Nonfungible tokens (NFTs) are a form of cryptocurrency like Bitcoin, only instead of holding money, they contain assets like art and music. NFTs have been part and parcel of the cryptocurrency space for the last couple of years. Still, their value and utility across several industries have driven their proliferation into mainstream consciousness.
In this article, we will discuss NFTs and their popularity. Let's begin!
NFTs can take the form of any digital asset. The most popular NFTs right now are digital works of art, though NFTs can be videos, audio files, or pieces of writing. On the other hand, fungible assets are all the same and interchangeable. Think of a dollar bill or a Bitcoin. Each dollar bill is worth the exact same and each Bitcoin is worth the exact same.
In contrast, each NFT is unique in appearance and value. NFTs are not interchangeable with one another due to their unique nature. Think of them as similar to concert tickets. While each ticket might be the same price, they are not interchangeable since each ticket represents a unique seat in the venue at a specific date and time for each different LIVE show.
Many artists and content creators create their own NFTs and then list them for sale on NFT marketplaces such as OpenSea, Rarible, or Solana. NFTs can be as simple as 8-bit illustrations of dogs or photographs you’ve taken and can be as complex as 3D virtual world maps.
Some creators are curating ‘collections’ of NFTs where each NFT includes a character or image that is part of the collection’s theme. One project collection that is skyrocketing in value is the Bored Ape Yacht Club, which began to skyrocket after Eminem tweeted that he bought an NFT from this collection for $452,000.
The process of making an NFT and listing it on a marketplace is known as 'minting'.
'Minting' in the most basic form refers to creating anything on a blockchain network. Minting is not NFT specific, though listing an NFT for sale on a marketplace such as OpenSea or Rarible qualifies as minting. When you upload an NFT to a marketplace, it creates the NFT along with what is known as a ‘smart contract’ on the chosen blockchain network.
When a creator uploads an NFT through a marketplace's web interface like OpenSea, they fill out a variety of fields with information about the NFT. On the backend, OpenSea creates the smart contract that stores the NFT's metadata.
If an NFT collection has 10,000 pieces in it, it would take the developer team a long time to manually upload and input the metadata to a marketplace such as OpenSea through their web interface. By creating smart contracts as files, humans can be removed from the minting process and a program can do the leg work.
Why Are NFTs So Popular?
NFTs began to gain publicity and popularity last February when an artist named Beeple sold a 10-second video for $6.6 million. Shortly after, a Wisconsin-based artist sold a collage of 5,000 digital pieces of art at auction for $69 million.
Each NFT comes with a unique token. These tokens are similar to when pieces of art or collectibles have a certificate of authenticity - it proves that the NFT is authentic and original. These tokens can be used as authentication keys, similar to API access and secret keys. NFTs are currently being used for things like virtual NBA trading cards, accessing original pieces of art and memes, or even for buying virtual real estate in the Decentraland.
While some NFTs are gaining popularity purely on appearance and collectability, a variety of brands and companies such as Taco Bell and Pizza Hut are announcing plans to utilize NFTs for things such as promotional deals that include free products or content.
NFTs don’t have to be a part of a collection or have additional perks and benefits such as metaverse content and usability. These benefits often help drive the price of NFTs though, since an NFT with more features than just digital art makes it more valuable to NFT collectors. Some NFT collections, such as NBA trading cards, have collector’s value that doesn’t rely on additional perks that allow the value to increase purely based on the trading value of the NFTs.
Some music artists are moving to an NFT marketing model, requiring fans to purchase the artists' NFT in order to have access to their latest song or album. Of course, you can sell it, or hold onto it and allow it to potentially gain value similar to cryptocurrency.
While NFTs are still a relatively new technology and crypto-asset, they are not going anywhere any time soon. NFTs are predicted to be widely adopted and be used for additional use cases such as gaming, marketing, and luxury goods in 2022.
Thus, NFTs come in many different forms, from the best highlights of the NBA to multi-million dollar pieces of art by some of the world’s most talented creators. The technology is also being used as a means to solve dilemmas for ticketing and other real-world use cases.