Maybe you have not yet heard of NFT till now. However, very soon you will hear a lot about it, as NFT’s have just captured the online space by a storm.
So much so that they have just doubled the total volume in February itself. So, let us know more about what these digital assets are and how they operate.
What Does NFT Mean?
An NFT is simply a non-fungible that exists on a blockchain network. A token shows the ownership of that asset.
For example, if you have a concert ticket that means you have the ownership of space for a concert. A bitcoin similarly is the ownership of a particular value of the Bitcoin. Since the blockchain is quite transparent, anybody can see who owns that token.
Fungible, to be specific, is an asset that you can easily exchange. A dollar is fungible as you can exchange it and get some other product in return.
If your neighbor borrows a pound of sugar and then buys you another packet that is also fungible as it is exchangeable.
On the other hand, a non-fungible token cannot be easily exchangeable with any other item. For example, if we talk of Artworks that have been selling on Blockchain for millions of dollars.
Beegle sold 21 pieces of artwork for a total of $3.5 million. He then proceeded to sell the masterpiece “EVERYDAYS: THE FIRST 5000 DAYS” for $6.5 million at Christie’s. Beegle or Mike Winkelmann was a graphic designer from South Carolina.
Artworks are just one part of all the things that can be exchanged on these marketplaces. Digital sports trading cards are another set of items that are adding volume to the NFT space.
Fans of basketball have spent $230 million in trading NBA top shot cards. The cards depict the classic moments of the sport, and the range is limited.
Ownership and scarcity of cards are taken care of by Ethereum Blockchain. Just recently, a Lebron James highlight went to the highest bidder for $200,000.
Why Would Anyone Pay For This?
The funny thing about these purchases is that anyone can still download the artwork of Beeple or Lebron’s highlights.
You just have to click “save image” on the laptop. Buyers don’t want the artwork per se; they want the proof of ownership, which remains with them. NFT is a simple way for art collectors to promote their favorite artists in the online space.
As lockdown extends in most parts of the world, people have no choice left but to purchase art in the digital world.
On the other hand, there are platforms like Decentraland which help the users to buy real estate or land through the digital world.
Until now, this was only a niche sector of the internet; however, in the last few months, it exploded into the mainstream media.
The first experiments with NFT originally started in 2013-14, but now the market has attained maturity and mainstream appeal. This took time, but now it seems NFT’s are here to stay.
Still, there are some issues with the NFT market. Since the main currency of exchange and network on which the marketplace is built is Ethereum, the transaction fees remain high.
You may have to pay $50 just to transfer the title of an NFT from the creator to the buyer. In fact, on platforms like Risible or Open Sea, each transaction like transfer or creation costs the user massive amounts. It also amounts to creating a terrible carbon footprint of the Ethereum network.
However, everything is still not lost as Ethereum plans to change its architecture by 2022, thus making it more eco-friendly.
Certain marketplaces seem to have found solutions to all these issues. For example, Drops is an NFT project in making that will allow the users to do more with NFT than just buying or selling them.
It will enable them to create NFT’s, bid, stake, take loans, and use the NFT as the collateral. It will also use a Layer 2 solution and thus reduces costs of transactions by few cents and impact the environmental costs as well.
The new creator economy
One thing that makes this NFT revolution so exciting is that artists with specialization in digital arts will be compensated for the work done.
Such artists found it tough to monetize their work because of the chances of their work getting reproduced. Now fans of these artists can support them without the presence of any middlemen.
Even mainstream artists seem to have been bitten by the bug. Artists like Kings of Leon released their latest album as an NFT.
Apart from that, Lindsay Lohan, Grimes, and Soila Boy also released NFT’s that represented their music, artworks, or ownership of limited-edition vinyl.
However, it is not only the artists who get benefitted from the NFT’s. The market for digital sports cards is already booming.
Solare is a Soccer trading card platform, and it saw a unique 2020-21 Kilian Mapped card selling for a massive $65,000.
They cashed in on the sports fans who are stuck at home and earned huge profits. So much so that gaming giant Ubisoft tied up with Solare for their future projects.
NFT’s, as is evident, is the next big thing in the crypto crazy market. Mainstream artists also are discovering this concept, and this has led to an increase in their popularity.