NFT Meaning Explained
If you’ve never dealt with cryptocurrency, you might wonder what an NFT is. The fact is, digital assets have their own world of nuances, and there are many ins and outs to dealing with them. Understanding NFTs and why they are important is just one step of the puzzle.
But don’t let it intimidate you. Once you understand the basics, there’s much you can learn from NFTs and how they can play into your digital trading habits. Whether you’re well versed in digital assets or are new to the game and want to learn more, take a look at this comprehensive guide.
Here’s What NFT Stands For
Let’s start with the acronym behind NFT and what it stands for. NFT stands for ‘non-fungible token’. This differentiates NFTs from digital values that are fungible. In other words, these items, the NFTs, are completely unique. They can’t be replaced with something equal in value. They are a one-of-a-kind digital possession, such as a design or artwork.
Each digital possession has its own value and identifiers that make it completely unique to one another. This works within the blockchain of each NFT value. By storing extra information — these unique identifiers — users can track an individual NFT through each owner and transaction.
By storing this extra info within the blockchain, the items work as an NFT simply by being unique, and blockchains can create or use their own versions of this technology.
The options are virtually endless. So long as NFTs fall within criteria such as paying for carbon offsets, there is much wiggle room for how they can be formed, traded, and passed between owners. They are simply a different type of digital possession, specifically one with more trackable data.
Why Do NFTs Exist?
In most cases, NFTs are assigned to items that could be easily replicated. Images, digital files or signatures, audio files — all of these could be replicated into fakes. Therefore, with an NFT, you can prove the ownership and validity of the file. Any fakes or recreations will have either no NFT or a different one altogether. Therefore, by having the identifier, the item becomes more valuable because the original can be proven.
It was invented in 2015, with the market soaring by 2021. The overall value sits in the millions, with digital items that are selling for multi-millions a pop, particularly memes.
NFTs are simply a new way to create authenticity among items online. This practice identifies a work to be an original, from coins and tokens to music and digital art files.
What Items Are Considered an NFT?
We’ve discussed the basics, what an NFT is and how it differs from the rest of the crypto world. Let’s talk about what an NFT actually is.
NFTs can be traded and hosted through the same blockchain as cyber currency, most commonly Ethereum. They are a one-of-a-kind digital file such as artwork, signatures, or videos—so long as a file can exist online, it’s pretty much fair game as an NFT.
But they can also be other types of digital items or tokens. From online belongings to signatures and more, NFTs are often tradeable collector items. Like collector items sold via eBay or other online platforms, NFTs can be traded online. The only difference is that the items are digital vs. those that you can hold in your hand.
Many digital artists are now creating NFT artwork and using a digital ledger to sell work, from video clips to digital collages. Some bids at NFT marketplaces for digital art have gone as high as $60 million. The digital artist Beeple has sold multiple pieces of NFT art for tens of thousands, including a collection of 5,000 images that sold for $69.4 in March of ‘21. Artists are also utilizing NFTs as copyright tools.
And because they still have their unique identifier, NFTs maintain ownership with the rightful buyer. That’s true whether funds (dollars or digital currency) were paid for them or if they were traded for.
Who Owns NFTs?
There is no restriction as to who can or can’t own an NFT. Or how many of them they can own. Just like anyone can purchase stocks, collector items online, obtain rare coins, etc., anyone can dabble in NFTs.
So long as a person is interested in cyber currency or digital items, they can obtain the NFT. What’s more, is that they can sell or trade the items on an NFT platform online. All they have to do is use open channels and play by the rules.
Like with any form of trading, all a person has to do is play along and buy or sell as many NFTs as they prefer.
Anyone wanting to get into NFT purchasing or trading should first ensure that they have a digital wallet. From there, they can branch out into any online trading place where they can purchase or obtain an NFT. This is a great way to get your feet wet and learn if you want to trade a little or a lot within the world of NFTs.
Remember that your digital wallet is traceable but won’t necessarily show you or your name to others. There are several privacy features in place, and you often have a say in what will go public.
Why Are NFTs Catching Flack?
There is a portion of the population that doesn’t want to use NFTs or who are claiming the items to be invalid. However, there is little proof surrounding these theories. Instead, it seems more like the majority of people just don’t know enough about NFTs.
Just because not enough is understood about how they work or how to trade an NFT, some have been quick to discount the process or the very digital items that fall within them.
But that doesn’t mean you should be quick to turn away from this growing market. If you’re interested in NFTs, avoid the naysayers and do your own research instead. There is much value in this growing market. The more you can learn about it, the more you can set yourself up for future success when buying, selling, or trading new or existing NFTs.
Do your research to find out the basics and how you can best earn or reach your intended destination to best benefit from the use of NFTs.
Further criticism has been drawn to NFTs due to the energy and time it takes to authenticate an item. Some say the practice negatively affects the carbon footprint due to the efforts it takes to prove an item’s value. Particularly with the growing amount of art scams that are in existence.
As more and more art thieves try to replicate pricey digital artwork, the need to authenticate via NFT has grown. This causes more use of digital time and resources. Hence, the negative feedback.
NFTs or non-fungible tokens are a new form of digital technology that has gained traction among Internet users since it was invented in 2015. Most notably, they are used to show creator ownership of digital files, including cyber currency and coins. Additionally, the items can be proven to be purchased by an individual through the use of NFTs.
This growing practice has not been without its issues, however. Because it has caused an increase in digital art recreation and the need for subsequent resources to check for authenticity, some users have given pushback to using NFTs for proof of ownership or as a certificate of authenticity.
Others still discount the practice simply because they can’t adapt or don’t understand how NFTs work. Whether they don’t want to learn how this digital addition can be helpful, or they prefer ways of the past, they have brought negative words as a whole to NFTs.
To learn more about NFTs, or if you are interested in jumping into the practice yourself, start performing additional research and see what you can take in. By better understanding NFTs as a whole, you can better accomplish your intended goal. Whether that be to earn more funds, take in a new hobby, or something else altogether.
Learn more about NFTs and all they have to offer by checking out our previous articles.