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What do you need to know about NFT’s?

NFT’s seem to have exploded out the box this year. From art pieces, games, to domains, various digital assets have been selling for millions of dollars. Yes!! You heard right, millions of dollars. But the question is what’s all the hype behind these NFT’s? Here let me breakdown the basic concepts behind NFT’s for you. 

The basics of NFTs

NFTs stand for Non-Fungible Token. The term non-fungible implies that the item is unique and there is no replacement for it. Let me make it clearer. 

  • In economics, when something is non-fungible it cannot be exchanged with any other item like one piece of art cannot be exchanged with another piece of art because both have unique properties. 
  • On the other hand, the fungible items can be exchanged for one another. For instance, 1 bitcoin is always equal to another bitcoin. 

The science behind NFTs

NFTs are the tokens that live on a block chain and represent ownership of unique items. But how does that help? Basically, digital file is difficult to track because it can copied and distributed without any hassle. This makes it difficult to prove the real ownership because everyone has an identical copy of the digital file. Here NFTs come to the rescue. 

Let’s say you made a digital piece of art, you can create an NFT out of this. The NFT representing your artwork will contain information about your art such as;

  • A unique fingerprint or a hash
  • A token name
  • A token symbol
  • An optional link to the file on IPFS

This NFT token is then stored on a block chain and makes you the owner of the art. It enables you to sell the token by creating a transaction on the blockchain. The blockchain ensures no one tampers with the original artwork. It also tells who the current owner is and how mant transactions had been made in the past. 

Things you don’t know about NFTs

Let me tell you some facts about NFTs that make them quite weird. 

  1. The buyer of the NFT representing an artwork, doesn’t get physical copy of the item as NFT only represent ownership.
  2. The token owner owns the original artwork but the creator of NFT has the reproduction and copyrights. This means the creator has sold the NFT but he can still sell the prints. 
  3. You can sell anything under NFTs if it is unique and demands ownership. It can be concert tickets, digital artwork, rare in game items and even the real estate. 

What makes NFTs worth millions?

The NFT market was worth more than $10 billion in the transaction volume for the last half of 2021. Crazy right!! So what is the golden secret behind the NFTs that make people go crazy after them. Well the answer is value. 

The value of NFTs are determined by what people are willing to pay for it. if someone is willing to pay $100 for an NFT then it’s value is $100. The worth is determined by the demand. Higher the demand, higher the worth. 

Conclusion

NFTs are used by wide variety of creators including artists, musicians, etc. There are so many platforms where you can buy NFTs. In fact you can also create an NFT for an artwork and put it up for sale. But the question here is that; Are NFTs worth it? Well according to experts the future of NFTs is risky and uncertain but since they are new you can try out your luck. So whether to buy NFTs or not should be your personal decision. 

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