What are NFTs? Non-fungible tokens explained in 2023

by | May 20, 2023

What are NFTs? Non-fungible tokens explained in 2023

Non-fungible tokens (NFTs) are digital assets that represent ownership of intangible things such as art, film, and music. NFTs are designed to run on blockchain technology. Although blockchain technology is also the foundation on which digital currencies such as Bitcoin and Ethereum run, non-financial tokens (NFTs) are not payment systems. Additionally, while many NFTs have sold for millions of dollars (you might’ve heard of the NFT Beeple recently sold for $69 million), they are hazardous investments. For this reason, if you’re considering investing in NFTs, you need to do your research first.

NFTs were first developed in order to authenticate or verify ownership of digital assets using cryptography. They’ve gained applications in different industries, but they’re especially popular in the art, cinema, and music industries. This is because they can use to transform pieces of art or other collectibles into digital assets that can be bought or sold on the blockchain.

What’s more, as you’re buying or selling an NFT, you can verify that it’s an original piece, thus reducing the risk of forgery. Since more and more people are discovering how NFTs make it possible to authenticate transactions, it should come as no surprise that NFT sales topped $2.5 billion in the first half of 2021. This marked a new high for the technology at the time.

Once you understand how NFTs work, you can utilize them in a variety of circumstances.

NFTs are currently used to transform works of art into valuable collectibles that can amasses. Each unique piece of art tokenized and the accompanying NFT acts like a digital certificate of ownership. When the piece of art is sold on the blockchain, the certificate of ownership is transferred to the new owner. Transactions in the NFT space can be governed by smart contracts to protect both the buyer and the seller. Simply put, a smart contract is a program that is designed to carry out specific actions only when specific conditions are met.

For example, a seller can program the smart contract not to transfer the funds from the buyer until the said buyer confirms that they’ve received the NFT. This smart contract would protect both parties since the payment for the NFT would hold in an offshore account until the buyer confirms that they have received the NFT. Likewise, the NFT wouldn’t transfer to the buyer until the payment has been made.

1) How Is an NFT Different from Cryptocurrency?

NFTs, like cryptocurrencies, hold on to a blockchain. Each NFT asset is unique and cannot be replicated. Now that the technology is widely accessible, NFTs may become increasingly difficult to change or counterfeit.

Before you invest in NFTs, it is necessary to understand the economics behind the concept of fungibility.

Since their worth is not reliant on scarcity or other identifying traits, fungible goods such as fiat currencies can easily be exchanged. Even though the serial number on the new dollar differs from the serial number on the old one, you may still earn $1 if you exchange a $1 note for another $1 bill.

Fungible items cannot exchange for non-fungible items. Given that each NFT token is unique, comparing the value of one NFT token to the value of another token is impossible.

It is this very feature of NFTs that entices individuals to put so much money into them. Using an NFT allows digital content providers to prove the scarcity and authenticity of their creations. According to Solo Ceesay, co-founder and chief operating officer of Galaxy:

“The Mona Lisa has duplicated several times, but only one original of the painting exists. NFT technology may used to determine who the true owner of an original product is to retrieve it.”

2) NFT Technology

In the art world, selling NFTs has proven to be a profitable venture for artists who traditionally struggle to make a living from their craft. Take into account the following:

  • Christie’s paid $69.3 million for digital artist Beeple’s work “Every day – the First 5000 Days.”
  • A 20-second clip of LeBron James’ “Cosmic Dunk #29” allegedly sold for $208,000 at auction.
  • At Sotheby’s first curated NFT auction, a CryptoPunk NFT got $1.8 million.
  • At an auction, an NFT of CEO Jack Dorsey’s first tweet sold for $2.9 million.

If you’re puzzled that someone would pay so much for a digital work of art, when it’s so easy to replicate digital assets online, you’re not alone. However, consider the fact that there are countless replicas of the Mona Lisa floating around. The original is still worth $870 million. With this in mind, you can understand why artists are suddenly earning so much money from NFTs. After all, NFTs allow them to prove the authenticity of their work and capture the attention of collectors who want unique pieces of art.

After all, the idea of owning a one-of-a-kind item is appealing to everyone. Once an artist has proven the authenticity of their work, the dynamics of supply and demand kick in. Since a low supply of a unique item increases the demand, the owner of this unique item can set a high price for the unique item and actually make sales. Similarly, an artist selling a unique piece of art can quote a high price for their art, and someone will eventually come along and pay for the right to own that unique piece.

3) How do NFTs work?

NFTs are supported by blockchain technology such as the Ethereum network and driven by prominent cryptocurrencies (such as Flow and Tezos). Since the blockchain is public, anyone can confirm and monitor the ownership of a particular NFT. However, the identity of the person or business holding the token may remain anonymous.

Tokenization may use to sell a variety of digital assets, such as artwork, games, and stills or videos from a live broadcast, among others. The NBA Top Shots market for artwork, for example, is a well-known NFT market.

NFTs may find a range of applications outside the art world as the technology that supports them evolves some more. However, at the moment, the most popular applications for NFTs are in digital assets such as art, music, in-game products, and films. When you buy or sell these assets, you would generally use cryptocurrency on the blockchain network. NFTs are quickly becoming popular as a means of obtaining and trading digital art. Most NFTs are one-of-a-kind, or at the very least, very rare, and this contributes to their appeal.

“NFTs, in a nutshell, establish digital scarcity.” ~ Arry Yu, Yellow Umbrella Ventures and the Washington Technology Industry Association’s Cascadia Blockchain Council

Thanks to the features they offer users, NFTs have applications in other industries. For example, during hiring periods, companies can easily validate an applicant’s education in a short period. Educational institutions are already planning to provide freshly graduated university students with NFTs that highlight their attendance records and performance. Furthermore, event venues may use NFTs to sell and manage event tickets, limiting the quantity of ticket resale fraud on any given day.

4) Non-fungible tokens (NFTs) can’t exchange for fiat money.

While both cryptocurrencies and NFTs run on the same blockchain technology, NFTs cannot be traded for any form of fiat currency. In order to buy an NFT, you must first convert your fiat money into cryptocurrency on a cryptocurrency exchange. On the other hand, you can exchange cryptocurrencies for fiat currency at any point in time.

You may buy, sell and create NFTs on a variety of online exchanges or marketplaces. If you want to sell NFT art, you must start by tokenizing your digital art and signing up on a marketplace. You then need to mint your tokens by confirming details such as file, title, and description. Most NFT artists prefer to use Ethereum for the minting process, which can usually cost anywhere from $40 to $200. Once this process is complete, you can sell your tokens on an NFT marketplace such as OpenSea, Raible, Super Rare, and Markers Place.

When you visit an NFT marketplace, you’ll notice the sale price set by either the product’s creator or the product’s current owner. If you decide to auction your NFT, you will need to participate in the bidding. Each NFT marketplace has different strengths, as you can see below:

  • Nifty Gateway is a partnership platform for artists, athletes, and Fortune 500 organizations.
  • OpenSea is a forerunner in the market for non-fungible tokens with a wide range of values.
  • Rarityo ffers a varied range of NFTs with an emphasis on the arts. Members get a RARI token as a symbol of appreciation.
  • SuperRare is a digital art marketplace where artists can sell their work and buyers may also buy it.   

Conclusion

While NFTs are considering high-risk investments, if you make educated investments, you can reap impressive financial benefits from this industry. In fact, some NFT creators have collected hundreds of thousands, if not millions, of dollars in the recent past.

Do you need help putting your NFT product in front of the right audiences and generating positive media coverage? Pressfarm is a PR agency that works with startups and companies of various sizes to help create newsworthy content like email pitches, press releases, guest posts, and press kits. Their PR professionals and expert writers will also create customized media lists to help clients find their perfect media match. The experts at Pressfarm also come armed with a content distribution strategy that has worked for hundreds of brands across different industries.

By submitting your content to the right media outlets and startup directories. Pressfarm can help your brand to rank in relevant search results across various search engines. Additionally, Pressfarm can build custom media lists in addition to offering clients access to a comprehensive database of over 1 million journalists across industries. By giving you these media contacts, Pressfarm can help you to continue doing media outreach for up to a year after you’ve signed up.