What are NFTs? Why are they trending in 2021?
What are NFTs? Why are they trending in 2021?
NFT corresponds to the acronym “ non-fungible token”, which we can translate as “non-fungible token” or “non-fungible asset”, or, in other words, the meaning of NFT means that it is an asset that is unique, it cannot be modified and it cannot be exchanged for another of equal value, because there would not be an equal one. And these assets are also digital, that is, they have no correlation in the physical world (although sometimes they may).
To understand it better, an NFT would be like a unique work of art, for example, Michelangelo’s David , there is only one and it is in the Gallery of the Academy in Florence; If someone wanted to have that particular David , they should buy it (if it were for sale) or get a copy, in which case, we would no longer be talking about the original, which is what gives the sculpture value.
Why are they trending in 2021?
Although now is when we are hearing about them the most, NFTs have been around since 2017 , when the first NFT, CryptoPunks (from Larva Labs) was launched, followed a little later by CryptoKitties, which went viral and raised more than $ 12 million.
However, they regained popularity in 2021 because in March of this year, the Christie’s gallery auctioned the digital work Everydays — The First 5000 Days , by the artist Beeple, for $ 69 million. Or because the first tweet ever sold for $ 2.5 million.
Suddenly, NFTs are on everyone’s lips and there is discussion about them, about their usefulness, about the speculation that is being generated around them, about the environmental impact they have (many energy resources are needed for their creation and transaction) and to what extent they are a legitimate way for artists to sell their digital works and have control over the price they put on them.
As with Bitcoin at the time, it is happening now with NFTs, they are the hot topic, they are not without controversy and in the world of NFT art or art based on NFTs they are creating quite a stir.
They are also a trend because they begin to discuss their usefulness beyond collecting, art and economic speculation around them; Can they be a way to certify the origin of physical products? Can they be used as a way to manage identity from anywhere in the world by applying them to passports or identity documents?
Are we facing a new bubble?
However, since what has made them a trend has been the millionaire sales of NFT, there are not few who think that we are facing a new bubble, where there are people acquiring NFT with the idea of selling them at a higher price in the future, based on in that unique and original feature of the NFT.
But the reality is that we are still facing a relatively small and very young market, where there are not many actors, which is not regulated and in which the uncertainty is great, starting with the fact that being digital and intangible content, it remains stored on a server, if it disappears, what happens to the NFTs contained there and the money invested in them?
Not to mention that we are facing a market where, right now and outside of the official card games or collectibles, speculation reigns.
Although, we cannot fail to mention that in the world of digital art, NFTs are becoming a relatively safe way for artists to make money and control the rights of their works. For example, on MakersPlace, an NFT marketplace , we can see hundreds of NFTs of digital works for sale. In this case, the NFT functions as a certificate of authenticity and originality and grants non-commercial (that is, non-exploitation) rights to the acquired work.
Obviously, nothing prevents someone from copying a digital work and uploading it to their own blog or website (nothing, except copyright, it is understood), but by acquiring the NFT, you are acquiring the work signed by the author and the rights of ownership over it. Certainly, it is still a non-tangible digital element, which raises the doubts that we have mentioned before.
Buying and selling NFT
Now that we know what an NFT is and, at a basic level, how they work, what is the purchase process like? Where can they be purchased? How are they paid?
To buy NFT you have to go to an NFT marketplace, such as the aforementioned MakersPlace, Nifty Gateway or Valuable. On these sites we will find NFT artists or creators who put them up for sale, but also NFT owners who trade with them.
Sales can take place at prices set by the owner of the NFT or through auctions (a much more popular medium from what we have been able to see and which contributes to this “fear” of being before a new speculative bubble). Here you pay in cryptocurrencies, the most common is Ether, but it is not the only cryptocurrency that can be used, so it is necessary to have a wallet or cryptocurrency purse to carry out transactions.
In the case of official products, such as those that we have already mentioned before, these have their own sales market and make the purchase process a little easier, since it can be done by credit card and not necessarily with cryptocurrencies. In this sense, it is evident that this type of collectible NFT or more oriented to games or video games, are designed to reach a more general public.
What value do they have?
The value of the NFT is marked by its creator or the person who has tokenized digital content and put it up for sale.
We cannot say that there is a fixed value to sell NFT and, as we have already said, speculation seems to be hovering over them currently.
In collectibles like the NBA or Doctor Who we mentioned earlier, they have fixed prices based on the rarity of each play clip or card and the number of equal “copies” that exist. But once bought, the person who owns them can put them up for sale for a higher value; For example, if you’ve acquired a very rare or unique card, you could sell it (or at least give it a try) for a much higher price than what you bought it for. The NFT is yours (we remember that it gives property rights) and therefore you can do with it what you want, including sell it.
So we can find NFT for cheap prices and others for much higher prices. We can use pages such as Coin Ranking of Binance and their sections on NFT to know the value of these tokens.