Recently, Digital collectibles have exploded in popularity because of NFTs. You’ve probably seen people in your social media feeds talking about NFTs too.
The growing market for NFT is turning the art, music, gaming and finance industries upside down.
NFTs can be confusing to understand for someone who is hearing it for the first time.
So today let's unwrap what is NFT and why suddenly it is becoming the next big thing on the Internet.
We will be running through everything you need to know about them.🙂
What the heck is NFT?
You’re probably familiar with this famous tweet by Jack Dorsey, the billionaire co-founder and CEO of Twitter. He is selling his very first tweet as an NFT.
Despite the fact that this tweet is publicly available as a free digital item to look at whenever anybody wants, as of 6th of March, the highest offer for buying this tweet was over $2.5 million🤯
What does “buying” this tweet actually mean?
What you are purchasing is a digital certificate of this tweet, it is unique because it has been verified by the creator and "only one" of this will ever exist all over the universe and you own that exact piece.
So What exactly is NFT?
NFTs, or Non-Fungible Tokens, are blockchain-based records that uniquely represent pieces of media.
The media can be anything digital. Here, “Non-fungible” more or less means that it’s unique and can’t be replaced with something else. For example, our fiat cash are fungible — trade one for another, and you’ll have exactly the same thing or a different thing with same value.
Ownership of these assets are recorded on a blockchain. NFTs are currently kept in the same blockchain logs as a cryptocurrency called Ethereum.
They're like unique collectibles in a open store that anyone can see and admire, but only one person (or cryptocurrency wallet, to be exact) can own at any given time.
Why are they becoming popular?
NFTs have received a lot of attention lately because in the last month itself, there has been over $300M generated in their sales.💰
Each NFT is unique and can’t be duplicated, making them rare by design.
But can't I just download the same digital media for FREE?🤷♂️
Yes, but NFTs are designed to give you something that can’t be copied: ownership of the work (though the artist can still retain the copyright and reproduction rights, just like with physical artwork).
To put it in terms of physical art collecting: anyone can buy a Monet print. But only one person can own the original.
It's important to understand that it's not just that image or a drawing (which can easily be replicated). It is their existence as a digital object on a blockchain is what makes it unique.
Unlike regular cryptocurrencies, NFTs cannot be directly exchanged with one another. This is because no two NFTs are identical.
Like all assets, supply and demand are the key in determining the price. Due to the scarce nature of NFTs, people are often ready to pay a lot of money for them.
Another important reason why they're popular is because Centralized social platforms(Example: YouTube) became the dominant way for creators and fans to connect. In this model, the major source of revenue for creators are the ads.
The platforms used this power to become the intermediaries by inserting their own algorithmic recommendations between creators and consumers while keeping most of the revenue for themselves.
With NFTs you can completely remove those intermediaries and which will offer fundamentally better economics for creators, thereby reducing customer acquisition costs to near zero.
How To Get Started With NFTs?
There are several marketplaces that have come up around NFTs, which allow people to buy and sell the digital goods.
Grimes, partner of Elon Musk, mother to X Æ A-12 sold NFTs through "Nifty Gateway" but there are plenty of others.
Most Expensive NFTs 💸
Dragon the CryptoKitty(image above) is one of the most expensive NFTs in the space, valued at 600 ETH.
An NBA Topshot digital collectible card of basketball star LeBron James sold for $100,000.
An Axie named Angel from the NFT-based game Axie Infinity sold for 300 ETH.
NFTs are still extremely new. As an industry, there has to be a lot of work to be done to improve the technology. The biggest problems we are currently facing is to building applications that can support larger numbers of transactions.
We know that NFTs are still relatively inaccessible to mainstream users. Right now, only early adopters and speculators are using blockchain-based platforms. We need to lower the barrier of entry to NFTs.
Also, It is easy to scale a Centralized applications much more than decentralized ones, giving us one more hurdle to overcome, but this is a problem we’re actively solving.
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Jack explained it the best