Regardless of whether you are fascinated by technology or struggle to work with a computer, you will likely have heard about NFTs.
Depending on your point of view, a non-fungible digital token is either groundbreaking tech or yet another fad that will be swept under the carpet in a couple of years.
Regardless of your stance, there can be no doubting the intense popularity of NFTs right now. They are rarely out of the media spotlight, and you will likely know someone who is involved with the space.
However, like all aspects of blockchain technology, NFTs are not the easiest to understand at first and require a little more examination before the true potential of the technology can be understood.
Developing your understanding of NFTs is crucial because they are unlikely to fade into the background. The market and underlying technology are here now, and it is already transforming several different industries. You should learn how NFTs work and how they could benefit you, in much the same way that society has adapted to smartphones or the internet.
NFTs are all the rage: here’s why:
NFTs: A Brief Definition
NFT is short for a non-fungible token, which is an asset that is demonstrably unique and therefore cannot be traded directly with another identical token (because that token does not exist).
Unlike Bitcoin or ETH, you cannot use NFTs as currency as such, but they can have an inherent value, depending on the item you buy.
To help you visualize what an NFT looks like in practice, imagine a file on your computer that contains a single image or document. That is all an NFT is, in essence.
An NFT sits on a blockchain network – such as Ethereum – and is encrypted, meaning only the owner can ever access it. While it may be difficult to comprehend, the NFT market is a property market, only instead of handing over the keys to a house or car, they hand over the encrypted keys to a file.
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What are the benefits of NFTs?
An NFT allows you to own a unique digital property. While this doesn’t sound particularly useful to most people right now, as the internet evolves into Web 3.0 and the metaverse, digital ownership is set to take on a whole new level of importance. It will even rival real-world property ownership in legitimacy and interoperability.
This digital property could be a fragment of the property rights to a famous song (meaning you get a fraction of the proceeds), digital art, partial control over an upcoming Hollywood film script, or a crypto game character that can be used in any game of your choosing.
The traditionally closed-off financial investment opportunities presented by fine art, music, and other creative endeavors (as well as potentially real-life assets like commercial property) will be far more accessible to everyday people.
Are NFTs a gimmick?
NFTs have certainly enjoyed a roller coaster ride in recent times, and it is difficult to judge the industry with any level of expertise. Price discovery is still in its infancy, and wider society is yet to cotton on to the limitless possibilities presented by the technology.
This has led some to call it a gimmick, but it is an unfair label. While not all NFTs have value (much like most assets in the traditional art market), the proven benefit of the underlying technology has futureproofed the market.