NFTs (Non-fungible tokens) are tokens deployed on a blockchain that have a unique ID and can’t be replicated. A token is fungible when it can be replaced by an identical one. Since NFTs are non-fungible, only one of each can exist on a Blockchain.
NFTs have been around since 2014 but didn’t gain popularity until 2020/2021. The NFT hype really went over the roof in 2021 as virtually everyone in the crypto space wanted to know what an NFT is.
Owning digital arts used to be difficult because there’s no proof of ownership of the item and it can easily be replicated. This means you can’t show-off your art and not risk losing exclusive ownership.
Prospects of NFTs
Presently, NFTs have a wide variety of applications which includes creating, owning, and selling digital paintings, music, drawings, in-game properties, digital real estate and so on. NFTs have made selling digital arts easy and extend the borders of creators.
- In the future, more artists and creators will be open to adopting NFTs as a means of selling their art, this will increase their source of income.
- It might also increase the real estate industry as games already sell digital real estate and people spend millions of dollars on digital lands that are literally a jpeg.
- It will play a big part in the Metaverse as all properties or items owned in the Metaverse is likely an NFT if it’s built on the Blockchain.
- It can be used for ticketing and because of its uniqueness, it’ll help eliminate counterfeiting and fake replicas of tickets since it can easily be validated on the Blockchain.
- NFTs can also be used for Identity Cards and profiling of people. Since every individual is unique, they can have an NFT that is specific to them alone.
Problems of NFTs
- The idea of NFTs are already been altered and NFTs misused. Lately, there is more emphasis on the money tied around NFTs than the supposed purpose of an NFT. People now buy and trade NFTs just for potential profits.
- There are a saturation of creators in which most are ‘fake’. A creator should be skilled, either a naturally talented artist or someone that has learnt and mastered the art. But NFTs have allowed just anyone who can tell a good story and drive sales create series of computer-generated arts with different combinations to make them unique and then sell as NFTs.
- Creators don’t even need to think far anymore, they just replicate an existing project on another Blockchain and change the name or do NFTs of a different animal since animals are widely used as NFTs.
- NFTs don’t have specific values. An NFT is worth what a buyer pays for it, this means everyone holding an NFT risks selling at a lower price if nobody wants to buy higher. Also, there’s no ready liquidity and in fact, your NFT price can be determined by oher individuals holding the NFT in same collection when they sell lower and reduce the floor price.
- NFTs are not exactly arts and the practise of collecting arts is dwindling down. If you like an art, you’re supposed to buy and keep and not be worried about the price because the intention isn’t to sell or make profits. But it seems everyone is buying to resell and the loser is the last person holding. Once the hype around a collection dies, the holders are left with mere jpegs that they don’t exactly cherish.
This article doesn’t discourage the purchase of NFTs, it is only stating the obvious. Keep an open mind especially if you’re in the crypto space for the money. If you feel you can make money from trading NFTs, by all means, do it.