If there is one emerging technology that has been able to pique the interest of celebrities, thought leaders, and business bigwigs worldwide unanimously, it is NFT. Essentially, NFT aka Non-Fungible Tokens are exclusive and non-interchangeable digital assets, developed over blockchain network. The market size of NFT technology is predicted to touch a mighty $5093.3 million by 2028 from $1894.4 million back in 2021, clocking in at a stellar 17.9% CAGR. Interestingly, NFTs have been around since 2014 but they only came to prominence in 2017. The first official NFT was introduced immediately after the launch of Ethereum blockchain. It must be stressed here that the Ethereum blockchain is the prime hub of NFT projects. Read more about where to leverage trade crypto
Put simply, NFTs can be defined as limited-edition collectibles that represent some kind of digital data or asset on blockchain. These digital assets could range from art, painting, photography, music, in-game collectibles, and so on.
Exclusive digital assets
As NFT and cryptocurrency are both developed on blockchain, they are sometimes used interchangeably. But, while these two share certain similarities, these two are not the same. The primary difference is that a cryptocurrency is always fungible while an NFT is always non-fungible. When an asset is fungible, it means, it can be exchanged with a similar thing or similar value. For example, you can always exchange 1 ETH with another 1 ETH. But, an NFT asset cannot be interchanged with the same NFT asset. It’s because an NFT asset is one-and-only- there cannot be a twin version.
Each of the NFT projects is backed by unique ID proof of the creator. In other words, an NFT asset always carries evidence of ownership which is easily track-able.
NFT projects can be sold and bought over online dedicated NFT marketplaces. The right of ownership of an NFT asset rests with the creator. The creator will decide whether s/he will transfer the ownership right to the buyer. The NFT projects can only be bought by cryptocurrency as these projects accept no other form of payment. As most NFT projects are developed on Ethereum, ETH is the most common currency for buying and selling NFT projects.
How does it work?
NFTs, as mentioned previously, are developed on blockchain. Though Ethereum has been a staple for NFT projects yet, Ether’s terrible congestion issues and expensive gas fees have nudged many NFT creators to move to other blockchains. NFT assets are minted (read created) from digital assets that represent intangible and tangible assets alike.
It must be stressed here that each NFT asset is backed by an exclusive cryptographic key that helps to identify the uniqueness of the asset. This particular key defines the NFT ownership and can be transferred or not to the NFT buyer, based on the wishes of the creator. The creator can embed his/her signature in the NFT asset’s metadata. When an investor buys an NFT, say, an artwork NFT, s/he doesn’t get the physical artwork but its digital file..
As NFTs are developed and stored on blockchain ledger, they can be verified and tracked conveniently by the blockchain network.
It should also be stressed here that the value of an NFT asset is largely determined by market demand. In other words, the value of an NFT project can jump or plummet based on how much it has been able to evoke interest in potential investors.
Features of NFTs
Each NFT project is always backed by its exclusive transaction hash that makes it completely non-replicable. The hash helps to prove the authenticity of the project. Now, of course, anybody can create a replica copy of an NFT asset, say a painting. But, the forger cannot replicate the ownership proof or the creator’s authenticity. The NFT asset can easily be verified to find out the original creator. The very ability to prove authenticity will help to prevent random sale of fake NFT items.
Exclusivity and scarcity
The most defining feature of NFT is that it’s unique. Each NFT asset comes with its own exclusive set of features or attributes. In fact, each of the NFTs in a NFT collection is different from one another.
Also, these are scarce items and this is a major factor that drives up the value of NFTs. These are like those limited-edition collectibles that are 100% exclusive.
As NFTs rest on distributed and decentralized blockchain ledger, any information regarding a NFT project is easily traceable. From records related to NFT ownership to token issuance to trade to transfer, every single data about an NFT project can be tracked.
The blockchain ledger is always immutable and any data entered into the database cannot be altered. Likewise, as NFT projects operate over blockchain, data contained in the NFT assets cannot be manipulated.
Benefits of NFTs
- Allow to prove ownership
- Allow creators to enjoy royalty every time their creation is sold in secondary markets
- Help to prevent counterfeit products
- Offer complete transparency on journey of a NFT project
- Enable buyers to boast the pride of owning limited edition exclusive assets
Top NFT uses cases
Trade of digital artworks
Artists can create NFTs with digital versions of their creation and compositions. It could be anything from a video to a painting. As NFT assets carry the proof of authenticity, the artists will always have the evidence of complete ownership over their NFT creations. They can, however, transfer the license and copyright rights to the buyer.
Records and ID verification
NFTs can be utilized to house academic degrees. This way, potential employers can scan the QR code of the NFT to trace the authenticity of the degree during the hiring process.
Likewise, NFTs can be used to store and verify other kinds of data for say, medical records, military records, insurance records, and so on.
Food and medicine supply chain
Fake food supplements and medicines are one of the most glaring problems of the 21st century. One of the main reasons why the problem has been able to grow is because it is not easy to track the origin of the fake products. But NFTs can solve this problem by enabling users to track the whole journey of the product.
NFTs can represent gaming characters and in-game collectibles. In fact, NFTs offer the opportunity to resell the in-game collectibles as well.
Real estate companies can utilize NFTs to transfer various legal data related to property transactions, such as ownership proof, land deeds, and so on. They can also use NFTs to track movements in the value of a property over time.
Protection of IP and patents
On one hand, NFTs will help to establish ownership proof of patents and IPs- and on another, NFTs will prevent any risk of manipulation of such data.
Last but not the least, these days you can also stake NFT for passive income.