NFT have suddenly skyrocketed in popularity and many new cryptocurrency enthusiasts are willing to try their luck on NFTs. In this article we will discuss everything about NFT you need to know and why they are so popular.
Before getting started about NFT, we need to know what exactly is NFT. Also, why their market has exploded to value at an astonishing $2.5 billion in sales volume in the first half of 2021. This might be enough to spark your curiosity about NFTs.
What’s an NFT?
NFTs are packets of data kept in a digital network, known as a blockchain. It certifies that a digital asset to be one of a kind and hence, not exchangeable. Its full form is a Non-Fungible Token, meaning it’s like a certificate guaranteeing the genuineness of something, Whether it is physical or virtual.
The digital packet is stored on a network, and transfers of ownership are logged in the server network. Such that the sequence of ownership is pinned with the file forever. It’s implausible to change it with a duplicate.
In comparison, cryptocurrencies are Fungible meaning they are exchangeable, just like a paper currency that has the same value. However, NFTs are unique and are not mutually interchangeable.
NFTs can be anything digital (such as artwork, audio clips, software). Although, recently most of the hype around the technology is around digital art.
How do NFT work?
NFT is an authentic certificate linked to the file that says that the person who has this NFT is the owner of this file. And it can be sold/traded in the market just as a commodity.
Why such a hype?
As you’ve previously read that NFTs made an estimated $2.5 Billion in sales in the first 6 months of 2021. But the question is why people are so crazy about NFT? A possible explanation is that online collection, like real-world collection, has taken off and people want to take part in that, NFTs appeal to collectors as in old times you have to take heavy measures to make sure that the collectable is genuine, whereas, with the help of NFT you can just see the certificate to verify that it’s genuine as it is coded in the NFT itself.
Often art buyers purchase the artwork as it is valuable, and then store it in storage units. They hold it until they find it favourable to sell it as an asset to a new client who also sees it as a monetary asset.
People other than Collectors get into NFT collecting so that in the future they might gain from their collection if they happen to explode in value. This is a gamble, but many are willing to play this.
Should I try my luck in NFTs?
If someone’s willing to spend a small sum of money for memorabilia that is fine, however spending a large sum of money without knowing about the possible outcome is favourable to them or not, is not advisable.
What about the environment impacts of NFTs?
People who know about blockchains know that it’s impossible to create money out of thin air. The cost here is the massive power consumption of transactions regarding cryptocurrency which have generated these concerns.
Also, nobody knows that their NFTs might have any of their original value in the future similar to other collectables.
NFTs have given artists over the world to auction their art using NFTs to get some cash who were once struggling to make money.
Music artists and Actors have realized the potential of NFTs making millions of dollars in the process.
However, the energy consumption concerns are a bane and are needed to be addressed soon.
Hopefully, this article taught you something about NFTs. If you liked this article do read about a Cold Wallet and its importance.