Non-fungible token (NFT) is taking cyberspace by storm with its meteoric rise. We’ve seen NFTs auctioned off in the millions in iconic auction houses like Christie’s. It’s quite intriguing how tokens could be worth millions, especially since they only represent “ownership” of a digital artwork that could easily be reproduced or copied for free. But what’s even more interesting is that winning bidders don’t even get a physical piece.
NFTs inspire a mix of skepticism and excitement – and it’s not surprising considering that NFT is a completely new asset class. Many are still clueless about these digital artworks: what and how they work. But one thing is worth exploring about NFT: What drives the value of digital tokens that users can easily access, replicate, and use?
To better appreciate this digital trend, you need to understand its main benefits and what they actually are. And once we fully understand NFTs, we can understand why it continues to soar.
What does NFT mean?
Non-fungible Token (NFT) is an innovative and promising blockchain technology usage. NFTs are digital files whose ownership and identity are verified on a blockchain. The term ‘fungible’ refers to assets quantified in units and can be easily traded or interchanged, like money. NFTs are non-fungible assets with unique, unquantifiable properties and thus cannot be interchanged.
Non-fungible tokens assign the ownership of a particular digital asset to an individual. It also guarantees the authenticity of the asset that they own. Although these digital tokens can be replicated, only one individual can claim ownership of the original like most other artworks.
Experts at NFT tech explain that, in essence, digital tokens serve as a certificate of ownership and proof of authenticity for digital assets. By creating tokens in the blockchain, it enables the transfer of ownership as well as buying and selling of NFTs at will. This practically turns digital assets into real commodities that can be bought and sold, except they don’t have a physical form.
What are the Benefits of NFTs?
NFTs offer several benefits for everyone, including creators, collectors, businesses, and consumers. Let’s explore some of its main advantages.
Typically, content creators get paid a one-time fee when they sell a new piece. They don’t get any royalties when the piece is traded on the secondary market. Since the value of art appreciates over time, these artists are not well-compensated for the potential worth of their work; only the traders and collectors earn huge. With NFTs, creators can set out conditions for future sales, such as automatic royalties. So, when their work is traded in the future, they don’t get left out.
Easier entry for creators
The digital medium lowers barriers to entry for content creators, such as music, literature, art, and collectibles. It does not have the tedious bureaucracy that runs the analog world. With NFT, creators don’t require an upfront investment that you’d need to create, manufacture, and distribute content.
Access to the global market
NFT expands your market beyond the boundaries of your geographic location. Digital assets are traded across all jurisdictions in the world. The Internet brings your creations closer to every consumer. There is no need to look for exhibits, galleries, or conventions to tap ‘quality’ prospects.
As with anything digital, NFT offers a superior convenience factor – and it works both ways. For creators, digital files are easier to create, reproduce, distribute, and trade. Meanwhile, NFTs are also easier for collectors and speculators to share, acquire, bring, and exchange.
Cuts unnecessary layers
The use of NFTs allows creators to directly sell and promote their work to the global marketplace without the help of a middleman. In the past, content creators usually needed an agent or manager to help them get their work into the right channel to find potential buyers. With NFT, the artists can copyright their digital work and market them. It also removes the hefty platform fees in the conventional marketplace.
Own unique items
Non-fungible items are unique digital files. And in a novel asset market, these items offer a level of exclusivity. No wonder speculators and collectors are scrambling to get hold of desirable or exceptional tokens. Over the past year, we’ve seen how NFT values have soared, and holding onto a rare token for several years could mean a lot of money.
Ultimately, like any other investment, although the value of a token can skyrocket, there are also risks. So, apart from understanding the main benefits of NFT, it also pays to know its potential downsides.