You’ve probably heard it from your friends, workmates, schoolmates, or just simply the term just keeps popping on the Internet. It has existed for quite a while already, but I bet you are still confused what it is.
With the rise of P2E games or play-to-earn games like Axie Infinity, which took the country by storm in the past few months, NFT is one of the familiar terms that are being tossed around by P2E enthusiasts. So, what the heck is an NFT?
NFT stands for “non-fungible token” which is a digital asset that is verifiable on blockchain technology. From the word non-fungible, these tokens are virtual, meaning they are basically like collectibles or ‘tokens’ except they are of digital or virtual format.
Some of these assets include artwork, music, or in-game assets, where unique avatars are famous as NFTs. Because of its non-fungibility, this unique asset in digital form can only be traded or exchanged by any other NFTs. This gives NFTs their unique or ‘one-of-a-kind’ factor.
NFTs have been quite famous for the last two years, thanks to the ongoing COVID-19 pandemic, where enthusiasts have been sprouting all over, though NFTs have been around as early as 2014. Cryptocurrency booming is one of the reasons of NFT’s sudden popularity.
Sure, the term itself is as handful as mouthful it is because blockchain technology is indeed an intricate and complicated concept. NFTs are transferred from one owner to another using blockchain technology, which creates a digital trail from seller to buyer that verifies the transaction. This encodes the unique ownership rights to the buyer (new owner).
This means that in order to acquire an NFT, one must have cryptocurrency such as Bitcoin, to buy a digital asset and create an account on the NFT marketplace that is connected to the cryptocurrency wallet holding the coins.
The most common blockchain NFTs use Ethereum ERC-20 tokens; this is what the blockchain utilizes to issue a smart contract on the Ethereum blockchain.
NFT vs Cryptocurrency
It is important to remember that NFTs and cryptocurrency are not the same; one would use cryptocurrency to conduct a certain transaction. Using the same blockchain technology that a specific cryptocurrency uses, an asset is built up differently when it comes to NFTs.
Whereas a cryptocurrency coin can be traded or exchanged at equivalency, the NFT cannot. This is because each cryptographic asset is set up with a unique identification code and metadata that distinguishes one NFT from another.
Investing in NFTs
One of the most common reasons why NFTs suddenly got popular is because of money. People came rushing like the California gold mine, hoping to buy and invest different NFTs as much and as early as possible. But is investing in NFTs a good idea?
Buying NFTs requires due diligence on the part of the investor or collector. Same with the stock market, you need to do diligent research with a specific NFT you would like to invest in. You need to first find NFTs that you feel are going to grow in value and that you have an interest in collecting.
NFT marketplaces where sales and auctions are conducted is a good place to gain knowledge about a certain NFT or if is it worth investing or not. YouTube, Discord channels, Telegram channels is also a good place to learn more about them. A growing community interested in NFTs will help you learn about the topic. However, be careful too with people you ask about NFTs as they might scam you or urge you to buy a worthless NFT, taking advantage of your lack of knowledge.
Overall, NFTs are continuously growing as a trend. Some argue that their popularity can help artists expand their collection and work, while some it diminishes the general idea of ‘making art’, where people get more focused on the financial value.