NFT stands for non-fungible token. This is a popular statement. What on earth does it mean?
To understand the meaning of NFT, you need to know what a token means. A token is a unit of value that can be exchanged for goods or services. It's like a cryptocurrency but instead of it being used as an alternative to money, it's used as an alternative to ownership.
Tokens, instead of being used as an alternative to money, are used as an alternative to ownership.
Tokens are issued by companies when they allocate their tokens on the blockchain (the software that makes Bitcoin work). They want these new digital assets they're creating to be unique and identifiable so they can track them later on down the road if necessary.
What is an NFT?
As a whole, NFT means non-fungible token and refers specifically to tokens that are unique/specific rather than fungible (interchangeable). So if we were tracking some special artwork via blockchain technology then each piece would be considered its individualized NFT because no other piece can ever replicate an exact specification.
All of that is to say that tokens are one-of-a-kind digital assets. If you're confused, here is an example of what fungible and non-fungible are:
Fungible: A bill of your national currency is interchangeable with another bill because they have no individual and isolated value. You could trade one for two quarters or five dimes, and no one would know or care if any particular note was missing or not. They are all equal in value, regardless of the special prints in a bill.
You can equate this with gold bars too. They are all equal in value and no single gold bar is more significant than another. That's fungible.
Non-Fungible: If you were looking for your wedding ring at an airport security checkpoint or some carousel, you may feel screwed if someone accidentally took possession of your ring (and then tried selling it online).
That's because each piece, like your ring, has unique characteristics that make it irreplaceable. It has sentimental value as well as monetary worth.
Where can you find non-fungible tokens?
These tokens live on the blockchain, which is a type of digital ledger that securely records information. It is the heart and soul of cryptocurrencies like Bitcoin or Ethereum.
When you buy an NFT project, you're purchasing a unique asset that's not interchangeable with other assets of its kind. In fact, unlike traditional digital assets like cryptocurrencies or crypto tokens, it doesn't have a predetermined value or price. When it hits the market, the anticipation for it can up its price. So, of what use is NFT?
What will NFTs be Used For?
NFTs can be used for a lot of things, perhaps, than you imagine. Here are just a few examples:
- Buying and selling digital assets, such as video games or in-game items
- Buying and selling real estate properties
- Buying and selling digital art or antique art
- Collecting digital collectibles (which may even be worth more than their physical counterparts)
- Digital ticketing
However, before we get here, why is it important?
Why are NFTs Important?
If you’re a fan of the blockchain, then you know that the technology has been used to create non-fungible digital assets. They can be used to sell digital art—a task that previously required third-party platforms like ArtWanted or Artspace.
But NFTs also have other benefits beyond just selling digital art. They provide a novel yet exciting way for celebrities to monetize their content and interact with fans on social media platforms such as Reddit and Instagram. We'll get to this later. Another question most people have is: Is this another cryptocurrency?
NFTs are digital assets that are not designed to be used as payment, but rather as a way to represent physical and intangible items in the real world.
Are NFTs Cryptocurrency?
Nah.
NFTs are not another mystic coin tagging around cryptocurrencies. They are digital assets that are not designed to be used as payment, but rather as a way to represent physical and intangible items in the real world.
For example, an NFT could represent ownership of a piece of art, the right to stream music or watch movies on a streaming platform, collectible card game (CCG) cards, and more.
To give a real-life perspective, do you remember Martin Shkreli who increased the price of the antiparasitic drug, Daraprim, by 5,455% in 2015? He increased the price from US$13.50 to $750 per pill and it led to a lot of noise. Yeah, that guy.
He bought the "Once Upon a Time in Shaolin '' studio album by Wu-Tang Clan just because he likes it. It doesn't stop the song from being streamed. He bought it for $4 million.
Now, imagine that the sale was made on an NFT platform. Imagine that Wu-Tang has an NFT of the album (or the studio session was an NFT project) and Martin Shkreli had bought it just because he loves it. Can you see that NFT is not cryptocurrency?
It's not a medium of exchange. It represents ownership. Now, how are they created?
How are NFTs Created?
NFTs are created using a smart contract on the Ethereum blockchain. A smart contract is a computer program or transaction protocol intended to automatically facilitate, verify, or enforce the negotiation or performance of a contract. Companies can do it, a platform can fix it for you too.
NFTs can be made available for purchase in an auction that lasts from hours to years. The price of an NFT reflects the project's popularity, scarcity, and other factors that affect supply and demand. Once an NFT is bought from another user at auction (or sold online), it cannot be resold until another round of bidding occurs. This ensures that the asset retains some value for its original creator (and others) regardless of whether it's being used by anyone else at any given time.
We left the subject of celebrities and NFTs earlier. Let's dig into what it's about now.
Why Do Celebrities Love NFTs?
As you may know, celebrities are always looking for new ways to monetize their brand and outputs. NFTs can be an excellent way for them to do this in a new way.
Celebrities can create digital assets (like music or art) and sell them through NFTs on platforms like NameBazaar. These are not just any old digital assets though; they're high-quality digital collectibles with a value that's based on real-world assets.
They are often limited edition and unique, meaning there's only one copy of each item out there in the world—and whoever owns it gets to keep it forever. For example, the studio album of the Wu-Tang Clan. Or the top shot dunk by LeBron James which sold for almost $400,000 at an actual auction house in the US.
Which Celebrities Love NFT?
Celebrities have taken notice of NFT and are starting to use it with their fans. Many celebrities have been known to create NFT in the past and others have even started using it as a way of expressing themselves. Here's a list of some celebrity users:
Paris Hilton, Pitbull, Lil Yachty, Jimmy Fallon, Shawn Mendes, NBA athlete Ben Simmons, Madonna, and many others like Lindsay Lohan, King Bach, a comedian, Banksy, a graffiti artist, Snoop Dogg, Rihanna, Mark Cuban, etc.
What Platforms are NFTs On?
NFTs are currently on several platforms, including OpenSea, Rarible, and Mintable. This is a good way to start if you’re new to NFTs or want a little more control over your collection.
You can even try SuperRare if you want to buy items that are harder to access.
Which Company like Meta is Maximizing the Use of NFTs?
Companies are using NFTs to create digital art trading that is secure and transparent. MetaCert, for instance, is a blockchain data security company that has created a system called “tokenization”. This means they have created digital images which are unique and impossible to replicate or copy.
Many other companies are using NFT to boost their value on Metaverse. These are brands like Ceat & MG Motor, Prada, Mahindra & Mahindra (M&M), Adidas, Balmain, Dolce & Gabbana, and many others.
How Can I Get Started with NFT, and what is dangerous about it?
If you want to get started with NFT, the first thing you should do is understand what NFT is. Now that you have, you can head to any of your interested platforms recorded above, create an account, and get started. Now, what is dangerous about investing in NFTs?
By the way, don't forget that what you buy may have value and make you more money when you resell. However, what's tricky about this business idea?
What is Dangerous About NFT?
You no longer ask what NFT is, you want to know what's dangerous about it.
1. NFTs are generally not regulated, which means that you need to be extra careful when buying them. Although there are some exceptions, such as Cosmos and Ethereum, most NFTs are created by anyone who wants to create them.
They're completely decentralized, and anyone can buy or sell them on the open market. This means that there's no central authority monitoring what happens with these assets. If someone sells you an item of unknown provenance who says that it's worth $10 but is actually worth $1, they won't take responsibility for it.
2. They can be extremely volatile: Be prepared for losses if necessary by setting aside savings from your paycheck every month into an emergency fund until things stabilize again. Remember: there's no guarantee how much profit you will make back after being burned once already. Sometimes, it makes sense to just wait them out rather than risk all you have.
3. Buying NFTs is a lot like gambling: if you know what you're doing then it could be very profitable for you. If you don't, there's no guarantee that things won't go wrong somewhere along the line.
Conclusion
Now that you know what NFT is, if you have a lot of money to blow, you can invest in it. If you don't, you can shy away from it.
However, if you're investing in NFT, don't forget: Beware. Don't get your hopes up because a project you think will have huge value may end up being thrash. You may feel damned to have rushed into buying a project only to realize it's worth less than it's sold for.