In recent months, the talk about NFTs has been making waves on social media platforms such as Twitter and Tiktok, as well as media powerhouses such as CNN. The popularity of NFTs skyrocketed back on Feb 22 when YouTube star Logan Paul sold an NFT worth $5 million.
This trending topic has left many people wondering what it is and how they can access it. So what exactly are NFTs, and why are some of them worth millions of dollars? This article will break down the concept of NFTs and fungibility.
For example, all fiat currencies are known to be fungible. This is because, for them to be used as a medium of exchange in any particular market, they much be interchangeable with one another currency of equal unit.
A one-hundred-dollar bill is always interchangeable with another one-hundred-dollar bill. As per this logic, most cryptocurrencies out there are fully or partially fungible assets.
For example, Bitcoin is a partially fungible cryptocurrency. This is attributed to the fact that it can be exchanged with another Bitcoin, but all its transactions are freely available, meaning that you can trace them to find that unique coin you transacted with.
On the other hand, absolute fungibility basically refers to the notion of anonymity with respect to non-unicity. This means that all coins used in transactions are identical and unidentifiable. Some of the coins with absolute fungibility include Zcash and Monero.
However, the biggest downside to coins with absolute fungibility is that they can easily facilitate money laundering. Moreover, non-fungible items are types of items that have unique properties and can’t be interchanged with other assets. Examples of non-fungible tokens include computers, watches, furniture, vehicles, among many others.
Unlike popular cryptocurrencies such as Bitcoin, which are indistinguishable and similar, NFTs are never the same. This means that NFTs cannot be directly interchanged with one another, divided into smaller units, or even replicated.
NFTs are bought and sold online, in most cases with cryptocurrency, and all of them are encoded with the same software as cryptocurrencies. Even though NFTs have been around for several years, they have steadily gained popularity in recent years. This is because they’re viewed as a more secure means of buying digital artwork from individuals or even organizations.
To put this into perspective, a staggering $174 million has been spent on NFTs since November 2017. One thing that make NFTs so popular is that they have unique indentifying code, which creates digital scarcity. This is very different compared to the most digital creations out there, which come in infinite supply.
What differentiates NFTs from other digital creations or even currencies is that cutting the supply doesn’t increase their value. This is because NFTs already have digital creations that exist somewhere else on the internet. These NFTs include things like video clips and pictures.
So why do many people opt to spend millions of dollars on pictures or video clips they can easily down from the internet? This is simply because NFTs accords buyers ownership of the digital creations. This is something that features built-in authentication, which can be used as proof of ownership.
Consequently, this explains why most collectors value the bragging rights that come with NFTs more than the items themselves. The buying and selling of NFTs has been made much easier these days with platforms such as SuperRare, Opensea, Known Origin, and Rarible.
On these platforms, users can upload their digital works, mint them and then wait for offers from interested buyers. After purchasing, buyers store these digital works inside digital wallets as collectors’ items.
However, this doesn’t exactly mean that the profit ends there for the creator. They’re also entitled to a percentage of the earnings every time an NFT is sold and even resold. Another benefit you get for buying NFT is that no one can manipulate the item in any way. Also, you can hold on to the asset forever, knowing that it is secured by your own crypto wallet.
A great thing about NFTs is that anyone can tokenize their work and sell it as NFT to an interested buyer. up to date, some people have sold animated GIFs, digital art, and recently, Twitter’s founder, Jack Dorsey, tokenized the first-ever tweet on the platform, and the bids have hit a staggering $2.5 million.
This means that you can tokenize almost everything you want and sell it as an NFT, and people might purchase it if they’re interested.
On the other hand, digital files can be easily and endlessly copied and pasted. However, this is not the case with NFT art. NFT art is bought and sold with a unique digital certificate. It’s also important to note that the original NFT art can only have one official owner at a time.
NFT art is also secured by an impregnable and incorruptible database that can never be tampered with. The most popular and expensive NFT art to be sold up to date is the Beeple’s “Everydays-The First 5000 Days,” which sold for a staggering $69.3 million.
However, before getting involved in NFTs, it’s best to conduct your research and understand how it works. This will help you avoid disappointments or losing your money in such an investment.