It seems like everywhere you turn these days, you’re hearing about NFTs. They are without a doubt one of the biggest blockchain and fintech "fads" out there. But these types of digital creations may end up having a pretty long lifespan and becoming a permanent part of our financial world, not to mention the entertainment industry and similar sectors.
But what are these assets anyway?
The acronym NFT stands for non-fungible token. Let's break that down a bit – a token is a digital asset, like some utility token or specially made digital object that can be ‘owned’ in a digital context.
What does it mean for a token to be non-fungible? Simply, it means that this is a unique individual token. It can't just be interchanged for another identical one. It has its own attributes and its own characteristics. There’s only one of an NFT available.
When you understand this simple definition, you can see how the creation of NFTs fits into everything that's done in the cryptocurrency and decentralized finance world.
Like cryptocurrencies, NFTs are built on blockchain technologies. Many of them are created with ERC tokens and run on Ethereum smart contract chains. Unlike coins and tokens, though, NFTs can’t be traded for each other at least not interchangeably. Each one typically has its own market value – and those market values can be significant! In weeks past, the world watched aghast as a wealthy patron bought an NFT created by the artist Beeple for the staggering sum of $69 million.
Will NFTs Live Up to the Hype?
To some people who are looking at this trend, the million-dollar question is whether NFT's are just a flash in the pan or whether they have staying power as assets. Will they live up to the hype and keep retaining value when they have lost their relative novelty?
While it may be that NFTs are getting a boost because of how new and exciting they are, it's likely that these assets are going to stick around for a while. Part of the appeal is that people are able to buy a digital asset based on something or someone that they like. For centuries, we've been able to buy physical things like posters and shirts, and albums that represent our relationship with an artist or entertainer. This is our first real opportunity to buy entirely digital icons that also represent these relationships, and that have value in a purely digital market. The idea also dovetails with the concept of the "digital album" of music. Since there is no physical media to purchase anymore, an NFT can be the perfect way to encapsulate the transaction when a beloved artist’s new record drops.
That’s only one example. Other NFTs, like Beeple’s, are tied to digital works of art that are visual, or narrative-based. Really, when it comes to creating these new kinds of assets, the sky’s the limit.
Where can you buy and sell NFTs?
The short answer is that many exchanges and trading platforms are building these assets into their footprints. So there are many places to buy and sell these items, sometimes alongside more fungible items.
But what about creating or minting NFTs?
This is a smaller circle with fewer players that have actually accommodated people making their own NFTs from scratch.
One such platform is Mintable. Another is Unifty, which is often seen as the gold standard for NFT minting. Through alleviating some of the fees associated with this activity and creating the ability to build collections in a process called NFT "farming," Unifty is a preeminent place to explore the idea of NFT creation and get these assets ready for sale with ERC token technology tools that make brand new NFTs easier to manage.
The Appeal of NFTs
As mentioned above, NFTs represent a unique opportunity for the buyer. But sellers benefit, too – NFTs are a whole new marketplace that influencers and innovators can use to their advantage. Just look at the prescient strategy of Snoop Dogg and other entertainers to offer their own NFTs first, and quickest. Celebrities who are tired of signing autographs might be eager to promote their "digital autographs" on these markets and get some of the same interest without the work.
Then look at the institutional structure for buying and selling these assets. NFTs have come on the scene quickly, but that doesn't mean that they're going to just as quickly leave as creators and exchange participants close up shop. More likely, we’re going to continue to see these assets proliferate as we enter a new digital era in an increasingly connected world. Check out the NFT creation and farming process through Unifty to see how easy it can be to get involved in this new market.