What Are NFTS and Why Are They Popular?


Crypto is no longer simply about buying and selling assets. They have now become a good source of passive income for investors where they can be rewarded with methods like crypto staking.

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NFTs stand for Non-Fungible Tokens. To familiarize ourselves with the term, we should know the difference between fungible and non-fungible tokens.

  1. Fungible Tokens

Fungible tokens are assets that have a value depending on their number, size, or weight. These can be exchanged for another token that has the same value. For example, we can exchange $20 for another one, as their value is the same.

  1. Non-Fungible Tokens (NFTs)

Non-fungible tokens are special digital assets that cannot be exchanged because they are irreplaceable and therefore unique. NFTs are often linked to cryptocurrencies, especially in terms of technology. Cryptocurrencies and NFTs are like different faces of a technological coin.

In the case of cryptocurrencies, their value varies depending on demand, like what happens with gold. If the number of buyers increases, the sellers' prices will go up, and vice versa. On the other hand, NFTs are unique, and their value is different for each of them, just like different pieces of art.

Let’s think about NFTs as a big artwork. Imagine there was only one NFT in a concrete place. In art, you can buy the original piece (if it’s for sale) or you may choose to buy another one but with a different value. In the case of NFTs, the idea is the same, but in a digital way.

 

  1. How do They Work?

NFTs use blockchain technology to store the data of transactions and secure ownership. They cannot be plagiarized, meaning they can lose their certificate of originality. They operate through a decentralized computer network, where blocks are secured using cryptography. The blocks are interlinked, so the data that is stored cannot be modified.

NFTs are signed with a kind of certificate of authenticity; a set of metadata that cannot be modified. It records the starting value, all the transactions made, and the author.

This means that if you buy an NFT, there will always be a record of its first value and how much it was bought for. It’s like buying a painting and keeping track of its movements.

NFTs are commonly based on the Ethereum blockchain, as it is easier to make transactions using wallets that work with ETH.

  1. Why Have NFTs Revolutionized the Art World?

The hype around NFTs in recent months has done nothing but grow, increasing the popularity of digital art. Before the creation of NFTs, it was impossible to buy or sell a digital art piece and guarantee its originality and ownership. Today, NFTs have made digital art a valuable asset, with thousands of buyers interested in a unique piece.

In the traditional art market, the pieces have to be certified meticulously by contracts and notaries, while with NFTs, everything is under strict control through blockchain technology. Some NFTs have been sold for higher prices than traditional art pieces by well-known and famous artists, such as Dali.

 

  1. 5 Most Expensive NFTs of 2021

The Merge byPAK: $91.8 million

The most expensive NFT ever sold so far. This NFT was fractioned and distributed between 28,983 traders.

Everyday – The First 5000 Days byBeeple (Mike Winkelmann): $69 million

The third most valuable work of art sold by a living artist. It is a collage of 5000 individual images that were made over more than 13 years.

HUMAN ONE byBeeple (Mike Winkelmann). $28.9 million

A more than 2-meter sculpture formed by LEDs. It features dystopian images accessed through the ETH blockchain. Beeple said he intends to update those images through blockchain in order to create an “ongoing conversation” between artist and owner.

CryptoPunks #7523 by Larva Labs: $11.75 million

This NFT is composed of nine little portrayals of pixel art. This one is the most expensive avatar of this collection to date.

CryptoPunk #4165 by Larva Labs: $10.35 million

CryptoPunk is simply a series of 8-bit, digital characters.

  1. Why do People Buy NFTs?

Buyers are looking for proof of ownership rather than the asset itself. Traders and investors are hoping that in a few years, NFTs will become increasingly popular, and therefore their value will increase.

As they are unique pieces, NFTs should be given a higher value over time. According to data, NFTs sales on the Solana blockchain surpassed a total volume of $1 billion in January 2022.

  1. What Will Happen?

As we mentioned, NFTs have specific codes to ensure they cannot be destroyed, duplicated, or deleted. All the transactions are recorded in the blockchain, securing ownership of the asset. At the end of the day, NFTs have been considered valuable assets linked to cryptocurrency and the art world.

They can be very useful in different sectors, but many are still unsure about their real use. Only time will tell whether this digital art is an excellent opportunity or just speculation to inflate the value of something that has no value in the long term.

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