What are NFTs? Understanding the Latest craze in the Crypto Industry
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What are NFTs? Understanding the Latest craze in the Crypto Industry

What are NFTs? Understanding the Latest craze in the Crypto Industry

NFT_Admin
May 27, 2021

NFTs stole the headlines in the crypto world in 2021. Artists and investors (both individual and institutional) have completed deals worth millions of dollars in this relatively new field in the cryptocurrency world. On March 1, 2021, Grimes sold NFTs for a digital art of a flying cat (Nyan Cat).
Ten days later, Christie’s auction house announced selling Mike Winkelmann’s The first 5000 Days’ for a $69,346,250 record fee.

Barely two weeks later, Jack Dorsey’s first-ever tweet sold for $2.9m on March 23, 2021.

All these are just a few examples of the major deals that occurred in the world of NFTs. But, what are these NFTs? And how do they work?

NFTs Defined

NFTs is an abbreviation of non-fungible tokens. Before we define NFTs, let us first understand the concept of fungibility.

Fungibility is the property of a good or asset whose individual units are mutually interchangeable. For example, one can easily swap fiat currency such as a dollar bill for another dollar bill of equal value. Fungible assets are also divisible. For example, a hundred-dollar note has the same value as five twenty-dollar notes.

On the other hand, non-fungible assets are those that are non-interchangeable. For example, a piece of art such as the Mona Lisa cannot be interchanged by another piece of art. This art is one of its kind. Other non-fungible assets include a piece of diamond and a piece of land.

Back to NFTs. These are digital tokens that represent a variety of physical or non-physical distinct items. The assets include digital artworks, music, in-game assets, virtual lands, digital collectibles, tokenized invoices, digital event tickets, signatures, and many more.

NFTs and Blockchain

NFTs are created, stored, and transferred within the blockchain network. The network creates a highly secure and transparent environment for the tokens.

The decentralized nature of blockchain ensures that any user participates in verifying transactions, not a central authority that can be manipulated.

The token transaction history is also available for any blockchain user to view, thus maintaining transparency. Additionally, NFTs are unique, which maintains the rarity of the asset it represents.

Final Thought

NFTs are already creating possibilities of massive scale as many industries are adopting it. These digital assets are also arresting the interest of artists, traders, and investors. NFTs is a new promising niche in the crypto and blockchain world.

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