Everything You Were Afraid to Ask About NFTs

by Prima Felicitas Best Custom Software & Blockchain Development

NFTs – You may have heard of them, but most likely, you have absolutely no idea what they are. And while NFT stands for non-fungible token, that probably didn’t help explain very much, either.

Yet a CNBC report on NFTs reveals that sales topped $2 billion (£1.43 billion) in the first quarter of 2021 — 20 times higher than the record from the previous quarter.

So why exactly is demand heating up for something that most people know next to nothing about? Here’s a no-nonsense beginner’s guide to blockchain’s latest trend.

What are NFTs?

Simply put, non-fungible items are unique and cannot be replaced. Your average train ticket, for instance, is considered non-fungible due to its unique serial number and capacity for one-time use. This is the opposite of, say, cash — a bill can be replaced with coins that amount to the same value.

When placed in the world of crypto, non-fungible items become NFTs: unique digital assets. The majority of NFT sales involve digital art, giving digital content creators a secure avenue to sell their work. And one item alone can be worth millions.

Even the viral 2011 video sensation, Nyan Cat, was sold as an NFT last February for a whopping $580,000 (£414,529), and Twitter co-founder Jack Dorsey sold his first tweet for an even larger $2.9 million (£2 million). And though winning bidders will never see a physical manifestation of their purchase, buyers are still clamoring for more.

How does it work?

Briefly put, digital assets are tokenised. Here at PrimaFelicitas, for instance, experts work to encode self-executing smart contracts, which are a form of NFT.

This process results in a ‘minted’ digital asset that, in itself, acts as a certificate of ownership, giving the new owner exclusive rights to it. However, it’s important to take note that, unlike physical non-fungibles, people can still duplicate your NFT. The only difference is that you are the official owner of the original copy. It’s similar to people owning prints of famous artwork, like Van Gogh’s Starry Night.

Similar to cryptocurrencies, NFTs rely on blockchain technology to pull this off. The blockchain acts as a digital ledger that takes official record of an asset’s certificate of ownership. And since the blockchain is connected to thousands of computers worldwide, records stored within it cannot be forged.

And while NFTs mainly make use of the Ethereum blockchain, other cryptocurrencies, like TRON, have already implemented their own version of NFTs, too.

How do I make a purchase?

Simply head over to one of many NFT marketplaces. The biggest marketplaces currently include Opensea.io, which specializes in rare items, and Foundation, where content has to earn enough upvotes to be posted.

Once you’ve decided what to buy, find out what currency the creator wants to receive. It can be any currency, but sellers usually ask for Ethereum, since the majority of NFTs operate on the Ethereum blockchain.

Will the bubble burst?

Due to the unprecedented growth of NFT sales, many crypto enthusiasts wonder: Are NFTs here to stay, or are they simply enjoying their 15 minutes of fame? As with most things, opinions on the future of NFTs vary. Some see NFTs as the future of fine art collection — a hobby that will become increasingly exclusive to those who have the means to bid in the millions.

Meanwhile, there are those who speculate that the rise of NFTs is merely a fad, as pointed out in a guide to NFTs by FXCM. Critics have pointed out that NFTs don’t have much value outside how people perceive them. And, surprisingly, one of the sceptics is digital artist Beeple, who once created a video that sold for $69 million (£49 million).

On the whole, the uncertain future of NFTs might make them risky for some. So, if you’re in the market for one, do your research beforehand and enjoy it for what Forbes says it really is: an experience, not a thing.