Non-fungible tokens (NFT) have broken the internet in the recent few years and these digital assets are selling like a popular cheeseburger. Not just hundreds or thousands, some NFTs are worth millions of dollars in the current market. From music and gaming to finance and real estate, NFTs are ruling the digital world and they are here to stay. But will it change the way of Investing? Are NFTs worth the hype? And can you trust NFTs? Let’s find out!
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What is an NFT?
A Non-fungible Token (NFT) is a digital asset. Just like any physical asset, NFTs are digital assets that represent real world items like Music, Games, Images or Videos. NFTs can be bought and sold online just like an ecommerce product except with cryptocurrency. NFTs can be anything from a DLC pack for a game to a digital image of yourself. Digital Entrepreneurs claim NFT as the future of investing. NFTs started gaining popularity for nearly a decade but they have attracted most investors in the past couple of years. According to Forbes, a whopping $175 million has been invested on NFTs since early 2018.
NFT are encoded with the same software that encodes cryptocurrencies. They all have unique and secured identifying codes and anyone who has the code can access the token. NFTs have some sort of digital form like any digital art on the internet. Recently, “Everyday: The First 5000 Days” , created by Mike Winklemann, was sold for a whopping $69.3 million. This digital art was made up of 5000 images merged together into a single collage. It is also the biggest digital art NFT sale till date. We can expect more of these arts coming soon after this.
NFTs Vs Cryptocurrencies [Bitcoin, Dogecoin]
NFTs are built using the same programming as Bitcoin, Dogecoin or Ethereum. However, cryptocurrencies are fungible as they can be sold, exchanged and have equal value. For example, one bitcoin equals another bitcoin. The value of cryptocurrencies is changing every second and their fungibility characteristics makes them trusted means for doing blockchain transactions.
However, NFTs are non-fungible. NFT can’t be exchanged or be equal to another NFT as each one has a digital signature that’s completely different. One NFT of a video game is not equal to another NFT of music as both possess different features and different values.
How Does NFTs Work?
Thinking about how an NFT works when anyone can simply screenshot or download the image from the internet? When an investor buys an NFT, he is not just buying a digital asset but owns the original item as well. It has a built-in authentication system that proves the ownership of the item and buyers hold all the digital and physical rights to the purchase.
If you are familiar with how blockchain works, you probably know how cryptocurrencies operate on the internet. NFTs also exist in the blockchain that records transactions. For example, NFTs can be held on the Bitcoin or Ethereum blockchain for processing. NFTs represents both tangible and non-tangible items like Arts, Videos, Game Avatars, Designs, Collectibles, Digital Skins, Music, Images, and many more.
When you buy an NFT for a Music Concert Poster, you don’t get a physical poster that you can hang on a wall but a digital file that you can store in Google Drive or anywhere online. However, you hold the physical rights of the poster if it exists. A digital item might or might not have a physical form but if it does, you have the ownership of that item and can claim it anytime.
Recently, Jack Dorsey sold his first ever tweet for over $2.9 million as an NFT. So, you see, anything that is rare, collectible, and possesses value can be sold as an NFT. This is the reason why most investors and buyers see NFTs as the future of investing.
NFTs in Music, Video Games, and Digital Art
NFTs are taking over various industries including Music, Video Games and Digital Art. How? Read on!
NFTs in Music
NFTs took the music industry by the storm. No one thought NFTs would change the way of buying and selling music online. If you want to own any music, firstly, you have to find a platform that sells NFTs for Music. There are various popular platforms like Opulous, Opensea, or NiftyGateway. Although music NFTs are not as easy as digital arts, there are only a limited amount of music NFT sales that have taken place till now.
Secondly, you download a crypto wallet to hold NFTs. Like we previously mentioned, NFTs are stored in blockchain. You need a wallet to hold and access NFTs. We recommend MetaMask, but there are various wallets that you can choose from. Setup your wallet and create a secure private key. Private key is a combination of numbers and letters just like your password.
Thirdly, you have to exchange some of your cash for crypto because NFTs can only be sold or bought with cryptocurrencies. You can buy crypto from Binance or Coinbase. If you are a musician and want to sell your music NFT, there are plenty of resources on the internet that will guide you on how you can create and sell music NFTs.
NFTs in Video Games
Ever since NFTs arrived, the video games industry is booming to a new height. NFTs allow video game players & streamers to monetize their play time “Play to earn”. Game creators, publishers, community experts, and enthusiasts have adopted NFTs while some have declined the NFT model in gaming. In recent news, Vine creators announced to be working on NFT blockchain video games, Epic is working on adopting NFTs as well. However, Valve has banned blockchain games and NFTs on steam. Valve stated they don’t want to allow game items that can have a real-world value to be sold as NFT.
‘Play to earn’ is a new controversial model for NFT. Players can purchase the in-game items to enhance their gaming but they don’t really own any digital assets of the game in return for their invested money and time and creators have full control over any items purchased. This model is in controversy but we can soon expect a new model for NFT in video games that can utilize the resources better and can benefit both game developers and players.
NFTs in Digital Art
Digital art NFT took the world by shock after “Everyday: The First 5000 Days” NFT was sold for $69.3 million. Right after that the value for digital art NFTs skyrocketed and as of 2022 there are thousands of digital art NFT that artists from around the world have listed for sale. Many artists and collectors claim NFT art is not just the hype but a reality that NFT arts are the future of art. NFTs have shaken up the art world and some of these are worth millions of dollars. Any why not, you own both the real and digital version of the art and art collectors are loving it.
Should You Buy NFTs?
NFTs are like high risk, high reward schemes like SPACs. Risk is because the future is uncertain and there is not enough history of NFTs to judge for their versatility and performance. They are new and worth investing if you have money to spare. Remember how only a few people invested in Bitcoin in its early days. A little risk today and tomorrow you won’t have to say ‘wish I had bought that NFT’. Investing is solely a personal decision but keep in mind that the value of NFT is determined based on what one is willing to pay. An NFT that you purchased for more can resale for less and vice versa. Demand and supply!