Introduction To NFT’s — The What, How, And Why
Google, “what is an NFT?” and you will receive over two billion search results, all explaining in their own way why, how, and what Non-Fungible Tokens (NFTs) are and why they are (or aren’t) a valuable new asset.
Non-fungible tokens have become the ‘next big thing’, thanks in large part to the Beeple artwork, which sold for USD $69.3 million in 2021. Indeed, some of the highest valued pieces of NFT artwork are from Beeple or Larva Labs, an early arrival in this world. Nowadays, however, these digital assets are selling anything from music to tacos to 17th-century exotic Dutch tulips — The hype is real. While some financial advisors will tell you “it’s all just completely nonsense created by the Web 3.0 craze”, others will tell you that these digital assets will become a part of everyday life and utility within years.
What Is an NFT?
An NFT is a digital asset that symbolizes physical objects such as art, music, in-game items, and films. They are purchased and traded online, frequently using cryptocurrency, and are typically encoded with the same underlying software as many cryptos.
Although they have been present since 2014, NFTs are gaining popularity as a means to buy and sell digital artwork since late 2019. NFTs are also normally one-of-a-kind, or at the very least one of a very limited run, with unique identification codes. In its essence, NFTs can be seen as a digital scarcity, which stands in clear contrast with how we know the internet and digital world today (unlimited). However, individual images — or perhaps the full collage of images — can be viewed online for free by anyone. So, why are individuals prepared to spend millions of dollars on something that they can easily capture or download?
That’s because an NFT permits the buyer to retain ownership of the original item, which includes built-in authentication and thus, acts as proof of ownership. Like with “traditional” art, owning an NFT artwork comes with a certain prestige. That said, while the first NFTs were only collectibles, nowadays, more and more NFTs offer exclusive utility and rights to their holders.
How are NFTs Different From Cryptocurrency?
As we mentioned earlier in this article, NFTs stand for Non-Fungible Tokens. The technology is generally built upon the same blockchain networks on which crypto assets are built, such as Ethereum, Solana, Polygon, and smaller chains such as Telos EVM and Eluvio. But, it’s important to note that that’s also where the similarity ends.
Physical currency and cryptocurrencies are both “fungible,” which means they may be traded or exchanged for one another. They’re also worth the same amount. One USD is always worth another USD, and one Ether is always worth another Ether. The fungibility of cryptocurrency gives it a reliable method of executing blockchain transactions. NFTs don’t work like that. Each NFT contains a digital signature that prevents it from being swapped for or equal (hence, non-fungible). Just because they’re NFTs, one CryptoPunk is not equal to the EVERYDAYS artwork created by Beeple mentioned earlier in this article. In fact, one CryptoPunk isn’t even equal to another CryptoPunk for that matter.
Why You Should Obtain an NFT
First things first, it is worth noting that this is not financial advice, and no rights can be obtained from this article nor any other communications by EMP. That said, NFTs have the unique quality of being able to afford artists and content creators the opportunity to monetize their wares. Artists, for example, no longer have to rely on galleries or auction houses to sell their work. Instead, the artist can sell it straight to the consumer as an NFT, allowing them to keep a larger portion of the revenues.
Furthermore, artists can automate royalties so that they receive a percentage of revenues anytime their artwork is sold to a new owner. This is an appealing feature because most artists do not receive future proceeds after their work is sold.
Another somewhat newer concept is Utility NFTs. Utility NFTs are NFTs with valuations depending on the token holders’ access, privileges, and opportunities. Utility NFTs have a clearly defined intrinsic value, in addition to the scarcity normally associated with NFTs. We are still in the early stages of utility NFTs, which provide value accumulation for NFT technology as a whole, with endless prospects for visionary NFT inventors. These 2.0 NFTs offer a broader range of practical applications. By holding one of these NFTs, you will be granted access to exclusive experiences, early access to products, airdrops, exclusive invites to events with celebrities, etc. Thus, the introduction of Utility NFTs illustrates the wide adaptability of NFT technology, only time will tell where its implementation will end.
Electromagnetic Productions is a premium film and television production studio. Our team has produced over 100 films and TV shows for major studios, networks, and streamers including Disney, Fox, MGM, Sony, NBC, Apple TV+, Bravo, and CNBC. With our new NFTs, you can join our community and be a part of the process.