What is NFT? – Great Learning

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what is nft

Just imagine that you purchase a piece of digital artwork on the internet at a reasonable price. You get a unique digital token that certifies your ownership over this purchased artwork. How would you feel about getting ownership? Won’t you be thrilled about it? Definitely “Yes” because this would be a new experience for you. Well, now you can avail that opportunity because of NFTs.

Bringing NFTs into existence was an extraordinary idea. Kevin McCoy and Anil Dash are the pioneers who first created Non-Fungible Token (NFT) in May 2014. The main motive behind its creation was to protect artists.

This year it has generated enthusiasm amongst the people around the world. It has created an online platform for selling and buying digital assets from art and music to tacos and toilet paper, where artists are earning handsome money for their unique creations.

What do you think? Are NFTs worth the money or is it just a hype created amongst people? Some experts believe that NFTs are just like a bubble that can burst at any time and some experts are firm that they will last for a longer period, and it has come into existence to change investing patterns forever.

NFTs have created a stir in the digital art and collectables world. Just as everyone in the world used to think of bitcoin as a digital alternative to currency, now NFTs are believed to be the digital answer to collectables. This has resulted in the changing lives of many digital artists due to the massive sales to new crypto customers.

If you are interested to know about NFTs and keen to explore your knowledge about them in a much more detailed way, then you are on the right path. Let’s start and see what it is.

  1. What is NFT and why is it important to know about it? 
  2. Examples of NFT
  3. What are the basic differences between NFT and Cryptocurrency?
  4. Working of NFT Explained
  5. What makes NFT special?
  6. What are the benefits of NFTs?
  7. Disadvantages Of NFTs
  8. Best NFTs to Buy and invest in 2022
  9. Predictions
  10. The future of NFT and the market that it serves
  11. Conclusion

What is NFT and why is it important to know about it? 

The full form of NFT is a Non-Fungible Token. A non-fungible token is a non-interchangeable unit of data stored on a blockchain. It is a form of digital ledger. NFT can neither be replaced nor interchanged with any other material or object because of its unique properties. NFTs differ from most cryptocurrencies, such as Bitcoin, Litecoin, and Bitcoin Cash which are fungible. In economics, fungible assets are those units that can be interchanged. For example, money, where a note of two hundred rupees can be interchanged with two notes of hundred rupees or with two notes of a hundred rupees can be interchanged with a single two hundred rupees note. After every change, the value of both units remains the same.

Whereas, in the case of NFTs, each token is uniquely identifiable, which makes it non-fungible. These non-fungible assets might be anything, like Tajmahal, India Gate, a video recording of cricketer Yuvraj Singh hitting six sixes in the 2007 T-20 World Cup, a brilliant catch by Kapil Dev in the 1983  ODI final, Monalisa painting, all these are unique. Anyone can download such precious video clips available on the internet or take photos of these or printouts, but the original piece remains one in the world.

NFTs are also one of a kind of digital assets of the digital world. NFT represents real-world objects like music, art, in-game items, and videos. Online buying and selling of these real-world objects have become possible with the arrival of NFT. The buying and selling activities are done frequently with cryptocurrency. There is no fungible available for its replacement, and therefore a digital token is issued by NFT to claim its ownership.

They are generally encoded with the help of the same underlying software used by many cryptos.  

NFTs have been in existence since 2014, but nowadays, they are more in talk because they are now considered a popular way of buying and selling digital artwork. 

As per the statistics available on the records, we will be surprised to find that nearly $174 million has been spent on NFTs since November 2017. This is an interesting figure.

One notable example of NFT is CryptoPunks. It makes you able to buy, sell and store 10,000 collectables with proof of ownership. 

The CryptoPunks are 10,000 uniquely generated characters. Each one of them can be officially owned by a single person on the Ethereum blockchain. Originally, CryptoPunks could be claimed for free with the help of an Ethereum wallet, but the real story is that all 10,000 were claimed quickly. 

Now the option is to purchase it from someone via the blockchain decentralization marketplaces. The function of a blockchain marketplace is to allow users to sell products and services transparently and get feedback. If we talk about traditional markets, they sometimes lack transparency for sellers which means sales algorithms, requirements, and seller metrics are not made available. Since the data is immutable, it can not be deleted or edited. With the help of this market, you can buy, bid on, and offer punks for sale.

It is clear that once any digital material like videos, photos, artwork, etc., is freely available on the Internet, anyone can view or download such material without paying single money. Then the question is, why are people so crazy to spend millions on such things, which can easily be screenshotted or downloaded?

The main reason hidden behind the interest is to gain ownership of purchased digital artwork. NFT allows buyers to have ownership of the original digital item. 

Mainly, the artwork is “tokenized” to create a certificate of ownership, and this is the certificate that you buy or sell. It contains built-in authentication, which serves as proof of ownership.

Also Read: Top 8 Best Ethereum Wallet in 2022

Examples of NFT

The NFT world is entirely new to people. Some examples of NFTs that exist today in the digital world are given here.

  • A Digital Collectible
  • Domain Names
  • Games
  • Essays
  • Sneakers in fashion line

What are the basic differences between NFT and Cryptocurrency?

Worldwide, NFT is known as a Non-Fungible Token. Its building process involves using the same kind of programming as cryptocurrencies, like Bitcoin or Ethereum. That’s the only similarity they share.

Cryptocurrencies and physical money are fungible assets. That means, they can be traded or exchanged for one another. Their values are equal. This means the value of one dollar is equal to the value of another dollar; the value of one Bitcoin is always equal to the value of another Bitcoin. The fungibility of Crypto makes it a trusted source for carrying out transactions on the blockchain.

NFTs are different from physical money or cryptocurrencies. They are non-fungible because each has a digital signature, and that’s why NFTs can’t be exchanged for or equal to one another. For example, one NBA top shot clip is not necessarily equal to another NBA shot clip because both are NFTs and are unique.

Also Read: What’s Next For Shiba Inu Coin In 2022?

Working of NFT Explained

Now, after the initial steps of understanding what an NFT is, you should continue to focus on learning how an NFT works.

The non-fungible token (NFT) is used for digital assets or goods. All available NFTs contain a unique digital signature. It is seen that mainly cryptocurrency, Ether, or dollars are used to buy NFTs. For NFTs, all the records of transactions are maintained in the blockchain.

With the help of a unique process, digital objects available on the Internet, such as videos, images, text, music, and even tweets, can be converted into NFTs.

It is now possible for all creators to tokenize their digitally available artwork and other assets. This is done by the creation of a unique digital certificate and signature of ownership, hence creating the NFT, and later, he can sell the NFT digitally.

For example, if you possess a unique painting and you want to sell it to earn money, then as per the conventional process, this painting is given to the person who quoted the highest bid for this painting, and in return, the original artist gets the money for that painting. 

The function of the non-fungible token is also similar. The only difference is that it is done in digital form, which means online bidding is carried out on the NFTs platform for digital gifts, paintings, and videos for the buying and selling purposes, where the highest bidder wins the race.

What makes NFT special?

When you buy any kind of GIF, painting, video clips, etc., online NFT, then you do not get this stuff in the physical form. You are given a type of unique digital token in their place, which is also called an NFT token. This token certifies your digital ownership of that item.

This kind of non-fusible token gets a valid certificate of ownership. For anyone who is selling an item that falls in this category, along with the certificate of ownership, all rights related to that item are transferred to its new owner. For some time now, this token has been used for online gaming, crypto art, etc. is being done.

On the NFT platform, blockchain technology is used to buy and sell items. Ethereum Blockchain is the main technology that is being used for trading items under NFT. The speciality of this technology is that once any type of digital entry is made, then no one can delete it.

What are the benefits of NFTs and how does it play an important role in the development of creators and artists

NFTs, along with an exciting new invention for collectors and speculators, also provide some promising benefits for digital creators.

Most of the following new benefits to digital creators already exist in writing, music, movies, gaming, and more, but with the introduction of NFTs, all these benefits become available in the art and collectables space:

1. Easy entry and lesser restrictions 

The digital medium significantly lowers the barriers to entry for creators of art and collectables, just as it did for musicians and authors. It provides a hassle-free environment and avoids the upfront investment required to set up the manufacturing and distribution of a set of several thousand physical collectables. From this point of view, it can be said that NFTs have shown a new way to their analogue counterparts. The NFT platform provides new opportunities to a lot of creators and artists to sell their creative work at a scale they simply didn’t have before. Creators can have direct access to a huge market, unlike in the traditional world of art and collectables guarded by publishers, art galleries, retail chains, and other gatekeepers.

2. Global market can be accessed easily 

NFT shows a path for creators and artists to reach a global market. It enables them to market their work to all jurisdictions in the world. It is very much clear that not everyone has easy access to conventions, exhibitions, and galleries to demonstrate their work to the large community, but the NFT platform provides an opportunity for creators and artists to do so.

Though traditional art and collectables are also traded online, just think about how much planning, expenditure, and execution are required for shipping a piece of art worth millions of dollars across the globe. It is just an example. It is possible for one who can do all these, but what about creators and artists who live in remote places and, despite having great talent in them, they are not able to do all these things. From my point of view, I can say that it happens either due to a lack of knowledge or financial limitations. Thanks to NFTs, the digital world provides an equal level of playing field to all creators and artists and makes art and collectables equally accessible to everyone, regardless of their location in the world.

3. The well-defined system of royalties 

The word “royalty” we often read or hear when there is talk about the music industry. Many well-known Indian singers have struggled with this royalty issue against music tycoons and succeeded. 

When artists sell their new piece, they receive payment for it but miss out on any profits made on its trading later in the secondary market. Since the value of art increases day by day after its creation, the lack of royalties has historically left artists with just a fraction of what their work is worth, whereas collectors and speculators become rich. It is a bitter truth that many well-known artists have made little in their careers just because of a lack of royalty.

Now just imagine how good it will be if creators and artists automatically start getting 10% and 20% royalty on all future sales of their work. This is easily achievable by programming such a royalty directly into the NFT from the beginning, creating much better conditions for creators and artists.

With this effect, trading digital artwork in the secondary market will become easy, which is already much more active. Each sale will result in money in the artist’s pocket, regardless of how much their work is appreciated.

4. The importance of collectors 

One important point is that the digital world is more convenient than the analogue world, and it has been proven practically on many occasions. For creators, it is very convenient to mass-produce, sell and distribute created digital files and in the same way, acquiring, exchanging, storing, and the share of these digital files is convenient for the collectors. With this, collectors directly benefit the creators. The great advantage is that there is no need for physical storage space and other right equipment for storing digital collectables and artworks. You can have your assets always with you on your phone or laptop. You can buy or sell an asset online even from your home, too and both the transaction and the transfer happen effortlessly.

Disadvantages Of NFTs

NFTs have certain disadvantages. They are explained below:

1. Market being high risk 

Whenever we hear or read about NFTs from any source, and since it is a new concept for all of us, it is obvious to arise various questions in our minds like whether or not NFTs have any real value? Can we think of a long-term investment in NFTs? Somewhere it is not that the wave of NFTs has started, and everyone is anxious to take a dip in it. Is it just a passing trend that many are anxious to follow? Truly, it is very difficult to answer all these questions. It seems that at present, only emotive quality is playing an important role in valuing NFTs.

2. Copies Of Digital Assets Are Possible

This is very important to keep in mind that NFTs merely certify your ownership over any creation or artwork that you purchased online with an NFT platform, that’s all. You can not rule out the possibility of copies of your purchased item. You don’t have any technical or any other type of control over this type of illegal online activity. It happened many times, and in the future also,  art can be copied, GIFs can be shared numerous times, and videos can be shared with many people online. You don’t have any such power that can control all these activities. You have proof of ownership.

3. Costs To The Environment

The environmental impact of blockchain-based cryptocurrencies, such as Ether and Bitcoin, has raised concern globally and received much attention. It is found that entering entries onto the blockchain demands tons of computing power. Therefore, the long-term viability of blockchain-based assets needs to be addressed properly so that its bad effects don’t affect the environment.

As per the estimation, each Bitcoin transaction uses nearly 2100 kilowatt-hours (kWh), which is roughly what an average US household consumes in 75 days. When this huge energy is supplied from non-renewable energy sources, it can result in the generation of exorbitant greenhouse gas emissions by cryptocurrencies like Bitcoin.

4. They Are Vulnerable To Theft

Even though it is claimed that the technology behind NFTs is very safe, many exchanges and platforms are still not safe, and they are required to pay attention to safety issues immediately. There have been many cases of NFTs being stolen due to breaches of cyber security.

There are always some potential downsides with every new technology. Here we discussed some of the important issues related to NFTs to make you aware. We hope that all these issues will be resolved soon.

5. NFTs Are Illiquid and Volatile

Due to its relatively immature state, the market for NFTs is not very liquid. NFTs being a new concept in the field of trading, are still not widely understood, and the number of potential buyers and sellers in this field is very small. This means the trading of NFTs can be very difficult, especially during distress periods, and NFT prices can be highly volatile too.

6.  NFTs Do Not Generate Income

Before investing in NFTs, always keep in mind that it doesn’t offer any income potential to their owners like dividend-paying stocks, interest-bearing bonds, and rent-generating real estate. The returns associated with NFT are not in your control. It entirely depends upon the price appreciation that you should not count on. It is just like it happens with antiques and other collectables.

7.  NFTs Can Be Used To Perpetuate Fraud

While there is no doubt about the integrity of a blockchain, NFTs can be used for fraud purposes. Many artists have recently discovered that their work is on sale as NFTs on the online marketplace without opting for their consent. They have reported this matter to the concerned operating authorities to take action. This kind of incident violates the purpose of utilizing NFTs to facilitate the sale of art. NFT authenticates the value of a physical creation or artwork with an equally valued unique token. This assures the token owner that having the token means having the ownership of the original work of creation or art.

But the serious problem is that a lot of cases are reported where an electronic image of the original work is created, and after attaching a token, it is put up for sale on a virtual marketplace. It has no relation to the original work. The token is linked to fraudulent work.

8.  No Permanent Place to Store

The major security concern usually faced by the NFT investors is that there is no specific provision for the storage of items. No permanent solution is there for the storage of NFTs, making a shaky choice for investors. The important point is that your NFTs are not being stored on a blockchain wallet. These are stored on a server, and if you don’t protect your valuable asset, then it could get deleted, destroyed, and corrupted. It means that all your precious work, like image, artwork, music, and video that represents your NFT, will disappear at some point.   

That’s why pumping lots of dollars as an investment for NFTs is simply not a smart move for any investors when there are a lot of chances of corruption or deletion. Any buyer has the right to know where his purchased item will be stored, and he should make sure that the  NFT hosting entity maintains it properly.

9.  Capital Gains Tax explained 

This is a very important point, and every investor who is interested in trading NFTs to generate profit should be aware that NFTs are subject to capital gains tax. Always remember that all your profits earned after investment in NFTs are all liable for capital gains tax.  

Some common NFT activities, like selling NFTs for cryptocurrency, trading NFTs for other NFTs, or purchasing an NFT with a fungible cryptocurrency, are subject to capital gains tax. Investors should carefully consider all the tax implications before going for investment in NFTs to refrain from any surprise tax bill at the time of filing tax returns.

Best NFTs to Buy and invest in 2022

The year 2021 has witnessed the peak of growth of the NFT market, where more investors than ever were capitalizing on the trend of owning digital art. This trend will continue in 2022, with the value of lots of exciting NFTs growing and becoming attractive assets for the investors to own. 

So, make up your mind. We are going to discuss some of the best NFTs to buy in detail. This includes reviewing the top digital assets available in the market and how you can invest in the NFT market today.

Let’s go through a closer look at the best NFT Tokens to Buy in 2022. So, without wasting any time, let’s dive and explore each of these NFTs individually to have a deeper understanding of why they are considered prize assets.

We will guide you on what the best NFT apps are available in the market with the low fees and how to buy and sell NFTs most safely.

1. About Lucky Block NFTs – Platinum Rollers Club Collection

You might be aware that Lucky Block is being considered one of the best altcoins to invest in this year for its innovative use case and unique tokenomics. 

The development team is releasing a collection of 10,000 unique NFTs before the launch of Lucky Block’s crypto-lottery app. Each NFT provides valuable benefits to the holder.

Its most notable benefit is that each one acts as a ‘ticket’ into Lucky Block’s daily NFT draws, which will run separately from the platform’s crypto-lottery draws. Every day there is an opportunity for one lucky NFT holder to win the jackpot. This jackpot is 2% of the main jackpot draw.  

As per the Lucky Block’s user base and ticket volume projections, this NFT jackpot is estimated to approx total $10,0000 on average.

2. About Bored Ape Yacht Club

This is one of the most sought-after NFT drops that investors ensured was on their NFT calendar is Bored Ape Yacht Club. This is a collection of 10,000 unique NFTs that represent ‘Bored Apes.’ 

Matching their name, these Apes are pieces of digital art that look bored yet have gained incredible attention from high net worth investors worldwide.

Along with owning a unique piece of art, Bored Ape owners also gain access to the ‘Yacht Club.’

This club generally grants members impressive benefits, most remarkably an exclusive Discord server, which is populated by entrepreneurs, successful individuals, and even celebrities.

In addition, Bored Ape owners gain access to additional NFT drops first, including the Bored Ape Kennel Club and Mutant Ape Yacht Club.

3. About CryptoPunks

CryptoPunks is just behind the Bored Ape Yacht Club in terms of mass appeal. At the time of researching how to buy an NFT, you may have heard the name CryptoPunks already. It is one of the oldest NFT projects, launched in 2017.

Although CryptoPunks were not originally highly coveted, their price was at its peak in 2021 as the broader NFT market expanded.

The CryptoPunks NFT collection consists of 10,000-pixel images, which are mainly hosted on the Ethereum blockchain.

Each ‘Punk’ has its characteristics and aesthetic, where aliens and zombies are some of the most valuable. 

As noted above, the value of most CryptoPunks is derived from the length of time these NFTs have been around instead of their visual appeal.

CryptoPunks have been popular with celebrities, Much like other high-profile NFT collections. Snoop Dogg, Steve Aoki, Logan Paul, and others all have unique Punk. These NFTs command a high price point, with the most expensive NFT CryptoPunk sold last year for $11.75 million, where the floor price for one of these assets was over $200,000.

CryptoPunks is considered one of the best NFT projects to date. The CryptoPunks NFT floor price pumped back above 75 ETH, When management of the CryptoPunks project was taken over by Yuga Labs.

4. About Pudgy Penguins 

Pudgy Penguins NFT is another best option to buy. It has a collection of 8,888 NFTs, each one detailing a fun cartoon penguin with an array of characteristics. Each Penguin unique becomes unique with these characteristics, with some considered rarer than others.

Similar to Bored Ape Yacht Club and CryptoPunks, this NFT collection has gained the image of super-popular NFT with high net worth investors – which has added to their appeal.

The latest floor price for Pudgy Penguins is just around $4,000 or more, making them a little bit more accessible to investors than the previous ones on our list. 

However, some Pudgy Penguins have sold for an unbelievable price. For example, one investor bought a Penguin for an exceptional  $463,000.

5. Decentraland

Decentraland can be considered the best NFT to buy within the ‘metaverse.’ In simple words, Decentraland is an open-world blockchain-based play to earn a crypto game in which users can create in-game avatars and buy plots of land. The interesting thing is that these plots of land are arranged as NFTs, which means they can be traded with other users and monetized. 

This Decentraland has become home to many of the most popular NFT games. It is hosted on the Ethereum blockchain, although it uses MANA instead of ETH as its native currency. 

Decentraland’s in-game items have become incredibly popular because of the rise in popularity of the metaverse concept, with ‘land parcels’ being highly sought after.

These land parcels can be purchased by the users through the  Decentraland Marketplace or OpenSea. The price of one specific piece of land is nearly $50,000.

Investors can use the best crypto exchange to purchase MANA and use the currency to buy in-game items. Along with land parcels, investors can also purchase art, apparel, weapons, and more. 

It is sure that in the long run, as Decentraland’s world expands and gains popular appeal, the value of these NFTs can rise, and therefore it is one of the best NFTs to purchase in 2022.

Predictions

The NFT market is so unpredictable that here one can gain everything, and one can lose everything. That’s why experts are skeptical about the NFT market.

KEY POINTS

  • According to statistics available, during the third quarter of 2021, NFT trading volume hit $10.7 billion.
  • While NFTs can be anything, the current trend is focused on collectables and digital art.
  • However, several experts are very worried, and they don’t recommend entering the NFT market at the current price point due to immense hype and speculation.

A decade ago, the dream of getting married in a virtual space seemed like a joke. Not now. 

A Chennai-based couple became Asia’s first couple who recently celebrated their wedding on the metaverse, where people interacted through their avatars, and even the bride’s late father attended. And also, The couple launched non-fungible tokens (NFTs) featuring them and the wedding invitation. 10 unique NFTs of around $25-150 were launched, which were later resold for $1,000-2,000. It received a good response.

There was a time when it was limited to celebrities only when they created and sold them for millions. Now the time has changed. NFTs have come a long way, and now NFTs are slowly but surely becoming a part of our everyday lives. 

Along with a great business opportunity, NFTs are also a new way for people to enjoy themselves while making money. That’s why NFTs are surely here to stay, according to an expert.

The way the world accepts the metaverse, NFTs will become the thing to own. NFT owners would be able to access certain exclusive things in the metaverse. Similarly, Collectors can access unique and credible artworks in the form of NFTs from around the world.

The way the NFT market is booming, some collectors consider it a long-term investment option.

The future of NFT and the market that it serves

In the present scenario, people are still not sure about the future of NFT in India. Nothing can be said about it at this moment. Whether it will start its operations in India or not, this is a wait-and-watch situation and is very difficult to answer. The main reason behind this uncertainty is that it is a completely new concept to us.

Just as there were different types of opinions among the people regarding cryptocurrencies, similarly, there is a difference of opinion regarding NFT too. According to the opinions of experts, we have to wait for a while.

Many economists believe that it does not have a future in the long run. Many economists see NFTs as the future of ownership of properties and other assets. According to the people who are much interested in NFT, all types of assets will be digitally marked with their ownership status. As per the reliable information available, Crypto exchange Salt is the first Indian company to launch NFTs in India, which may be known as Duzzle.

Conclusion 

I am sure that you have now seen everything you wanted to know about what an NFT is, how it works, its uses, and how and from where you can buy them.

Anyone, who is an experienced Blockchain developer or an enthusiast who is interested in exploring more about NFTs, cryptocurrencies, and blockchain, can enrol in the Great Learning Certification Training Program. We, as a dedicated team, can assure you that this program will help you to learn and explore more about cryptocurrencies, blockchain, and all other associated technology, accommodating all levels of experience.

If you have any questions for us, please feel free to ask. Our experts will get back to you as soon as possible.

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