Did you hear what we heard? Yes! The talks about your favourite film star dropping their first Non- Fungible Tokens are all over the place!
In India, over the past few months, many film stars like Amitabh Bachchan dropped his first NFT collection of Madhushala. Salman Khan also announced a partnership with NFT marketplace Bollycoin. After that, former India cricketer Parthiv Patel’s Cricket Foundation launched its NFT marketplace for cricket.
Not only them but several other actors and Bollywood musicians have also signed up with NFT marketplaces such as Colexion.
But why are all the celebrities launching their NFTs? Are you wondering that too? In today’s blog, we will help you in understanding what are the Non-Fungible Tokens all about:
What Is a Non-Fungible Token (NFT)?
NFT gives us a way to have clear ownership over a digital item: an image file, a tweet, a song, a text posted on a website, a physical item, and any other digital format.
A tweet? Yes! Twitter CEO Jack Dorsey’s first tweet NFT sells for $2.9 Million!
Although they are not new and have been around since 2014, these tokens are gaining popularity as they are becoming an increasingly popular way to buy and sell digital artwork.
It allows us to buy and sell ownership of unique digital items that keep track of who owns them by using the blockchain.
So, NFT basically stands for “non-fungible token,” and it can contain anything digital including drawings, songs, animated GIFs or items in video games. So it can either be a real-life painting or trading card but the blockchain keeps track of who has ownership of the file.
Difference between Cryptocurrency and NFTS:
These tokens are cryptographic assets on blockchain that have unique identification codes and metadata which distinguish them from each other. However, they are different from cryptocurrencies.
Cryptocurrencies are fungible which means that they can be traded or exchanged, one for another. For example, the value of one Bitcoin is always equal to another Bitcoin. On the other hand, these tokens are non-fungible.
One should note that fungible is defined as “able to replace or be replaced by another identical item” as shown in the example below:
Each token of NFT is unique and irreplaceable, thus making it impossible for one non-fungible token to be equal to another. They are digital representations of assets that have been linked to digital passports as each token contains a unique, non-transferable identity that distinguishes it from other tokens.
Because of its distinct construction, it can be used in various ways. For example, can be used to digitally represent physical assets like real estate and artwork. As they are based on blockchains, they can also be used for removing intermediaries and connecting artists directly with audiences or for identity management.
These tokens can be used effectively for removing intermediaries, simplifying transactions, and also creating new markets.
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Why are they Important?
Non-fungible tokens are an evolution version of cryptocurrencies. As they can be used for digital representations, the main benefit of NFTs is market efficiency.
As the physical asset can be converted into a digital one, this Token helps remove intermediaries. Instead, they allow artists to connect directly with their audiences.
The other benefit of NFT is that it can help us in improving business processes.
How To Buy ?
In order to buy these tokens, one needs to open a digital wallet that allows them to store cryptocurrency and NFT. In most of the cases, these tokens can only be bought for cryptocurrencies, according to Forbes.
First, you need to buy some cryptocurrency and store it in your digital wallet. Then you can go to any NFT exchange and buy whichever NFT you like. There are a lot of exchanges operating in cyberspace today such as Wazirx, Colexion etc.
Should you buy NFTs?
This is the main question- Should I buy NFTs?
We would say that investing in these tokens largely depends on you. If you have money to spend, it may be worth considering, especially if that piece holds meaning.
But one should also keep in mind, the value is based on what someone else is willing to pay for it. Thus, demand for it will drive the price rather than the other fundamental, technical or economic indicators, which influence stock prices in the stock market and generally form the basis for investor demand.
One should also note that this token may resale for less than the price you paid for it. Or there may or may not be any buyers if you want to resale it.
So do your research while understanding the risks—including that you might lose all of your investment—and proceed with a healthy dose of caution if you decide to buy.
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We hope that this article has helped you figure out the hype around NFT and the saga behind it. Hoping that you found this blog informative and will use the information to its maximum potential in the practical world. Also, show some love by sharing this blog with your family and friends and helping us in our mission of spreading financial literacy.
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The NFT Boom- Everything you want to know about Powerful Non-Fungible Tokens-2021 is written by Elearnmarkets for www.elearnmarkets.com