Non-fungible tokens, otherwise known as NFTs, are super famous nowadays. For those who are not familiar with NFTs, they are digital assets. For example, digital art, GIFs, videos, music, etc.
How are NFTs Different from Cryptocurrencies?
NFTs utilize the same principle as cryptocurrencies. They are created from crypto blockchains, specifically the Ethereum blockchain, and stored in crypto wallets. You transfer your private and public keys when you sell your NFT, just like crypto.
However, there still exists a significant difference between NFTs and crypto. To understand the difference, we must first know the meaning of fungible. Cryptos are fungible as one crypto can be equal and exchanged for another. A perfect example is trading one Bitcoin for another Bitcoin.
Non-fungible tokens, however, are not equal. One can’t exchange for another due to the difference in value. This aspect makes NFTs even more enjoyable.
But what makes an NFT valuable? After all, it is just digital art that can be downloaded and duplicated. Most people have this question lingering in their minds.
Valuableness of NFTs
Most artists have found a way to raise money. They can sell their short clips, videos, and artwork for a reasonable amount. For instance, Michael Winkelmann, popularly known as Beeple, made a fortune from NFTs. He sold his “Everyday: The First 5,000 Days” NFTs for $69.3 million.
Jack Dorsey, the CEO of Twitter, sold his first tweet for more than $2.9 million. Not to mention the “Clock” NFT sold for $52.7 million. More and more people are trading with NFTs. Gone are the days when assets were only physical.
NFTs get their value form from sole ownership. Owning an NFT means that you have all the digital asset rights. If you wish, you can add some details to the NFT. Artists mostly add their signatures or names.
It doesn't matter if your NFT gets duplicated. The system design tracks and quickly verifies ownership. Moreover, as the owner, you get to control the digital asset. Despite selling your NFT, there’s another way to make money from these assets.
You can program royalties when you sell your NFT. You will always receive a sales commission every time your NFT has been resold. It is excellent as you get to retrieve money spent for creating and posting the NFT.
Though the profits are incredible, trading NFTs can be very risky. First and foremost, the NFT market is highly volatile. Anything can happen.
Secondly, your digital assets are hackable if not well secured. Not to forget, they are subject to capital gains taxes. Proper calculations and care should be taken when dealing with NFTs.
There is a belief that the future is NFT. The market has been performing so well over a couple of years. It goes to show how most people value NFTs.
There is a reduction in visits to exhibitions and galleries. Today you can have beautiful digital artwork on your phone. NFTs have made this more possible. It is a platform that indeed helps support artists of all kinds. It exposes the raw talent that is somewhere hidden.