IIn just a few months, NFTs – short for “Non-Fungible Tokens” – have caught the imagination of consumers, artists, technologists, sports enthusiasts, speculators and even venture capitalists.
It’s hard to surf the Internet these days without coming across another NFT story. From the multi-million dollar sales of NFT artwork to the involvement of celebrities like Lindsay Lohan and Mark Cuban, NFTs are taking the mainstream.
But what exactly is the excitement behind NFTs? To understand this latest blockchain phenomenon, one has to start with the basics.
What’s in a name
Almost everything there is to know about NTFs can be derived from their name. First, the “token” part is conceptually simple: NFTs are tradable digital assets hosted on a blockchain, similar to Bitcoin (BTC) or ether (ETH). However, unlike cryptocurrencies, NFTs have embedded digital files of a work of art, video, or other digital representation that provides potential buyers with aesthetic or functional value. At this point, most NFTs are exchanging hands online, being stored online, viewed online, etc. They are a purely digital experience.
The “non-fungible” part simply means that each NFT token is a separate digital entity that cannot be reproduced or copied. For example, if you own the NFT from LeBron James dips backwardsYou can comfort yourself that no one in the world can claim this video – or, in more poetic terms, which NFT enthusiasts are appropriate, “own” this moment in basketball history. (More on this NBA top shots, soon to be a popular NFT marketplace).
The non-fungibility of NFTs is different from Bitcoin and other cryptocurrencies. If you sell your bitcoin and then buy bitcoin a few minutes later, your new bitcoin will functionally be the same as the bitcoin you previously held. But if you’ve sold and bought your LeBron James NFT Zion William’s NFT blocked a shotThen you hold a new, differentiated asset.
In other words, Bitcoin is “fungible” because one Bitcoin always costs as much as another Bitcoin, but the LeBron James NFT and the Zion Williamson NFT (probably) cost different amounts at different times. The LeBron NFT could appreciate while the Williamson NFT could crash or vice versa.
How are NFTs used?
So far, the most popular NFT use cases are those that mimic, expand, or modernize traditional forms of asset collection and trading.
For example, the aforementioned basketball NFTs are part of the hugely popular NBA top shot Marketplace. These NFTs are reminiscent of highlights from professional basketball games and enable die-hard fans to “own” parts of NBA history: the more unforgettable the moment, the more expensive the NFT. Of course, NBA Top Shots is essentially a digitized version of trading cards that has drawn speculators, traders, and enthusiasts for decades. As with traditional cards, NFTs with sports themes are rare, which gives them value by adding “clout” to their owners.
The art world is another arena that is getting an NFT switch. Last week, popular graphic designer Beeple sold an NFT titled “Everydays: The First 5000 Days” for $ 69.3 millionThis makes it the third most expensive work of art sold by a living artist. Lesser known artists are also Make thousands of dollars selling their digital goods on the blockchain.
“NFTs are here to stay. In the near future, you will be placing more emphasis on a physical item sold alongside a digital item than on a physical item alone,” said Ian Rogers, CXO at Ledger, a leading crypto security company. “This is where basic human needs play a role – we love to collect, we love to share, and we have an innate desire to show that we are part of tribes. We lead a digital life. Digital collecting and sharing is inevitable now as it is technically possible. “
In addition to video games and works of art, NFT enthusiasts point to a variety of other potential use cases, from property rights and event tickets to business contracts and real estate. Indeed, the idea of adding real things to the blockchain has aroused crypto obsessives for a long time; The NFT model is possibly the closest thing to realization.
Are NFTs here to stay?
Many experts believe that today’s NFT boom will go away. However, consumers around the world are increasingly buying exclusively digital products. This is especially true for Millennial and Gen Z consumers who have already spent billions of dollars on in-app products for video games (e.g. custom clothing or gear for their in-game characters, among many other examples). For young people, NFTs appear to be more of a natural evolution than a speculative aberration.
That said, there are legitimate concerns that NFT reviews have been artificially inflated due to investor enthusiasm for a new flashy product. Just as Bitcoin has proven to be a volatile asset, NFT prices are also likely to fluctuate widely.
“NFT is a hot topic right now, but I’m sure the hype surrounding it will soon subside,” said Kosala Hemachandra, CEO of MyEtherWallet (MEW), a leading wallet interface for Ethereum, the blockchain technology on which many NFT marketplaces are built.
“Right now, the appeal of NFTs is the status of having one [rather than the ownership]”Says Hemachandra.” I think this current version of non-fungible tokens will continue to evolve into larger and broader use cases. Things like real estate and physical property ownership; Anywhere NFTs can help take legal action. Then will things really interesting. “
The views and opinions expressed are those of the author and do not necessarily reflect those of Nasdaq, Inc.