The concept of a NFT (often pronounced “nifty”) has exploded recently in the world of cryptocurrency and blockchain. Gaining new attention in any industry, it’s also gained new investors and a boatload of new money entering in.
What does NFT stand for?
In short: NFT stands for “non-fungible tokens”.
But that’s not particularly helpful without more explanation.
In longer: Non-fungible means that each unit is unique and different to each other one. A fungible token is the opposite: One equals one. For example: one Bitcoin is equal to one Bitcoin (they each hold the same amount of value and one can be exchanged for one without any problem) and one United States dollar bill is worth any other United States dollar bill. A non-fungible token is not worth another non-fungible token in the same way.
It’s like art. You can’t go to an art museum and say you’d like to replace one art piece with the one in your home. They’re unique in what they are and what their value is. At the heart of it, NFTs are anything digital. This can be digital art, music, video, poetry, anything that can be created and held in the digital world.
So what can you do with a NFT? Is it a cryptocurrency? And can you spend them?
Is a NFT a cryptocurrency?
NFTs aren’t quite the same as cryptocurrencies – they can be bought, stored, and traded, but because of the unique property of each individual NFT, they’re treated a little differently. They exist on the Ethereum blockchain – much like a few cryptocurrencies – but the market and way they’re handled are unlike most cryptocurrencies.
Because of this, you can’t quite spend them in the same way you can’t spend the painting hanging up in your living room.
What is the point of a NFT?
This question can be answered depending on which camp you fall into:
- You’re a seller of NFTs, or
- You’re a buyer (or collector)
What’s the point of creating and selling?
If you’re an artist, you might consider turning your art into a NFT because it opens up a new market for you to sell your art with the benefit of blockchain backing it. You can sell your digital creations in the emerging industry and know that all sales and transactions are transparent and secure. It also means there’s a neat platform for you to sell on. New audiences = new opportunities.
There’s also a neat feature that NFTs offer which gives you a percentage every time the art you created is sold or exchanged. So if your piece gains a lot of attention and sells for a huge amount, you’ll see a little profit from it with each trade or transaction.
There’s also the very important, very worthwhile blockchain-related feature that means the owner of the NFT will always be the owner of the original and the public blockchain transactions and ledger will back this up. Of course, this is unless there’s a disastrous hack or mistake where a private key gets lost or something to the like.
What’s the point of buying a NFT?
If you’re a buyer of a NFT, there are a couple of perks. Firstly – and arguably one of the most important ones – you’re supporting artists and the art industry. Buying NFTs helps artists continue their work – financially simple as that.
It also means you get basic legal usage rights to the NFT. Since you bought it – it’s yours. While you can’t claim to have created it, the NFT belongs to you and there’s a very evident blockchain entry to support the claim.