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Money Things

WTF are NFTs and how do they work?

Money Things

WTF are NFTs and how do they work?

Get your questions answered about these digital, collectible markets.

We’ve had a mini-series going so far covering hot new tech concepts. Things like blockchain and crypto are really making waves in tech spaces. There’s speculation that they’ll switch over to the mainstream before we know it. If you’ve not read through those posts, we recommend reading those to get caught up. They’ll help make sense of our next topic: what are NFTs and how they work.
If you’ve ever asked yourself, “What’s an NFT?” then keep reading. It’s an interesting concept that’s gaining traction as we speak. Don’t believe us? Well, global NFT sales leapt over $4billion at the end of 2021! It’s definitely a technology folks are interested in. But, where they go from here is anyone’s guess.

  1. What are NFTs?
  2. Why are NFTs so popular?
  3. What does the future of NFTs look like?
  4. Conclusion

What are NFTs?

Let’s start with the acronym N-F-T. It means “Non-Fungible Token”. And no, we’re not talking about mushrooms. “Fungible” means something that is replaceable or can be exchanged for an identical item. So a “non-fungible token” is a token that cannot be replaced. Compare that to a cryptocurrency like Ether or Bitcoin. An individual token can be exchanged for another token that’s just like it.

NFTs, on the other hand, are intended to be unique. And they can represent any kind of digital assets verified by blockchain. This verification lets others verify authenticity and ownership, which means, not only is there “one” asset like it, the blockchain also says who is the owner of the asset.

So what can be an NFT? An NFT can be digital artwork, music, copyright licenses, documents, etc. If it can be digitized, it can potentially be an NFT. For example, the musician Grimes sold a 50-sec music video for almost $390k. Others have sold artwork ranging into the millions of dollars for a single digital art piece. Blockchain enthusiasts have even compiled lists of the most common types of NFTs. It’s safe to say that this new technology is making its voice heard.

No. of NFT buyers over the last 3 years
graph showing the increase in NFT buyers since 2019
Yearly NFT Market Report 2021, How NFTS Affect the World. L’atelier BNP Paribas. March 2022.


Why are NFTs so popular?

There can be a number of reasons why NFTs are popular. Many supporters of NFTs came to the technology from their interests in blockchain and cryptocurrency. Buying an Ethereum-backed NFT is easier if you’re already familiar with Ethereum as a platform. Plus, the rapid exchange of money in NFT spaces has helped drive the conversation. Then there’s the rise in celebrities launching NFTs throughout 2021, helping to continue the conversation.
We also have to mention the collectibles industry as well. Outside of the digital sphere, collectibles are still very popular. People collect antique furniture, toys, statues, old coins, and much more. If there’s a limited supply of an item, there’s most likely a community looking to collect what items they can. NFTs can be seen as digital collectibles, playing to the same things that made Beanie Babies so fun back in the 90s (remember those?).

What does the future of NFTs look like?

As of now, it’s unknown what the future could look like for NFTs. They’re a new technology, and the digital landscape is changing around us. Some economists believe that the market is forming a bubble and is bound to crash. Others dispute this, citing that as a new technology there’s always going to be volatility in the beginning. And while certain collectibles got hot and then disappeared with time, others have maintained strong communities. Whether or not we’ll continue to see multi-million dollar sales of ape drawings remains to be seen.

But NFT enthusiasts argue that the potential futures are endless. They argue that NFT and blockchain technology will alter how we view ownership within a digital space. Video game companies are already exploring the application of NFTs within their products. Others have speculated that NFTs will even go so far as to advance digital land purchases in VR realities. And they may be used to create secure online identities in the future, eliminating anonymity on the internet. We don’t know if these things will actually happen. But we do know that people are working to make them a reality.

Conclusion

NFTs seemingly came out of nowhere. Now we have to wonder if they’re here to stay. If they are, they’ll change the way we live our lives. Our environments could become more digital before we even know it. Maybe something entirely different will come from them. Or maybe they’ll disappear as quickly as they arrived. Regardless of what happens, they’re here now. Even if you don’t care about what NFTs are, having the knowledge keeps you up to date. You never know what tomorrow will bring.

The opinions we expressed in this post are for general informational purposes only and are not intended to provide specific advice or recommendations.
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