What is an NFT?
A lingering question on everyone’s minds for some time now is What is an NFT? Let’s start at the beginning. NFTs have quickly become a huge talking point the crypto world but is something that can be hard to get your head around. It’s difficult for crypto newbs to understand how some computer code can be called money and be worth something. But to complicate things further, how on earth can a JPEG sell for thousands (even millions) of dollars?
Don’t worry, in this blog we’ve broken it all down for you so you’ll get to know what the hell an NFT is and why you should care. Let’s go!
A (VERY) QUICK CRYPTO LOWDOWN
Cryptocurrencies like Bitcoin and Ethereum are based on a technology called blockchain, which is a database that allows for secure transactions without the need for a third party (for example, a bank). You can check out our lowdown on Bitcoin here to get up to speed with all things blockchain related.
With blockchain technology has seen the development of decentralised applications, or dapps. NFTs are one such type of dapp. So, let’s get into it. Why are they so popular?
WHAT THE HELL ARE NFTs?
NFTs (or Non-Fungible Tokens) and are unique digital assets that can be used to represent a variety of things, but most commonly that of digital art. Yes, those random JPEG’s of pixelated creatures, apes, cats and other wild designs can be worth a fortune.
Each NFT is completely different from the next, which makes them very valuable and appealing for crypto lovers and investors. They have become popular in recent months and in fact, there have been cases where a simple JPEG image has been sold for millions of dollars worth of cryptocurrency!
Numerous celebrities (Justin Bieber) and mainstream companies (such as Disney) have collaborated with projects and started releasing NFTs. The potential for this technology keeps growing! The explosion of NFTs famously saw Tory Lanez sell 1 million copies of an NFT album in just 57 seconds last year, with ever growing scope for music releases plus more.
WHAT MAKES NFTs SO VALUABLE?
There are a number of reasons for NFT popularity. Firstly, scarcity drives value and because NFTs are unique, they are inherently scarce. Secondly, they can be used to represent digital or real world assets. This opens up a world of possibilities for their use and makes them very desirable. Finally, the development of blockchain technology has allowed for the creation of smart contracts. These allow for the secure transfer of ownership of NFTs and add an extra level of security and trust.
WHAT ARE THE MOST POPULAR NFTs OUT THERE?
There are a lot of popular NFT projects out there, but some of the most well known include CryptoKitties, CryptoPunks, and the Bored Ape Yacht Club.
CryptoKitties is one of the most famous NFT projects out there and is often used as an example to explain what they are. Essentially, CryptoKitties allowed users to purchase digital kittens with cryptocurrency. Users could then breed them and sell them off at a profit or keep them for their own collection.
As we see the possibilities of the NFTs continue to grow, Decentraland is another popular project that’s burst onto the scenes, allowing users to build their own virtual world and sell or trade land in the Metaverse. This is huge! In December 2021, Bill Gates famously commented that he see’s the future of remote work meetings being held in the Metaverse
The future of NFTs is very exciting indeed and it’s not that hard to see why they are so popular! As the technology continues to develop, we can only imagine what new and exciting applications will be created. The potential for NFTs is astronomical and it’s only a matter of time before they’re used to represent more than just digital assets.
It’s already on the horizon for event tickets (such as sporting events and music concerts) to be distributed as NFTs, where the tickets themselves will become collectibles as they’re already unique. There are even projects for real world assets where an NFT represent a piece of real estate!
The possibilities are endless and the blockchain is perfectly poised to become the data powerhouse of our (not so distant) future.
NFTs AND THE MAINSTREAM
Some mainstream companies are also getting in on the NFT action by releasing their own or partnering with existing projects. These include Toyota, who partnered with CryptoKitties to create a limited edition car and even Nike, who purchased a virtual company that creates shoes!
Other huge names getting involved in the space are Taco Bell, Adidas, Clinique and even fashion houses such as Louis Vuitton on Gucci. Everyone is jumping in to get a piece of the pie.
NFTs aren’t about the big brands though. Big names of the centralised world are really the little guys of the crypto space. Check out the digital artist, Beeple, who famously sold a single NFT at Christie’s auction house for $69 million in 2021.
The first thing you need is to purchase some crypto. Ethereum is the most common currency used to buy NFT’s, along with Solana. Some NFT projects however do accept fiat payments. The first step is to create an account on a crypto exchange. If you’re brand new to crypto, be sure to check out our Beginners Guide.
One of the most popular platforms to purchase your NFTs from is Opensea, which is biggest NFT marketplace where you can find huge amount of collections to explore, however knowing what to buy isn’t as easy as it seems. Be sure to do plenty of research including, checking out the team behind the project, check their social media accounts and also, check out their roadmap. You want to find confidence in the project and that it’s here for the long-haul.
WHAT’S THE FUTURE FOR NFTs?
The potential of NFTs is massive and for this reason, it appears that they’re here to stay. As the space continues to see more and more celebrity and mainstream interest, this builds the foundations of what is likely become part of our future.
The technology has immense potential, mostly due to the unique capabilities. An NFT literally proves ownership of any asset and remember, they can be sold or transferred without the need for the middle man. To help paint a picture of where we are and where the technology could take us is to look at the buying and selling of houses.
In the U.K, it takes around 12 weeks to complete the sale of a house, mostly due to the cumbersome process of exchanging documents and contracts. Now imagine the deeds to your home being an NFT and how quickly a sale could complete? It’s an exciting thought, isn’t it?
Who knows where the future of crypto is taking us but one thing for sure is that we’ve entered the most exciting technological era we’ve seen since the dot com revolution!
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Please note that the content of this blog does not constitute as financial advice and is purely for information purposes only. Always do your own research before making any investment.