Find out what NFTs are and whether or not you should buy them.
I’m sure you’ve heard of the term NFT being tossed around on the news, on tech websites, or even on social media. Perhaps, you even have a few friends who have been bragging that they’ve purchased some NFTs. However, despite their rapidly growing popularity there still remains a lot of confusion as to exactly what they are. They are seemingly just as abstract as cryptocurrencies and blockchains.
If you are one who continues to be mystified by what exactly NFTs are, you are not alone. But fear not, despite their seemingly abstruse existence, NFTs are actually quite simple to understand. In fact, if you’ve ever played a video game like The Sims where you’ve downloaded assets created by other people that were not part of the original software and put them into your game, then you likely already have a general understanding of what NFTs are without even knowing it. With that said, we are going to get into the nitty-gritty of NFTs and detail just exactly what they are and if they are at all worth investing your hard-earned cash in.
WHAT IS AN NFT?
NFT is an acronym for non-fungible token. Essentially, a non-fungible token is a unique digital asset that cannot be traded for an identical one, hence, their non-fungibility. Whereas cryptocurrencies like Bitcoin are identical, similar to the way real dollar bills are and can be traded back and forth for other identical coins, NFTs are unique creations that do not have duplicates. Perhaps an easier way to understand what NFTs are is to think of them like digital pieces of art. When one creates a piece of art it is unique to them, anyone trying to duplicate that piece of art would make it fraudulent.
Another way to understand what an NFT is would be to look at them through the framework of a video game. If you were a child of the 1990s then you might recall a PC game called Petz. Petz was a game where you would “adopt” a dog or a cat and then raise them in your game. When the game had been around for a while, some intelligent individuals started creating their very own Petz files and then put them on websites that they had made in order to advertise their creations. Other Petz players could then put in applications to “adopt” those unique files. The person who ended up receiving that file and putting that pet into their game ended up with a digital asset unique from any other Petz file in existence. NFTs are essentially that, exclusive digital files different from any other.
WHY ARE NFTS SO POPULAR?
NFTs are popular because of their exclusivity. People relish in the idea that they own something that no one else does. The fact that each and every one is unique means that their value has the potentiality to appreciate exponentially in a short amount of time which also makes them more attractive to some.
NFTs are also very popular with artists because they make it possible for creators to monetize their work without the need to display it in a studio or art gallery. Similar to how cryptocurrency is decentralized, selling art as an NFT eliminates the middle man and keeps more money in the artist’s pocket.
Another reason why NFTs are becoming so popular, especially in recent years, is because of how they can potentially be used in the future, particularly within the metaverse. For instance, as the metaverse develops we are likely to get to a point where every individual has their own home base or “room” in which to decorate and invite people over to. If you own NFTs then you can show them off within your metaverse space similar to how you would display art in your home.
HOW TO BUY AN NFT
NFTs are purchased in the same way one would purchase cryptocurrency via a digital wallet or service like PayPal, Robinhood, or Sofi that provides access to purchasable NFTs. OpenSea and Rarible are marketplaces where you can also acquire them, after which you can transfer them to an NFT compatible digital wallet. However, it is important to understand that while many NFTs are purchased in the same way as cryptocurrency and exist within the blockchain format (the majority being on Ehterium) they are not at all a currency.
Another way to purchase NFTs that is becoming more popular with physical collectors is via a company that includes an NFT with the purchase of a tangible item. For instance, Hasbro offered a limited edition Megazord figure that came bundled with an NFT version. Hence, by buying that item one can display the figure both in their home and at the same time have a digital copy to show off.
SHOULD YOU BUY THEM?
Similar to real-world collecting, the particular value of an NFT goes hand in hand with consumer demand. The more people that want to purchase a certain NFT, the more the NFT will be worth and vice versa. This is why some NFTs can be worth millions and others can be worth nil. Before buying an NFT you should keep in mind that its value will ebb and flow with its desirability, thus it could prove to be a potentially futile investment if all you were looking to gain from owning one is a profit.
However, if you like the idea of owning a unique digital asset that has no duplicate or are looking ahead to the future in anticipation of the evolution of the metaverse, then NFTs could absolutely be worth the money (crypto or otherwise) that you sink into them. Ultimately, deciding to purchase one is a personal decision that has to feel right to you. Whatever you decide, NFTs clearly are true indications of how both our physical worlds and digital identities are beginning to fuse more and more together. They foreshadow a future defined by digital enmeshment.