Craze That’s Sweeping the World
Take a quick look at the image above. The quirky grey pixelated cat flying through space on a rainbow looks pretty cool, isn’t it? But, can you guess how much this image is worth? Well, the digital rendition of this Nyan Cat meme from 2011 sold for about US$590,000 in an online auction. Sounds unbelievable? If that’s a hard pill to swallow, let’s have a look at another image.
Now, you might be wondering how much does this image costs. This image was sold for 4,200 ETH, approximately $7,584,485.82. Rolling your eyes with disbelief? Thinking what’s so special about this digital art? Well, the image you are looking at is an NFT. And, this is a part of a collection of digital files known as CryptoPunks, released in 2017. NFTs are having their big-bang moment right now. It’s gaining a lot of hype that even some well-known influencers have begun to create and collect their own NFTs to jump on the bandwagon and ride the waves of NFTs. And if you think only digital artworks or images are being sold for millions of dollars, you are mistaken. Twitter CEO Jack Dorsey has sold his first-ever tweet as an NFT for $2.9 million. Now, all these eye-popping headlines and hype around NFTs lead to some obvious questions, and chief among them is— what on earth is an NFT?
So, What Is NFT, Anyway?
NFT means Non-fungible token. Okay, that doesn’t make it any clearer. “Non-fungible” means that it’s one-of-a-kind, irreplaceable, and can’t be exchanged for another asset of the same type. For instance, $10 can be replaced or exchanged with two 5 dollars or one bitcoin can be traded for another bitcoin and you’ll have exactly the same thing. But that’s not the case with NFTs. Basically, NFTs are a non-interchangeable unit of data stored on a digital ledger like a blockchain- the same technology on which popular cryptocurrencies such as Bitcoin and Ethereum rest. But unlike cryptocurrencies, an NFT is completely unique and each NFT has a digital signature that makes it impossible for NFTs to be exchanged or replaced with others.
Why People Are Spending Millions on NFTs?
Now you may ask, while you can simply just right-click on an image and save it to your desktop for free, why people are willing to spend millions of dollars for buying an NFT? Well, people value traditional works of art due to their rarities. And there might be a million copies of the Mona Lisa all over the world. But even a general non-art spectator would know the worth of the original painting. Similarly, NFT gives exclusive ownership rights to the buyer.
However, the internet is a dodgy market place and it’s easy for any digital file to be manipulated and duplicated. But, once acquired, the record of transfer of NFT ownership becomes irreversible and unchangeable. The blockchain ledger it sits on verifies who the rightful owner of that one-of-a-kind asset is and makes it easy to transfer tokens between owners. NFTs can have only one owner at a time. Also, the owner or creator of NFTs can store specific information inside them. For instance, artists can sign their artwork by adding their signature in an NFT’s metadata.
Does Owning The NFT Grant You The Copyright To The Art?
No, owning an NFT doesn’t mean you own the copyright for the art too; they are distinct from one another. So, how does it work? Typically, creators create or mint their work on an NFT marketplace which includes platforms like OpenSea, Nifty Gateway, and many others. Minting is the process of creating an NFT essentially a smart contract that will be stored on the blockchain. The smart contract includes a lot of important information such as lists of the creator of the work and it ensures that the creator, or other parties, receives royalties each time the NFT is sold.
What Are NFTs Used For?
NFT offers artists a unique opportunity to monetize their work. They no longer have to rely on art galleries or auction houses to sell their art. Now, they can just turn their art into an NFT and keep more of the profits by selling it. Moreover, by programming in royalties, they can get a percentage of sales whenever their art is sold to a new owner. Some eminent brands like Charmin and Taco Bell have also raised funds for charity by auctioning off their themed NFT art.
Are NFTs Just Another Fad?
What does the future hold for NFT— this is hard to predict. And those who claim to know the answer are probably trying to sell you something. The true potential of NFT is yet to be discovered. Whether big industry players will buy into it or not is also yet to be seen. So, it’s still too early to forecast whether the NFT will be the future or just another passing trend. However, one thing is for sure, NFTs did provide artists with more control over their creations. It opened doors of opportunity for artists to be acknowledged and valued. And, as for now, there is significant enough demand for NFTs to give a good reason for you to learn more about these digital assets.