What Is NFT?

The cryptocurrency landscape is one that is constantly changing. Those who are immersed into cryptocurrency would know that one of the hottest topics right now is NFT. But there are many who aren’t familiar or informed about NFT and its characteristics. This article hopefully can help clear up some of the mysteries surrounding NFT.

So, what is NFT? Why is it important and how is it going to shape our future?

To answer these questions, we must first understand what NFT means and how it works.

NFT stands for Non-Fungible Token. Non-fungible means that it is something unique and cannot be replaced by something else. Therefore, a NFT is a token that allows your digital assets to become one of a kind by giving it a unique digital signature which defines the ownership of your assets and can be bought or sold using real money, cryptocurrency or even other NFT. For example, the painting of the famous ‘Mona Lisa’ is non-fungible as it cannot be mass produced and even if it can be copied it will not be authentic.

On the other hand, fungible assets are interchangeable or can be divided into smaller units to form something that is the same value. Let’s use RM 100 bill as an example. You can trade your single RM 100 bills into either 2 RM 50 bills or 5 RM 20 bills. They will remain the same value.

Each NFT contains distinguishable information such as who owns the digital asset and who sold it. Making them distinct and easily verifiable. This certificate is almost impossible to forge due the nature of blockchain technology securing the digital assets originality.

Now you may ask, how does NFT work?

NFT basically creates a blockchain base digital certificate for your digital collectibles such as games, music, art, and cards. Having this certificate means that your digital collectables have a unique identity. NFT majorly exists on the Ethereum blockchain which is also a distributed public ledger that records all the transaction.

However, NFT has some distinct differences with cryptocurrency. For example, Bitcoin and Ethereum are fungible tokens. When you trade one for the other, you will get back something that is equal in value. On the other hand, NFT is a unique token. If you try to trade it, you may end up with something that is completely different. Meaning there is no fix value. For example, you can trade your highly valuable first edition Charizard Pokemon card for something like NBA legend Michael Jordan trading card.

So now you may think, why is NFT such a big deal? Well, the reason to that is it comes down to whether are you a buyer or an artist?

If you are an artist, then you may want to consider getting NFT for your artwork because it allows you a way to sell your artwork rather than going through the traditional means such as a sales gallery. Also to note is that NFT has a feature that would pay the artist of the artwork a percentage every time the NFT is sold or change hands.

If you are a buyer/ collector. One of the main benefits is that it allows you to show your support to the artist. You will also gain basic usage rights such as posting the image online as well as bragging rights to owning the artwork with the support of blockchain entry to solidify your claim. Speaking of blockchain, buyers of NFT do not need to worry that their digital assets are a fake copy as it contains the digital certificate to prove its authenticity. Its like buying an autographed print.

In the collector’s perspective, these NFT can also be viewed as speculative assets. Since NFT mainly consists of items such as digital art, cards, music etc. Who knows one day in the future these items would increase two-three times or even more than its current value? Holders of these NFT may want to sell their tokens then to gain profit from it.

With the ever-growing popularity of NFT, we may see that NFT will play a more significant part in the digital economy of the future. We may also gain a deeper understanding towards how we perceive value in different items moving forward. Only time will tell.

Sources: https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq