Non-fungible tokens (NFTs) have seen a great surge in trading volume and interest over the past few months. Many celebrities have started promoting wide range of new NFT products. And because of the nature of technological development, an increasing number of NFT marketplaces are surfacing to buy, sell, and trade the various types of unique digital assets available. Lets get started, A Comprehensive Guide to NFTs…
If you are new to NFTs and don’t know how they work, then this guide is for you. It breaks down what NFTs are and what makes them so valuable.
What is an NFT?
A non-fungible token (NFT) is a cryptographic token that represents a single digital item. Think of it as a unique fingerprint that you can add to your digital file or art. Not only is this fingerprint unique, but it is also easy for art collectors, auction houses, online marketplaces, and computers to identify.
When you attach the NFT to your digital asset, you basically claim that that specific file is the “digital original” and that every other version of it is just a copy. In other words, non-fungible tokens work by creating exclusivity around digital files or artworks and aim to make them truly unique.
Fungible means something that can be directly traded or replaced. Bitcoin, for instance, is fungible as you can swap it for another Bitcoin and it will still hold the same value. Non-fungible tokens on the other hand cannot be simply replaced with something else, hence making them truly unique.
Following are some of the well-known platforms that sell NFTs:• Rarible• SuperRare• OpenSea• NFT Showroom• Nifty Gateway• Axie Marketplace
What Makes NFTs So Valuable?
If you have done some research into NFTs, you will know that some people are spending lots of money. There are several reasons why NFTs are so valuable.
Like all assets, the key drivers for price are supply and demand. Much of the value of NFTs comes from their scarce nature and the fact that owners have proof that they are the original owner of an asset. Not to mention, some non-fungible tokens have the potential to generate massive returns when sold on to another buyer. Because of this, investors, collectors, gamers, etc. are prepared to pay a lot of money.
Apart from the above reasons, the nature of NFTs also adds to their value. Here are some key characteristics of NFTs:• Interoperability: You can trade NFTs across multiple ecosystems.• Standardization: Common, reusable standards can be built for NFTs.• Verifiable: Historical ownership data is stored on the blockchain. This makes it easy to trace the NFT back to its original creator.• Tradability: The tradability of non-fungible tokens is what facilitates free trade across open markets. This means users can move items from their original environment to a more advanced trading marketplace.• Scarcity and Immutability: Thanks to smart contracts, owners can put caps on NFT supply to make sure that only a certain number of particular tokens can be created.
With whopping sums of money being spent on NFTs, it’s clear that there is real hype and great potential surrounding the innovation. As NFTs continue to become mainstream, their growth and trading volume within the industry is expected to increase. While the technology is relatively new and has yet to be developed in order to facilitate a fully interoperable marketplace, non-fungible tokens are a welcomed addition to this booming industry.
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