Incredibly lucrative endeavors for some and nothing but a short trend for others, NFTs managed to change the landscape of the cryptocurrency world in just a year. In 2017, the very first NFT was released on the Ethereum network offering people to buy a piece of virtual land for a meager 1 ETH. Today, one can expect to sell a hexagon in the world of Etheria for a couple million bucks.
However, the real craze for NFTs started in the beginning of 2021. It seems that every single artist on the planet is planning to mint one in the nearest future hoping to capitalize on the hype.
Imagine Bitcoin. Each BTC costs exactly one BTC and it can traded as such on any platform. It means that it is fungible with a stable price that changes only in relation to other assets in the market. Non-fungible tokens are exactly the opposite: every single one of them contains unique meta-information about something digital or physical.
It is a record in a ledger that basically confirms ownership of something. Since every single token is unique by design, one can assign something to the token. The most common use of this asset is attaching an artwork (digital or physical) to an NFT and sell it to an interested party.
Several obvious applications exist:
Gaming. Blockchain-based games usually employ a method of attaching in-game items and land to NFTs. Examples include Decentraland or Etheria.
Digital art. A unique token may be used as a representation of digital art created by people and even algorithms. CryptoPunks and Beeple’s work come to mind immediately. Some are exclusive nft projects.
Music and video. Various types of NFTs were used to either promote or support music or films. On a typical nft crypto marketplace, you can find assets minted by Eminem, Quentin Tarantino, and other prominent artists.
Yet, the variety of available on the nft marketplace crypto assets is astonishing thanks in part to the fact that anyone can create one without much hassle. A great deal of nft’s for sale is comprised of simple pixel art, basic sounds, colors, numbers, and, sadly, even stolen art.
Some concerns exist. For one, the uniqueness of something is not protected by a record in a ledger. A piece of art can be easily copied and multiplied regardless of protection methods. Piracy is rampant. On the other hand, you don’t really have any rights for the art since many NFTs do not offer any licensing or expanded rights for intellectual property.
The price of NFT is also quite volatile and value retention in the long run is questionable at best. Experts simply do not know whether a piece of digital art which you own through a record in a public ledger will cost anything just in a year from now.
Simultaneously, finding a better way of supporting an artist you like or buying a copy of unique digital drawing is difficult especially considering the possibility of earning money after reselling. Artificial scarcity also increases value.
Multiple NFT tokens made headlines as their prices sky-rocketed during the first half of 2021. However, such incredible popularity and hype should not drive your financial decisions. Stay safe, buy nft crypto after careful consideration.