Anything that can be converted into a digital form can be an NFT. Everything from one’s drawings, photos, videos, GIF, music, in-game items, selfies, and even a tweet can be turned into an NFT, which can then be traded online using cryptocurrency.
But what makes NFTs unique from other digital forms is that they are backed by Blockchain technology. Blockchain is a distributed ledger where all transactions are recorded. It is like one’s bank passbook, except all transactions are transparent and can be seen by anyone and cannot be changed or modified once recorded.
NFTs are gaining massive popularity now because they are becoming an increasingly popular way to showcase and sell one’s digital artwork. Billions of dollars have been spent on NFTs since its inception—which date backs to 2015.
How do NFTs work?
- NFT works on blockchain as it gives users complete ownership of a digital asset.
- For instance, if you’re a sketch artist, and if you convert your digital asset to an NFT, what you get is proof of ownership, powered by Blockchain.
- Art NFTs: NFTs have a long-standing relationship with digital art. Even if it is fake art in the real-world scenario, NFTs can identify them. Crypto art tends to attain more value if its ownership and authenticity are verified digitally. Sometimes, it becomes more necessary to verify its ownership, rather than the inherent value of the asset. NFTs prove effective for these purposes.
- Gaming: According to experts, there are almost 2 million people who indulge themselves in online gaming activities, every day. The reason why NFT has not witnessed a wider acceptance in this industry is that the development lifecycle of games is longer than digital arts and collectibles. But as more people are choosing blockchain games, the industry is turning to the facilities of NFT.
- Finance NFTs: In Defi, NFTs provide unique financial abilities. Most will have some artwork involved but their value comes from the utility. Through different NFT platforms and models, the users can access token pools, creating secondary markets for these NFTs based on the degree of access they can provide.
- Fashion and Wearables: Luxury brands are now coming to the NFT space. The amalgamation of high fashion and blockchain has started to create a revolution in the fashion industry. The set includes physical assets like retail clothing and other accessories along with their digital companions as NFTs.
- Music NFTs: Like an image file or video, musicians can attach their audio pieces to NFTs and create a collectible piece of music.
- Logistics: Blockchain technology can be useful for logistics as well mainly because of its immutability and transparency. It ensures that the supply chain data remains authentic and reliable. With essential commodities and perishable goods, it is imperative to know the details related to the goods and for how long will they remain usable. The added benefit to this is NFT’s nature to represent unique items.
- Real Estate: NFTs have platforms for selling digital real estate in both the virtual and real worlds. Digital real estate applications are gaining momentum in different types of games. Using NFTs to purchase objects and areas ensures that the original owners and producers can be identified.
Risks associated with buying NFTs
- NFTs, like any other entity, have a dark side to it too. In the recent past, several incidents of NFT scams have been reported including: emergence of fake marketplaces, unverified sellers often impersonating real artists and selling copies of their artworks for half prices.
- Another risk associated with NFTs is the negative impact on the environment. In order to validate transactions, crypto mining is done, which requires high powered computers that run at a very high capacity, affecting the environment ultimately.
How to structure
- Give an intro about NFT
- Explain in detail
- Explain the use of NFT
- Mention recent initiatives if any