What is NFT?
NFTs Non Fungible Tokens are digital assets that represent the real-world objects such as art, music, game items, and videos. They are bought and sold online, often with cryptocurrencies, and are generally coded with the same basic software as many cryptocurrencies.
Although it has been around since 2014, NFT is gaining prominence now as it is becoming an increasingly popular way to buy and sell digital artwork. Since November 2017, $174 million has been spent on NFT.
NFT is also generally one of a kind, or at least one of the very limited processes, and has a unique identifier code. “Essentially, NFT creates digital scarcity,” said Arry Yu, president of the Cascadia Blockchain Board of the Washington Technology Industry Association and chief executive of Yellow Umbrella Ventures.
This is in stark contrast to most digital creations, which are almost always offered endlessly. Hypothetically, cutting supply should increase the value of a particular asset, assuming it is in demand.
But many NFTs, at least in these early days, were digital creations that already existed in some form elsewhere, such as iconic video clips from NBA games or digital art versions already circulating on Instagram.
For example, renowned digital artist Mike Winklemann, better known as "Beeple", created a combined 5,000 images per day to create the most famous NFT of the time, "EVERYDAYS: The First 5000 Days", which was sold by Christie`s for a record $69, 3 million.
Anyone can view a single image or even an entire collage of images online for free. So why are people willing to spend millions of dollars on something they can easily take a screenshot or download?
Because NFT allows the buyer to own the original item. Not only that, it contains built-in authentication, which acts as proof of ownership. Collectors value the "digital bragging rights" almost more than the object itself.
How are NFTs different from cryptocurrencies?
NFT stands for non-fungible token. These are generally built using the same type of programming as cryptocurrencies, such as Bitcoin or Ethereum, but this is where the similarities end.
Physical money and cryptocurrencies are “worth it”, which means they can be exchanged or interchanged with each other. They also have the same value: one dollar is always worth another dollar; one Bitcoin is always the same as another Bitcoin. Crypto's functionality makes it a reliable means of conducting transactions on the blockchain.
NFT is different. Each has a digital signature which makes it impossible to exchange NFTs or to be the same (hence not interchangeable). The NBA's Top Shot clips, for example, aren't the same as EVERY DAY just because they're both NFT. (NBA Top Shot clips aren't even necessarily the same as other NBA Top Shot clips.)