NFT (the acronym for non-fungible tokens) is Collins Dictionary’s word of the year in 2021.
The definition goes, “a unique digital certificate, registered in a blockchain, that is used to record the ownership of an asset, such as an artwork or a collectible”. It simply means irreplaceable or non-interchangeable.
Why NFTs are gaining popularity
NFTs made their way to media headlines when digital assets were sold at an insane price.
In 2021, Chris Torres sold his unique digital rendition of the Nyan Cat for 300 Ether or $580,000. The Nyan Cat is a viral GIF of a cat with a pop tart body leaving rainbow trails.
Twitter CEO Jack Dorsey sold his first tweet “just setting up my twttr” as an NFT for a whopping $2.9 million.
Special qualities of NFTs
NFTs have special qualities that motivate users to create NFTs and lure others to invest in them.
The main reason why NFTs come at a hefty price tag is each one’s uniqueness. Wondering why Nyan Cat was sold for almost $580,000 when it’s easily downloadable on the Internet?
Each NFT’s digital signature is unique. It’s like buying an original painting. You’ll have the artist’s signature as proof that it is the original. This unique signature is recorded in the blockchain and can be viewed publicly. Everyone will know that the user, identified only by its wallet number) is its rightful owner.
NFTs can’t be divided into smaller tokens. If you’re going to purchase a digital painting, you can’t buy just a quadrant of it. The NFT would have to be sold as a whole.
One of the improvements made in NFT, however, is fractional ownership. Multiple users can now own NFTs. “The Merge”, which is the most expensive NFT ever sold, is owned by almost 30,000 users who chipped in to collect $91.8 million for the digital art.
An NFT can be created in such a way that the artist or the original creator is awarded royalty every time the asset is resold. This is enforced by smart contracts. The artist can still earn from future sales and need not communicate to be able to collect the royalty because it is automatically paid.
The different types of Non-fungible tokens
Artwork. Digital illustrations, videos, and even memes can be tokenized into NFTs.
Some are calling NFTs “the future of art”. Traditional auction houses such as Christie’s and Sotheby’s already started selling them as sales in conventional art decreased due to the pandemic.
Even Paris Hilton’s mansion has screens showing NFTs, including a video of a chihuahua sitting on top of a column.
Trading cards, like physical baseball cards, are sold as collectible items on the NFT market.
Music. In March of 2021, Kings of Leon became the first band to release an album in the form of NFT. The money goes directly to the artists instead of passing through traditional markets and streaming sites.
Owning their NFT album means owning a token that gives you access to the record, exclusive artwork, and limited edition vinyl. The limited tokens will not be reproduced but can be resold to other willing collectors.
Even artists like Shawn Mendez, the Weeknd, and Snoop Dogg already joined the trend. Independent musicians now also see NFT as a profitable platform.
Gaming. The play-to-earn model followed by NFT games has become a selling point even for those who have zero knowledge in crypto to start exploring the NFT market.
Users can now buy and sell in-game assets such as skins and characters that help increase the buyers’ winning potential. Completing objectives in the game also rewards the player with cryptocurrency.
Axie Infinity is probably one of the most popular NFT-based games. Inspired by Pokemon, players can collect, breed, and sell virtual creatures called Axies.
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