A tweet stored in NFT by Twitter owner Jack Dorsey sold for $2.9 million?! A digital artist Beeple sells NFT art for $69.3 million in Christie’s auction?! You might be wondering: what is an NFT? Nevertheless, I will take you on a trip to better understand the world of NFT.
What is NFT?
NFT stands for Non-fungible tokens. 100% this definition does not make it any clearer. In the simplest terms, NFTs transform digital works of art and other collectibles into one-of-a-kind, verifiable assets that are easy to trade on the blockchain. NFTs, on the other hand, are unique and not mutually interchangeable, which means no two NFTs are the same. NFT built based on blockchain technology as unique identification codes and metadata that distinguish them from each other.
We can take for example the famous painting Mona Lisa of all time by the eminent Italian artist Leonardo Da Vinci, painted in 1503. This is the only painting in the world that has only one copy. These imitations of the original paintings are worthless. Like the Mona Lisa painting, NFT brings unique value to the owner, which cannot be replaced by other things.
The distinct construction of each NFT has the potential for several use cases. For example, they are an ideal vehicle to digitally represent physical assets like real estate and artwork. Because they are based on blockchains, NFTs can also be used to remove intermediaries and connect artists with audiences or for identity management. NFTs can remove intermediaries, simplify transactions, and create new markets.
How does it work?
NFTs evolved from the ERC-721 standard. Developed by some of the same people responsible for the ERC-20 smart contract, ERC-721 defines the minimum interface – ownership details, security, and metadata – required to exchange and distribute gaming tokens. The ERC-1155 standard takes the concept further by reducing the transaction and storage costs necessary for NFTs and batching multiple types of non-fungible permits into a single contract. However, nowadays, because the transaction fees on Etherium are too high, NFTs stored on Binance Smart Chain or Polygon have also become popular and competitive in the NFT market.
NFTs are typically used to buy and sell digital artwork and can take the form of GIFs, tweets, virtual trading cards, images of physical objects, video game skins, virtual real estate and more.
The most usecase for NFTs is CryptoKitties, which launched in November 2017 . Built on Ethereum’s blockchain, cryptokitties are digital representations of cats with unique identifiers. Each kitty is one-of-a-kind and has a monetary value in ether. They reproduce among themselves and produce new offspring with different characteristics and values than their parents. Within a few weeks of their release, cryptokitties amassed a fan base that spent $20 million in ether on purchasing, feeding, and nurturing them. Some enthusiasts even spent up to $100,000 on the project.
While the cryptokitties use case may appear to be insignificant, subsequent ones have far-reaching business implications. NFTs, for example, have been used in both private equity and real estate transactions. The ability to provide escrow for various types of NFTs, from artwork to real estate, into a single financial transaction is one of the implications of allowing multiple types of tokens in a contract.
NFT’s growth statistics 2021
Out of the 20 countries studied, the Philippines has the highest percentage of NFT owners (32%), followed by Thailand (27%), Malaysia (24%), the UAE (23%), and Vietnam (17 percent ). On the other end of the spectrum, Japan has the lowest percentage of Internet users with NFTs (2%), followed by the UK and the US (3%) each, Germany (4%), Australia (5%), and Canada (6%).
According to Keegan Francis, Finder’s cryptocurrency editor, countries with higher levels of adoption typically have a lower average wage of working citizens. People are quitting their jobs because they can make more money trading NFTs or participating in NFT play-to-earn games. Furthermore, NFTs may serve as a conduit for them to enter the cryptocurrency industry in general. If you don’t have government identification, it can be difficult to open an account on an exchange. These NFT games do not require identification and yet allow you to earn money. Once you’ve made some money in cryptocurrency, you can exchange it for other currencies, such as Bitcoin or Ethereum.
Nigeria is expected to have the greatest increase in NFT adoption, increasing from 13.7 percent to 35.3 percent – a 22 percentage point increase. Peru, Venezuela, and the United Arab Emirates are among the other countries where NFT adoption is expected to skyrocket.
NFT’s Pros and Cons
Advantages of NFTs
NFTs can’t be changed or replaced in any way if their authenticity is verified on the blockchain. The intrinsic value of authenticity becomes an actual, extrinsic value, as well.
NFT royalties give you a standard 5-10% of the sale price each time someone buy or sell your NFT creation on a marketplace. Each time a secondary sale happens, the smart contract ensures that the terms of the NFT are fulfilled. If a royalty is specified, a cut of the profits goes to the artist who created them.
Play to earn
NFT games are starting to pick up steam, and people are noticing how they can play and earn money at the same time. The tokens gamers collect can be listed up for sale in online marketplaces and converted into Bitcoin or other cryptocurrency.
Do you get bored looking at crypto charts every single day? So NFT could be your next investment to think about. Making art, buying, and selling art is actually more fun than trading crypto currencies or stocks.
It’s just like you bought a piece of art on eBay for $100 and flip it over for $200.
Disadvantages of NFTs
Too many projects on marketplace.
According to a recent research, there are a lot of NFT collections released in the last 3 months. The majority of projects do not bring value to owners.
High transaction fees
Etherium transaction fees are going sky-high and most of NFTs are built on ERC-20.
Frauds and scams
The growing NFT market is home to all kinds of challenges, from fraud NFTs to people looking to make a quick buck scamming other people.
At the moment, NFT worth is entirely tied to aesthetic and sentimental value. It’s impossible to gauge its worth as a long-term investment, so right now, it’s nothing but speculation.
If you have any questions, comments, suggestions, or ideas about the project, please email [email protected].
DISCLAIMER: The Information on this website is provided as general market commentary, and does not constitute investment advice. We encourage you to do your own research before investing.