What are NFTs?
Are you wondering what NFTs are or why everyone around you is so interested in them? It is perfectly okay to be curious, as the buzz and hype surrounding NFTs in the recent month are enough to spark the curiosity of anyone active in the digital space. You probably don’t want to look stupid and uninformed as everyone around you seems to understand the supposed new technology. And just like every curious person, you went on Google with a search query that looks like this “What are NFTs.”. Frustratingly met with many technical terms, you don’t feel any more informed at the end of your search than before you hit the search button.
Well, the best way to know what NFTs are is by owning one for yourself 😊! It doesn’t seem helpful. Relax a little humour to calm your nerves before jumping right in.
NFT stands for a non-fungible token. I guess you know this already well “non-fungible token is kind of an unintelligible expression” perhaps that is why many people prefer to pronounce them as “Nifties.” Economist refers non-fungible to mean non-replaceable.
Knowing what NFTs (Stands For) doesn’t put an end to your already rising curiosity; NFTs are a digital asset, still too simplistic? NFTs is a cryptographic token that defines an asset. Such assets could be a sound file, an image, 3D art, a piece of text. NFT is also capable of tracking real-world assets, complicated a bit? It means you can lay an ownership claim over an asset, and the authenticity of this claim can be proven by the holder, so NFTs are like a certificate of ownership.
To understand what NFTs are, we would look at three characteristics common to all NFTs: Uniqueness, Rarity, and Indivisibility.
. Uniqueness: Like with every certificate you possess, it contains specific data in the form of numbers, signatures, stamps, or even signatures that differentiate you from your counterpart despite having received the same kind of certificate from the same institution. NFTs allow you to define an asset uniquely by providing “metadata” that describes and differentiates an asset from other assets. E.g., The Himecolle NFT collection; check it out https://himecolle.himegamiprotocol.org/.
. Rarity: This term refers to scarcity; elementary economics tells us the more scarce a commodity is, the more the demand for the item and thus a high tendency to impact its value positively. In a few words, scarcity commands high value. It is this rarity element that makes NFTs so popular. With NFTs, it is impossible to create new assets infinitely. The asset can only be defined once on the blockchain. The implication is that an asset cannot be registered twice on the blockchain. The rarity feature makes NFTs desirable among collectors; rarity is essential as long as people spend money on them. E.g., The Himecolle NFT collection; check it out https://himecolle.himegamiprotocol.org/.
Indivisibility: Lastly, you cannot break NFTs into smaller units or constituents. For example, if you cannot afford to buy one Ethereum or Solana, you can split the Ethereum or Solana into smaller denominations and buy, say ½, ¼ of Ethereum or Solana. You don’t want your users to buy 10% of a movie ticket or concert to explain further. If Ethereum or Solana had non-fungible characteristics, you would only be able to buy one Ethereum or Solana.
Now that we understand the characteristics of an NFT let’s know why many people are getting into NFTs.
- People want to show off: Collections like crypto punks are so successful because people can use them as profile avatars and flex in front of their followers; this act signals wealth, social status and status as “Elites” in the NFT space by investing iconic projects. Similar psychological feeling to owning a limited edition of Mercedes Maybach car.
2. People like to collect stuff: Remember Marvel & DC comics? We used to read them as kids and occasionally as adults; the concept of collecting each series and edition was addictive as we are always looking to have the next limited edition in our library. Well, NFT takes this addiction to another level.
3. People value authenticity: Anyone can take a screenshot of an NFT image; only a few people can own that particular NFT. When you purchase an NFT, you buy the underlying “metadata” of the asset, which is a unique code attached to each piece. It is the only proper form of ownership for the digital world.
4. Trading vs collecting: In the NFT space, there are two broad categories of people. First are the people who buy an asset and hope the price would increase either based on research or psychological bias so they can flip the asset and turn in a profit. In contrast, the second is die-hard collectors who genuinely want to support the artist or project