A non-fungible token (NFT) or cryptocurrency is an example of a digital collectible that is referred to as an asset.
NFTs are all the rage in the crypto world–some are even fetching millions of dollars. But what are the benefits of minting and owning NFTs?
Anyone who has heard about NFTs will marvel at the astonishing prices people are willing to pay for them.
What are NFTs?
NFTs, short for Non-Fungible Tokens, are digitally unique assets that exist on a blockchain.
An NFT is akin to a certificate of authenticity (COA) that accompanies the sale of a piece of traditional art. However, in the token’s case, the item itself is the COA. This means that at any given time, an NFT can only have a single owner. This makes NFTs very desirable as new-age collectibles.
What is the “value” of an NFT?
NFTs are minted for scarcity, with very few tokens created from an individual art piece. While all NFTs are digitally unique, some of them are the only ones of their kind. The fewer tokens minted of an art piece the more value the collection tends to have. The rarity of an asset is one of the aspects lending to its great value. However, rarity alone cannot do much without a demand.
The value of an NFT is determined by the concept that it represents, not its physical attributes or lack thereof.
The issue of ownership
Purchasing an NFT does not give the buyer complete ownership of the creation. Buying an NFT makes that particular digital code the buyer’s property. This partial ownership does not, however, give one the rights of a creator, like copyright and distribution privileges.
Blockchain cannot absolutely ascertain the authenticity of a piece of work. Therefore, it is possible to tokenize a piece of content while infringing upon the creator’s copyright. On top of that, the concept of scarcity is limited to each individual blockchain.
Who benefits from NFTs?
NFTs have been a saving grace for many artists struggling to monetize their skills. They allow artists to market their work on a global scale, improving the probability of making a sale.
Artists can also add a royalty clause to their NFTs. They will earn a certain percentage of the profit every time one of their NFTs is purchased by someone else, allowing the artists to profit from their work, even long after they have sold it.
Individuals in possession of cryptocurrencies can use them on NFTs to support their favorite artists financially. It also gives the buyer some basic usage rights like posting the image online or using it as a profile icon. Then there are the bragging rights of owning a piece of art with an immutable receipt in the form of a blockchain entry as proof of ownership.
Currently, NFTs do not offer much in the way of investment value. One can purchase an NFT and hold on to it in the hopes that it would gain value one day. However, the crypto market is currently too volatile to guarantee any profit.