What are NFTs?

Introduction

There are numerous talented and artistic minds with crafty skills out there in this world. Woefully, most go unnoticed due to lack of proper talent supporting and monetization platforms. As they say, where there’s a will, there’s a way - the internet has created just that. It helped creators to showcase their works online in the form of pics and videos. But the sad truth is that you don’t have rights on what you post or share on the internet.

The content or the data you post can be used by anyone. Since it’s a free public space with no strings or boundaries, you can’t claim ownership rights on the content you share online. On the other hand, there’s this fintech technology called NFT or non-fungible token. This one digital asset has changed the fate of millions of original creators in the world. So, what is NFT? And how does this asset class operate?

Definition of NFT

NFTs or Non-fungible tokens are crypto digital assets designed with the aid of blockchain technology. This is a kind of cryptocurrency loaded with personal data of the NFT owner. By using this asset class, creators or innovators can claim the right or title or ownership on the creations they make or share online. From antiques to art to music to games to technically everything, you name it, NFTs enable you to represent that particular asset.

As NFTs are tradable like other marketable securities, you can buy them by investing in your favorite digital assets. The best part of NFTs is that the same asset can be minted into a billion copies and still keep it original and available online for people to buy it.

If you’re an artist willing to sell your artwork online, NFT can aid you get the best price for your talent, skill, and the hard work you have put into producing art. Long story short, with this crypto tool, one can convert any digital asset into a unique authentic constructive version that can be traded via blockchain route.

How do NFTs work?

NFTs help you to transfer the ownership of the digital asset from one person to another. These one-of-a-kind digital collectibles are traded in the markets in exchange for money. NFTs opened the doors for the talented crew who wanted to monetize their work. This popular platform is constructed using the Ethereum blockchain technology.

Once you buy the digital asset using NFTs, they are permanently yours. They cannot be interchangeable or exchanged or duplicated by anyone. The NTFs are basically created with the help of minting, where the data is recorded and stored as blocks. One calls NFTs as permission-less because you need the permission to buy or sell this asset class - thanks to stern immutable properties.

The next step involves positioning the ownership and then transferring the same to the new owner. However, one thing you should note here is that minting involves cost which needs to be paid upfront to carry forward the process. As and when the minting gets done, they are kept in the marketplace for sale. The value of the NFL is fixed based on the market demand and uniqueness for that respective asset class.

Features of NFT

A lot of them think that NFTs and cryptocurrencies are similar as both use the blockchain technology to operate, but there’s more than what meets the eye. Both these asset classes have different features but the main difference is that cryptocurrencies are fungible and NFTs are not. Meaning, one can duplicate the latter but impossible when it comes to the latter. Some of the features of the NFTs are as follows.

• Proves ownership − Since NFTs are traded online with the help of blockchain, the data is stored in digital format on multiple platforms for authentication and checks. One can easily prove their ownership title of the holding asset traded using NFTs. This can be difficult in the case of traditional or offline asset purchases.

• Non-transferable − If you buy any asset via NFTs, consider that you own it for life. No one has the right on that asset except the owner who bought it. You cannot copy or duplicate the attributes or alter the asset in your terms and make a similar one. NFTs add a layer of originality to the asset, so, you cannot transfer it to anyone.

• Cannot be destroyed − Though NFTs transfer the ownership title, it doesn’t mean you can destroy the asset and clear it from the racks. The creators still own the NFL but not the channel or platform that’s trading them.

• Interoperability − This is another exciting feature that enables NFTs to be viewed on diverse platforms. Now, if someone comes with a new NFT project, you can still see various NFTs located in multiple wallet providers. This idea is similar to third party platforms like Make My Trip or Red Bus that showcase deals running on individual platforms.

• Eliminates middlemen − NFTs come with a smart contract feature, where the rights are automatically transferred to the other party. The trades and transitions don't involve any middlemen, saving some cost on the digital assets.

• Portfolio diversification − If you are looking for a unique financial product, there’s nothing better than an NFT. Inclusion of this asset class not only adds value to your existing assets but also diversifies your portfolio. In addition to that, it also balances risk-adjusted returns and acts as a leverage or cover for losses.

Conclusion

No one has ever thought that one day we can own anything that’s shown on the internet. But it has been made possible with NFTs or Non-Fungible Tokens - a crypto asset that allows the investor to attain and retain ownership of any digital asset online. So, once you purchase an asset via NFT mode, it’s all yours till eternity. This asset class adds value to your existing portfolio, resulting in diversification.

FAQs

Q1)What are some attributes of NFTs?

Ans)NFTs have become so popular in the digital age like no other asset class. Some of the common attributes of NFTs are easily verifiable, indestructible, offers ownership of the title, provides portfolio diversification, etc.