What are NFTs? Why are people buying them?
NFTs or Non-Fungible Token is the new hot dish in town. But what are NFTs and why are people spending millions on them?
NFTs are crypto assets, representing an intangible digital item, video, or in-game item. To better understand this, we need to understand the basic terms of NFT which are “Non” “Fungible” and “Token.” Fungible assets are those assets that can be exchanged or substituted. For example, cash is a physical fungible asset. Like most assets in today’s world, assets can be physical or digital. So fungible assets can be physical or digital as well.
To better understand this let’s go through an example: If you had a $10 note and gave it to someone, but that guy returned you two $5 notes, it will be completely fine as both are interchangeable, exchangeable, or can even be substituted by real products like cookies at the nearest supermarket.
The digital aspect of fungible assets is similar, and examples are cryptocurrencies like Bitcoin or your frequent flyer points.
Now, non-fungible physical assets are those assets that can’t be exchanged, substituted or interchanged, like paintings, or your house. No painting, however good a copy, can replace the original one.
The digital non-fungible assets work similarly. Game skins, trademarks, or even crypto keys are all digital non-fungible assets. They exist in the digital realm, but their ownership can be determined.
Tokens are digital certificate stored on a secure distributed database called a blockchain.
NFTs are unique, on-chain token representing ownership of digital assets or intellectual property which is publicly verifiable and authenticated on a blockchain. They are backed by a social contract from the creator of the NFT and the surrounding community. Since digital pieces cannot be physically owned, and prevention of copyright is nigh high, NFTs come in. NFTs assign a unique token to a thing, like the First Tweet of Jack Dorsey, the founder of Twitter. So, when someone bought the NFT, he gained ownership right over that tweet, making the other screenshots or retweets in the wild just copies of the original. Much like art, the value of most NFT right now is dependent upon the buyer’s interest, as they say, “Beauty lies in the eyes of the beholder.”
https://www.youtube.com/watch?v=QH2-TGUlwu4
The reason why people are comfortable with buying NFTs and spending millions of them is just to establish ownership right of an authentic digital piece. And this chain of events has led the digital assets to become scarce and valuable.
You might ask, that if I download and republish something, that might make the original invaluable because digital art looks the same on-screen. But NFTs have solved this very problem. The creator of digital art may create an NFT for his art which will make him the sole owner of the art, and any downloads, screenshots, etc, will just be copies of the original, not holding much value if the art is monetized. Just like trademarks can be implemented across the globe, so can NFTs be.
The creator can also create multiple NFTs of the same digital art which will make them multiple originals but reducing their value. The value of an NFT is highly dependent on scarcity.
Also, the future seems bright for NFTs as their use outside buying and selling art include a digitized form of IDs like Passport, tickets for events, and limited-edition item for games.
NFTs were created so that unique digital items could be bought and sold, but the size of NFT transactions show that a new asset class is making its way into the mainstream. A popular place to buy or sell NFTs is OpenSea.io
