NFT is an abbreviation for Non-Fungible Tokens, which means “non-fungible token.” It is an electronic certificate stored in the blockchain that confirms the originality of some item and authorship. It has a broad scope and has many differences in comparison with cryptocurrency. Below we have mentioned everything about NFT tokens, where and how they are used, how they appear, and their prospects.Â
What is NFT?
Without getting too technical, NFT is a non-fungible token that, like a cryptocurrency, is created on a blockchain, a chain of blocks where digital information is stored. Each entry in the blockchain is called a token. But it would help if you did not confuse NFT and cryptocurrency. Their main difference from conventional cryptocurrencies like Bitcoin is their non-fungibility. Roughly speaking, all bitcoins are functionally identical and have the same value. Therefore, by exchanging one coin, you can get the same in turn- the amount will not change from the rearrangement of the terms since both coins are interchangeable.Â
NFTs work differently. In a sense, NFT can be compared to unique trading cards. If the units of one cryptocurrency are no different, then each token is a small program containing an identification number, metadata, and a set of instructions. A group of specific users is assigned to write each program and then publish it in a single blockchain database. Thanks to the system’s features, information about all NFTs existing on the Network is in the public domain, from the date of publication to the complete history of transactions, including transaction amounts and digital wallet addresses of buyers and sellers. In other words, a published token is very difficult to fake. Even if you peep into the contract’s source code and create a perfect copy or an imitation can still be recognized because its history cannot be falsified.Â
How does NFT work?Â
Let’s try to figure out how NFTs work. Create artwork, such as gifs or memes, and register it on a marketplace like Binance or Open sea. Then you need to upload the work and assign the price to it, let’s say $300. Now customers can see it and make a purchase. After the purchase, the object is assigned an NFT token. Each NFT is unique and not equal to each other, and exchange operations with them are impossible.Â
To purchase an object, the seller receives tokens, which he can withdraw to his account in cryptocurrency, and then exchange for fiat money. Thus three things are needed for the successful sales
- A unique digital art object
- A cryptocurrency walletÂ
- An intermediary platformÂ
The uniqueness of the NFT is created by both the file to which it is linked and the online wallet. When a user registers his account in the system, an individual key is automatically generated. Subsequently, all tokens uploaded here will be assigned by it. This signature system makes it possible to identify all NFT holders from the moment of creation.Â
Why, where, and how to buy NFT?
The advantage of crypto art is that it is available to everyone, both professionals and novice artists, musicians, and designers. It is also an opportunity to enter the international market and earn money by selling their works.Â
NFTs are purchased primarily by collectors and those who consider this instrument an investment. Unlike the ownership of a classic work of art, digital works do not earn royalties from them, but they also increase in price and, according to forecasts, will cost many times more in the future.Â
You can buy and sell NFT tokens on technological platforms such as OpenSea, Nifty, Gateway, Foundation, and NFT ShowRoom. Some work as marketplaces, others only for specific categories; online games, art sports, etc.Â
Settlements are usually made in cryptocurrency, more often in Ethereum, so you will need digital money to purchase. Tokens are sold for a fixed price or at auction. Prices range from a few cents to millions of dollars, depending on the popularity of the author, as well as the value and uniqueness of the object.Â
The problem of the legal status of NFT tokensÂ
The main problem for sellers and buyers is the NFT lack of legal regulation. In addition, the status of non-fungible tokens is just beginning to take shape and is still very different in different countries.Â
In the US, NFT tokens are treated as securities. At the same time, the Securities and Exchange Commission in Thailand, on the contrary, banned crypto exchanges from using several tokens, including NFT.Â
What jurisdiction is the NFT sale agreement in if the buyer and seller live in different countries? Unfortunately, there are no answers to this and other legal questions.
The NFT market, despite its high prospects, faces a similar problem as the cryptocurrency – the interest of the audience but the lack of legislative regulation and support from government systems. One thing is clear: there are many more opportunities in the NFT. It will be actively developed further. All those who are interested can only hope that will resolve the legal aspects shortly.Â
In what areas are NFT tokens commonly used?Â
NFT tokens are widely used in the computer games industry. However, these developments can be successfully used in other areas, usually distinguished, such as the real estate markets or works of art. The general task of using NFT tokens is to certify and confirm the exclusive ownership of digital objects that have the property of originality.
Interestingly, the world-famous companies Nike, Formula 1, and Samsung use NFT developments in their activities. In all ongoing projects, non-fungible tokens are used to unambiguously confirm ownership rights concerning particular digital objects.Â
It is reported that the trend of universal digitalization is rapidly developing, penetrating various spheres of public life. In this context, the popularity of NFT tokens is growing. NFT tokenization may be of practical interest for members of the modern crypto community and representatives of other business areas. The popularity of non-fungible tokens will grow, and the scope of their application will significantly expand. Let’s look at the advantages and disadvantages of investing in NFT tokens.Â
Pros of investing in NFT tokens
Convenience:Â Tokens can be bought directly in the mobile application. The process will be apparent to those who have used crypto at least once.Â
Opportunity to support your favorite artist:Â Tokens will soon compete with traditional donations.Â
Exclusive content:Â There may be many copies, but the token holder owns the original picture or song.Â
Opportunity to earn:Â The fact that virtual homes sell for more than real homes confirms that demand for NFTs outstrips supply.
Cons of investing in NFT tokens
Lack of jurisprudence:Â It is not yet clear whether the court will accept the fact of owning a token as an argument if, for example, another artist begins to use your album.Â
Risk of losing assets:Â experts think that when the platforms where people store digital collections go bankrupt, the tokens themselves will disappear.Â
Overheated market:Â Now, people overpay for placing an item in the form of an NFT tokenâ€”the earnings of the pioneers who have mastered the technology spur the growth of supply in the market. Sooner or later, fewer buyers than sellers will be, and art objects bought for millions of dollars will lose their value.Â
Harm to the environment:Â Ethereum servers per year consume more energy than Iceland.Â
Fraud. Popular sites do not require confirmation of the work’s authenticity that you want to convert into a token. Taking advantage of this, scammers appropriated works of artists “left.”Â
NFT-codes:Â The stolen works were openly sold at auction. Anyone can register on the NFT buying and selling platform under the artist’s name and start selling someone else’s work.Â
Could the future of non-fungible tokens be good or bad?
The NFT market will grow. As long as investors are ready to buy, there is no limit to the growth in the object’s value. But the market is cyclical. If the trend changes, then investors who bought assets on the market’s rise will begin to get rid of them. And the more prices rose, the faster the fall would be. In the future, a non-fungible token will be used in art, games, sports, education, and business. The reliability of the blockchain technology will allow issuing of contracts, certificates, and diplomas in the token format. In addition, it will prevent the falsification of documents.
NFT technology allows you to secure the right to any product, whether it is a gif on the Internet or real estate in the United States. Due to its simplicity and ease of use. Today, digital paintings are sold for millions of dollars, and on popular sites, you can buy a card with a football player, a ticket to a show, or borrow money.
But this does not mean that it is worth investing the last money in NFTs. When the market is warmed up, it is almost impossible to determine the actual value of assets. Now the cost of virtual works is determined not so much by their weight to society but by the number of mentions in the media.
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