NFT has become one of the hottest crypto terms of 2021. The NFT market sold $2.5 billion worth of NFTs in the first half of 2021 alone.
Several brands, artists & creators jumped on the trend and launched their own NFTs, selling them for thousands if not millions of dollars. The NFT holds a lot of promise in the near future.
What is an NFT?
NFT stands for non-fungible token. These are unique crypto assets that can represent any virtual or real-world entity like art, music, in-game items, videos, even a house, a car, or a tweet.
Like cryptocurrencies, NFT also uses blockchain technology. Unlike NFTs, cryptocurrencies are fungible assets, meaning they can be traded or exchanged for one another and always have equal value. For example, the value of one bitcoin will always be equal to another bitcoin. However, two NFTs will never be identical, even if they exist on the same platform or look similar.
Think of an NFT like an NBA ticket. Each ticket is unique and holds specific information like the buyer’s name, the date of the event, venue, and seat number. Similarly, each NFT has a unique identifier that has its value.
While the concept of NFT has been around since 2012, it only came into the spotlight recently when NFTs became popular among creators to sell their digital artworks.
But how can someone own a digital asset? While it’s true that anyone can copy a digital asset as many times as they want, NFT gives you something that others can’t copy: ownership of the asset.
For example, there can be a thousand copies of the painting of Mona Lisa or The Last Supper, but only one original painting. Similarly, when you buy an NFT only, you can own it while others can only copy it.
How does NFT work?
NFTs are stored on an open distributed ledger where anyone can see them. NFT also uses smart contracts that are blockchain-based codes that can execute on their own to record the ownership.
When someone buys an NFT, their unique identifier gets encrypted into a token that keeps ownership records. This token is then distributed across the network so that anyone can see it. However, only the owner can access the NFT from their wallet.
How are NFTs used?
One of the most significant benefits of an NFT is that it is easy to verify due to its uniqueness. It makes the creation and circulation of fake collectibles pointless because their originality can be traced.
NFTs have also provided artists and creators with an opportunity to sell their creations directly to their fans while removing the need for intermediaries, giving them a revenue boost.
In addition, artists can also program their NFT so that each time their work gets resold, they will earn royalty from it. It happens automatically because of smart contracts.
Brands and celebrities have already started using NFTs. Celebrities like Snoop Dogg, Lindsey Lohan have already launched NFTs of unique memories, artwork, and moments. NFTs are also already being used to sell a vast range of collectibles like:
- NBA virtual trading cards
- First-ever tweet by Jack Dorsey
- Selling Virtual real estate in Decentraland
- Non-fungible pizza by Pizza Hut.
And a lot more.
Who can buy an NFT?
Anyone who owns cryptocurrency can also buy an NFT. All you need is a wallet to store your NFT and cryptocurrency of the native NFT platform. You can then purchase NFT from marketplaces like Rarible, Open Sea, and many more.
While NFTs can be valuable and might sell for a lot of money, the value of an NFT is subjective and based on how much someone is willing to pay for it. An NFT may resell for more than what you paid for it, but it is also possible that it might sell less or not at all.
The NFT craze is far from over and can be the future for artists and creators to sell their work to a broader audience and make money from it.
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