The word NFT, which has become very popular in recent years, will surpass even the most cryptocurrency in the latest Google search trends. You probably won’t find a person interested in the crypto world who hasn’t heard of this newly popular blockchain technology.
Often, even experienced cryptocurrency investors do not understand whether they want to understand this relatively new asset class, let alone others who are not yet willing to accept the benefits and uses of cryptocurrencies. So, what is NFT, and why are people willing to lay thousands for a “simple JPEG image”?
Worth to mention Piplum has its own NFT collection:
What is NFT?
NFTs are digital assets that transfer real-world objects into virtual space, e.g., Art, music, or game elements and videos. They are bought and sold online, often using a cryptocurrency, and are usually encrypted using the same technology as many cryptocurrencies.
Although NFTs have been around since 2014, it is only in recent years that they have gained tremendous notoriety as they have become an increasingly popular way to buy and sell digital artwork.
NFTs are also generally unique, or at least very limited, and have special identification codes marked in the play, as well as different rarity ratings that distinguish NFTs with rarer attributes, thus adding value to them due to their rarity and uniqueness.
This is entirely different from most digital works, the supply of which is almost always endless. This means that a lower collection of works should also increase the value of these assets (assuming that there is also demand for them).
Why NFT Has Value
We can view and download for free or “screenshot” individual images or even the same; other people’s NFT works online. So why do people want to spend thousands or even millions on something they could easily photograph or download?
The answer is quite simple :
Because NFT allows the buyer to have an original product and an original work of art.
What’s more, it has built-in authentication, which is proof of ownership and cannot be tampered with, which often happens with physical goods. Collectors value it almost more than the item itself.
The NFT category – “Profile Photo” (PFP) has become the new “Rolex” in social networks. This has become another way to “flex” the Internet space by showing off your assets.
How NFTs Differ From Cryptocurrencies
The NFT value is a Non-Fungible Token. It is usually created using the same programming as for cryptocurrencies, such as Bitcoin or Ethereum, but that is what the similarity ends with.
Physical money and cryptocurrencies are “exchangeable,” meaning they can be traded or exchanged. They are also of equal value – one dollar is always worth another dollar; one bitcoin is always comparable to another bitcoin. Due to the “substitutability” of cryptocurrencies, it becomes a reliable tool for performing operations in a blockchain.
NFTs vary. Each of them has a digital signature, which means that the NFTs cannot be changed or are equal to each other (hence, “irreplaceable”). For example, one Bored Ape is not the same as a Mad Meercat because they are both NFTs. (One Bored Ape is not necessarily the same as another Bored Ape, as their appearance, attributes, and rarity will vary.)
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Different NFT Types
As NFT is a relatively new asset class that has gained immense popularity in a concise time, it is currently in a bubble. In an attempt to milk and fool their investors, developers seem to be turning anything into NFT and offering to buy it.
Instead, they are downloaded directly from public auctions from tweets to photos of luxury cars. For the examples listed that undermine NFT technologies, I will list a couple of beneficial and high-potential NFT types and their possibilities for the future.
1) Collectable NFTs
What are NFT collections? – This is currently the most popular NFT category. The clearest example of this NFT category in the real world would be all the collectors’ favorite items, such as Pokemon, NBA, NFL, and other cards, stamps, luxury watches, and various coins.
As in the real world, so in blockchain, almost every collectible is unique and irreplaceable.
In the NFT system, rarer and unique attributes will be much more valuable than ordinary (common) attributes. This can be compared to the real world, where better kept and more rare items will be more valuable than others.
For example, in the process of opening (thinking) NFTs, NFTs randomly assigned to buyers with different attributes can be compared to opening Pokemon cards with tremendous popularity and value, where buyers have a chance to get cards worth hundreds of thousands of dollars.
Check this NFT collection: NFT. What is That?
2) Digital NFT art
It becomes an excellent opportunity for digital artists to make money from the work they create. Because NFT exists in blockchain, it allows digital artists to sell their work as unique and original, just as in the real world.
Nowadays, everyone is free to download a Mona Lisa picture, print it, and frame it in their room. However, it will never have any value compared to the original. With the help of NFT technology, this has also become true with digital works of art.
The most successful and expensive example of NFT digital art is the Beeple collection “Every day’s – The First 5000 Days”. The price paid at the auction was as high as $ 69 million.
3) NFT P2E games (play and earn)
Every child’s dream of earning money just by playing video games has finally become a reality. Residents of less developed countries are already taking advantage of this, quitting their regular jobs by replacing them with NFT games.
The economy of NFT P2E games works like this – just by playing the game, you can earn extraordinary NFT heroes and their appearance or other tools needed for the game, such as weapons or the appearance of firearms (Skins).
These virtual assets can be exchanged and sold in virtual stores for profit. So you may be wondering why gaming companies should integrate this technology and how you can make money from this business model? For each NFT sale, the game developers receive a set percentage of their sales amount.
Currently, the most popular NFT P2E games are:
4) Music and Entertainment Industry
NFT is currently being experimented with in the music and entertainment industry. Because NFT’s capabilities allow you to turn simple music or video file into an NFT, it will enable fans of emerging music creators to purchase performers’ works and obtain proof of ownership (NFT), thus directly investing in the success of the artist they like.
This becomes an excellent opportunity to earn money not only for the musician himself but also for their fans. Imagine if you used this technology to invest in a new Jay-z or Eminem before their global success. It’s probably hard to imagine how much NFT would be worth these performers these days.
As it is impossible to counterfeit the NFT contract, this would also eliminate the problem of piracy.
5) Tokenized Physical Assets, And Physical Documents in the Form of NFTs
Although this method of using NFT is not yet widespread, it would significantly simplify buying and selling significant physical assets, such as real estate. It would allow savings by eliminating the need for intermediaries and brokers.
6) Identity Documents
Counterfeiting of NFTs is not possible, and each NFT is unique and tied to a specific address that could change the current identity documents.
Tokenized IDs would also make it easy to tie discounts, offers, permits, rights, and other documents.
7) NFT Memes
Let’s not forget all your favorite Memes. It’s hard to verify at this time who was the original creator of the popular meme.
Converting their memos into NFT would allow original developers to obtain official proof of ownership and be rewarded for their work.
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The downside of NFT.
Although the pros outweigh the minuses (Personal Opinion), like any technology, NFTs have them, and it would not be objective not to mention them.
This is a new asset class, so it is difficult to predict its future and its actual value.
NFT asset class prices are highly volatile and unpredictable. However, as with regular artwork, their worth depends on how much the buyer is willing to pay.
The negative impact of NFTs on nature. Because a significant portion of NFT uses the Ethereum blockchain, the POW (Proof of work) used by Ethereum wastes a large amount of electricity. More and more NFT developers are starting to use other circuits, such as Solana or CRONOS. This significantly reduces the negative impact on nature.
Also, soon, Ethereum will change to POS (Proof Of Stake), almost completely eliminating this problem.
Fraud and theft of NFTs.
The world of cryptocurrencies is still dominated by the wild west without any regulation or prohibitions, making it a true rogue paradise. Because the crypto world is decentralized and each has its bank, the probability of reclaiming one’s assets through negligence is almost 0.