In this modern age, we have seen everything change into
digital form, from online shopping, working remotely, making transactions, and studying.
In 2009, the world already saw digital currency in the form of ‘cryptocurrency’
that is based on a blockchain model.
The monetary transaction takes place on an encrypted
computer network that is not governed by any central authority, for example, a
bank.
In the last few years, many of you might so much on cryptocurrency
and the reason why it is said to replace paper currency. Today, cryptocurrency is
giving everyone a chance to invest, and reap its benefits. However, another
term that has become quite popular recently is ‘NFT.’ The transaction of
an NFT is done on a ‘Digital Ledger,’
which is the same as one used for Bitcoins or other cryptocurrencies.
What is NFT and How did it become so Popular?
The first big news of NFT came into view when Twitter owner
Jack Dorsey tweeted for the first time, and his tweet sold for a whopping $2.9
million. Even today, you can see that tweet, but only the person who paid $2.9
million owns it.
Now the NFT market is popularized by digital artwork,
tweets, games, and anything unique that needs ownership. Many popular
celebrities from the sports and entertainment industry are using NFT to secure
works of art and putting out big sporting moments or unique television or film performance.
For those hearing it the first time, NFT stands for
Non-Fungible Token, which means the item cannot be exchanged for another item
as it is unique. For example, one piece of art, such as the Mona Lisa, is not
equal to another artwork, such as Self Portrait of Van Gogh.
You may also need to understand what is fungible and
non-fungible. Items that can be exchanged or substituted for one another, such
as one dollar or bitcoin, are fungible as their value is the same. One dollar
will always be equal to another dollar. When it comes to cryptocurrency, every
coin or token is of equal value and interchangeable.
On the contrary, NFTs are different as these cannot be
swapped for one another, hence the term ‘non-Fungible.’
An NFT has unique attributes that make it different even from something in the same
asset class. Some of the NFTs do include tangible assets but mostly are digital
and intangible.
How NFTs Work?
NFTs are tokens that are present on blockchain and mostly
denote ownership of particular items, which can be anything from artwork, music,
doodles, videos, and avatars. In simple terms, NFTs give you bragging rights
about particular digital artwork or files.
Usually, it is difficult to track who owns the authentic
digital file as it can be copied and distributed. Many online users can have
similar digital files or items and it is a problem to know who is the original
owner.
On the contrary, NFTs have solved this issue. Suppose you make digital artwork on your computer and want to sell it. You can easily mint an NFT of your artwork which will entail specific information such as
- Token name
- Token symbol; and
- Unique fingerprint
The generated token is then stored on a blockchain, and you
are its owner. You can sell the token by making a transaction on a blockchain
which ensures the information cannot be tampered with and also show you who
currently owns it and the price it’s been sold.
One thing to know is that it is not the piece of art you
made that is not stored on the blockchain but rather its information such as the
hash of the file and its token name and symbol. The person who buys your
artwork is the token owner of your original artwork, but you as an artist have
copyright and reproduction rights.
You can sell your original artwork as NFT but still, make and sell prints.
The most popular use of NFTs is digital artwork, but people can also use them for multiple purposes, such as Concert tickets
- Ø
Real estate
- Ø
Domain names
- Ø
Crypto games
- Ø
Digital content
- Ø
Postage stamps
One question that many people have is why some NFTs are so
expensive and cost a fortune. The answer is the worth of an NFT is determined
by its demand and what people are willing to pay for it.
Believe it or not, NFTs are taking the segment of digital
art and collectible by storm, similar to bitcoin dominating the digital
currency market.
What is the Key Difference between Cryptocurrency and NFT?
Although cryptocurrency and NFT are based on blockchain
platforms, there is a difference between the two. Cryptocurrency refers to all
the monetary transactions done on blockchain technology, similar to money in
your bank account.
You can even buy and exchange cryptocurrency using Fiat
currencies such as the Dollar or Euro. On the other hand, NFT is a particular
digital asset that can only be bought using a cryptocurrency. The value of NFT
can increase or decrease and is not respective to the cryptocurrency used to
buy that NFT.