The Non-Fungible Tokens Boom, A Big Hype, or a New Realm?
- What is a Non-Fungible Token (NFT)?
- The difference between NFTs & Bitcoin
- What Does the Future Hold for NFT?
This year the cryptocurrency market has certainly seen an influx of activity that has provided a lift in most top assets in 2021 thus far. However, it is not the only thing that has been grabbing the attention of the media in recent months. In mid-March Christie’s a global auction house said that it had auctioned off a digital collage called “Everydays: The First 5000 Days” by an artist named Beeple for nearly €70million. Then, later in the month business mogul Elon musk declares he would sell a tweet of his as a Non-Fungible Token, which contained a song about NFTs.
Bidding for Musk’s tweet exceeded €1m but has since come back and tweeted “Actually, doesn’t feel quite right selling this. Will pass”. This is not the only incidences, sites such as NBA Top Shot have NBA cards selling for more than €200,000 apiece.
Although it may sound bizarre, the Non-Fungible Token or crypto-collectibles arena is explosive and is a no joking matter. So, let’s take a deep dive into NFT what it is and why people are talking about it.
What is an NFT?
Tokens can be categorized into two types: Fungible Token (FT) and Non-Fungible Token (NFT). Fungible Tokens which include names like Bitcoin and Ethereum are characterized by their interchangeability & divisible nature.
On the other hand, NFTs are unique and cannot be replicated. The unique aspect of these tokens is done using blockchain technology and can be seen as a permanent certificate of authenticity.
What is Fungibility?
Fungible assets simplify the exchange and trade processes. Fungibility implies that two objects are identical in specification, meaning individual units can be equally replaced. Money is a prime example of fungible assets. For instance, €1 can be divisible. If you own fungible assets you can easily exchange them for more assets alike.
NFT Use Cases
Despite NFTs being able to tokenize almost anything, the most common items include:
- Digital art or music
- Collectible items
- Gaming objects
- Tokenized Luxury Goods
Within the digital art domain, we have already mentioned Christie’s. This specific auction fetched the highest price for any online-only auction. The event was home to about 22 million people at the final moments of the bidding process, with bidders spread across 11 countries.
Others have also joined the craze for NFTs. Twitter CEO, Jack Dorsey was among the players to get in on the action. Similarly, to Musk, Dorsey’s first-ever tweet “just setting up my twttr” was auctioned online and bids reached an extraordinary €2m. Proceeds of which were promised to a charity.
Non-Fungible Token vs Bitcoin
The main character difference between NFT assets and BTC is that bitcoins have a finite supply and are fungible. NFTs are unlimited and non-fungible. NFTs can appreciate in value but can never be interchanged for another NFT.
Why are NFTs Being Valued?
The significance of NFTs is their ability to securely value, purchase & exchange crypto/digital art using a digital ledger.
They first graced the marketplace through online gaming, followed by Nike’s patenting of its authenticity, CryptoKicks, and from here we have seen a string of users embracing NFT valuation.
The Blockchain allows the NFTs to be tokenized and ownership of the assets is then safely stored using a decentralized, open-source digital ledger that features smart contract functionality. Like with Bitcoin the traditional role of the middleman is now digitized.
What Does the Future Hold for NFT?
The macro picture for the crypto sector continues to increase. TIME magazine has now also cited that they are on the look for a CFO who is comfortable with Bitcoin and cryptocurrencies. The global publication is the exploration phase of creating one-of-a-kind non-fungible tokens based on some of its most iconic covers.
It is undeniable that digital assets and the Blockchain is revolutionizing the way we trade. NFTs are included in this help of growth. Blockchain has now evolved to the point it can now support processes like video & music streaming. In recent months platforms that are embracing this technology have seen their prices breakout as more people become exposed to the crypto ecosystem. One great example leading the way is Theta (THETA) and Theta Fuel (TFUEL). The Blockchain-based video streaming platform and the dual token system have seen astronomical growth in 2021 pushing its price to an all-time-highs. Others include Audius (AUDIO) whose price has rallied from €0.36 in February to a new high of €2.05 in March.
The cryptocurrency market cap now stands at over €1tn and BTC’s dominance rate is 59.8%. Now is a great time to buy Bitcoin with experts confident that the crypto will soar and reach more milestones in 2021.
Moreover, there is space for others to keep pushing up. For NFTs the future is not set in stone, and their full potential is yet to be uncovered. Popular among younger generations, the question could center on whether this generation will have the economic power to find more use cases for them in the future. One thing that we can be sure of is that new doors have been opened and smart contract functionalities and the blockchain are here to stay.