What are NFTs and How do NFTs work? How much are NFTs worth?

What Are NFTs?

• Introduced in 2017, NFTs have risen quickly to prominence when compared to cryptocurrency, though both of them are based on the same technology.

• Non-fungible tokens (NFTs) are blockchain-certified copies of real-world art, pictures, videos, music, pixelated punks that are unique and cannot be duplicated.

• They are tokens used to represent ownership of unique items. like art, collectibles, even real estate. They have only one official owner at a time and no one can modify the record of ownership or copy/paste a new NFT into existence.

• NFTs could be a house, or a painting such as the Mona Lisa, which is one of a kind. It can be a photo of the painting or a print but there will only ever be one original painting.

How Do NFTs Work?

• In NFTs, each individual token is completely unique and indivisible. Artwork can be “tokenised” to create a digital certificate of ownership that can be bought and sold.

• A record of who owns what is stored on a shared ledger known as the blockchain, trackable as a public ledger. The records cannot be forged as the ledger is maintained by thousands of computers around the world.

• NFTs can also contain smart contracts that may give the artist, for example, a cut of any future sale of the token and manage the transferability of the NFT’s.

• A lot of the conversation is about NFTs as an evolution of fine art collecting, only with digital art. Though they can be used for domain names, investments, and collaterals, gaming items, etc.

How Much Are NFTs Worth?

• In theory, anybody can tokenise their work to sell as an NFT but interest has been fuelled by recent headlines of multi-million-dollar sales.

• Big brands and celebrities like Marvel and Wayne Gretzky launch their own NFTs, which seem to be aimed at more traditional collectors, rather than crypto-enthusiasts.

• On 19 February 2021, an animated Gif of Nyan Cat – a 2011 meme of a flying pop-tart cat sold for more than $500,000 (£365,000). A few weeks later, musician Grimes sold some of her digital art for more than $6m.

• It is not just art that is tokenised and sold. Twitter’s founder Jack Dorsey has promoted an NFT of the first ever tweet, with bids hitting $2.5m.

Rising Popularity

• The NFT market experienced rapid growth during 2020, with its value tripling to $250 million. In the first three months of 2021, more than $200 million were spent on NFTs.

• This increased interest in NFTs was fuelled by a number of high profile sales, including an NBA Top Shot video clip of LeBron James for $208,000, a 3LAU album for $11.7 million, and a piece by digital artist Beeple for $69.3 million. NFT sales exceeded $220 million in March 2021 alone.

• This renewed interest in NFTs, particularly those in art, music, and sports made way into public consciousness, especially amongst the younger generation.

• Many investors have been willing to pay high rates to secure and promote NFTs, anticipating them to be the biggest and most profitable collectibles in the future.

• India’s NFT space got off to a start when WazirX announced the country’s first NFT marketplace on June 1 this year. Since then many exchanges have launched NFT services.

• Between April and June, Twitter said, the volume of conversations around NFTs spiked by 43 percent in India. Many Indians have identified an opportunity to tap the growing market and also reach out to the tech-savvy generation that is primarily propelling the sector.

• Celebrities are eyeing the rapidly growing market. Salman Khan recently announced to launch of India’s first social token Chingari’s ‘$GARI’ and its NFT Marketplace. Earlier, Amitabh Bachchan had also announced he will launch his NFTs soon.

• In July, TV anchor Vishal Malhotra released an NFT, which reportedly sold for about 2.5 ethers (RS 4.12L)

NFTs: A Bubble?

• Former auctioneer Charles Allsopp said the concept of buying NFTs made no sense. He said, “The idea of buying something which isn’t there is just strange. I think people who invest in it are slight mugs, but I hope they don’t lose their money.”

• NFTs have drawn scepticism with people raising environmental concerns and numerous cases of plagiarism and fraud.

• What NFTs are really for owning digital stuff. And NFT is – essentially a digital token representing ownership. Anyone can view Beeple’s “Everydays The First 5000 Days”, but only one person has the ownership token. That ownership is now verifiable, digitally secured, potentially divisible and easy to transfer.

• For sure, NFTs are a bubble. But bubbles always accompany new technology by which they accelerate investment & adoption. NFT art is just where the current focus is.

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