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The year 2021 was all about NFTs and the year ended with the sale of Pak’s ‘The Merge’ NFT for a whopping amount of $91.8m. As of now, The Merge is the most expensive NFT ever sold. Unlike other NFTs, The Merge isn’t bought by a single person. This NFT was fractionalized and sold to multiple traders. The insane price tags of NFTs have left many people wondering what these are and why people are paying millions to get these. Non-Fungible Tokens (NFTs) have exploded in popularity as these digital pieces are sold for crazy prices. So, why investors and collectors are joining this latest blockchain craze?
From a popular meme selling for hundreds of thousands of dollars to Twitter CEO Jack Dorsey selling his first tweet for $2.9 million; NFTs are the latest blockchain craze. However, NFTs have divided the blockchain enthusiasts as some believe it’s the future while others consider it as a passing fad. So, if there’s a conflicting opinion about NFTs, why people are still willing to pay millions for these digital items? To help people understand this, Curate founder James Hakim has explained what an NFT is.
What is an NFT?
An NFT (non-fungible token) utilizes blockchain technology, the same decentralized digital ledger technology that supports cryptocurrencies. However, the similarity between NFTs and cryptocurrencies ends here. Unlike digital currencies like Bitcoin which is fungible, NFTs are non-fungible. It means that while cryptocurrencies are exchangeable, NFTs are unique and cannot be interchanged. NFTs represent one-of-a-kind things such as a rare photo or unique artwork. These digital tokens are stored on the blockchain which makes them authentic and prevents fraud.
To make it further clear, let’s find out what the economic term “Fungible” means. In simple words, a good or asset is considered fungible if it can be exchanged for another good or asset of equal value. So, both fiat and digital currencies are fungible because they can be easily be swapped for another similar currency of the same value. NFTs, on the other hand, are unique and “non-fungible”. An NFT can be digital artwork, an in-game purchase, audio, GIF, or even a tweet. NFTs are traded using cryptocurrencies such as Bitcoin and Ethereum. Specialized platforms known as NFT Marketplace are created for minting, buying, and selling NFTs.
Reasons to Invest in Non-Fungible Tokens
Even if there are plenty of NFT cynics, this blockchain trend isn’t showing any sign of slowing down anytime soon. The main properties of an NFT include uniqueness and scarcity. These features increase the price of NFTs. Buying an NFT means you get exclusive ownership of a particular digital asset. Even if someone can share or see that particular NFT, only the buyer has ownership rights. The majority of people investing in NFTs are those who believe in emerging technologies. Also, the supporters of blockchain technology understand the long-term value of these digital assets. NFTs have also created a way to turn physical objects such as artwork into digital tokens. This has eliminated the issue of duplication of unique paintings. NFTs have a unique code that limits the ownership right to the artist or buyer. Blockchain authenticates the NFTs and the scarcity increases the value of the item.
The urge of collecting unique items also encourages affluent people to buy NFTs. With the development of NFT marketplaces such as Curate, the artists would no longer have to rely on art galleries or auction houses to sell their artwork. With no intermediary, NFT marketplaces connect artists with buyers and help them get more profit. It is becoming a trend in the crypto community as people are buying NFTs for social status. Even celebrities are taking interest in NFTs. Those who collect Rolex and vintage cars are finding collecting NFTs attractive.