An NFT is a digital asset that represents objects like art, music, in-game items, and videos. They are bought and sold online, frequently with cryptocurrency, and NFT transactions are recorded on the blockchain.
Although they’ve been around since 2014, NFTs are gaining notoriety now because they are becoming an increasingly popular way to buy and sell digital artwork.
NFTs are also generally one of a kind, or at least one of a very limited run, and have unique identifying codes. Essentially, NFTs create digital scarcity, in contrast to most digital creations, which are almost always infinite in supply. Hypothetically, cutting off the supply should raise the value of a given asset.
An NFT allows the buyer to own the original item. Not only that, it contains built-in authentication, which serves as proof of ownership. Collectors value those “digital bragging rights” almost more than the item itself.
How Does an NFT Work?
NFTs exist on a blockchain, which is a distributed public ledger that records transactions. You’re probably most familiar with blockchain as the underlying process that makes cryptocurrencies possible.
Specifically, NFTs are typically held on the Ethereum blockchain, although other blockchains support them as well.
An NFT is created, or “minted” from digital objects that represent both tangible and intangible items, including art, GIFs, videos and sports highlights, collectibles, Virtual avatars, videogame skins, and music.
Even tweets count. Twitter co-founder Jack Dorsey sold his first-ever tweet as an NFT for more than $2.9 million.
Essentially, NFTs are like physical collector’s items, only digital. So instead of getting an actual oil painting to hang on the wall, the buyer gets a digital file instead.
They also get exclusive ownership rights. NFTs can have only one owner at a time. NFTs’ unique data makes it easy to verify their ownership and transfer tokens between owners. The owner or creator can also store specific information inside them. For instance, artists can sign their artwork by including their signature in an NFT’s metadata.
NFTs and the use of blockchain in the metaverse/web3.0 will be foundational not only for digital commerce and marketplace transactions but also for protecting your digital persona, like avatars – and provide the mechanisms to allow you to freely take your digital avatar and assets between spaces.
A decentralized metaverse, with a responsible focus on privacy, data security, and personal safety, will lean on NFTs and blockchain technology.
What Are NFTs Used For?
Blockchain technology and NFTs afford artists and content creators a unique opportunity to monetize their wares. For example, artists no longer have to rely on galleries or auction houses to sell their art. Instead, the artist can sell it directly to the consumer as an NFT, which also lets them keep more of the profits. In addition, artists can program in royalties so they’ll receive a percentage of sales whenever their art is sold to a new owner. This is an attractive feature as artists generally do not receive future proceeds after their art is first sold.
Nyan Cat, a 2011-era GIF of a cat with a pop-tart body, sold for nearly $600,000 in February. And NBA Top Shot generated more than $500 million in sales as of late March. A single LeBron James highlight NFT fetched more than $200,000.
Brands and nonprofits, like XRSI, have auctioned off themed NFT art to raise funds for charity.