What is an NFT?
NFT or Non Fungible Token comes from the word ‘Fungible’.A fungible asset means that it is interchangeable or non-unique. For example, a 100$ note is equivalent to ten 10$ notes, i.e they have the same value.
On the other hand, non fungible means it is unique and non-interchangeable. So, NFTs are one of a kind digital assets which can be bought or sold like any other physical assets. You could take a photo or make a painting, it will always be only one.
How does an NFT work?
NFT creates a digital signature for your digital or physical assets (games, art, collectibles etc.) based on the Ethereum blockchain. Each NFT contains data like proof of ownership and its transaction history. It can’t be duplicated since it is stored in a blockchain (a public ledger shared by thousands of computers around the world).
You can copy an image as many times as you want but it won't have the ownership of the image.
In terms of physical assets, anyone can have duplicates of a painting, but the original is owned by only one person.
Uses of NFT
NFTs have a very wide range of uses. Basically they are used to create one-of-a-kind digital assets. Some use cases of NFTs are:
Artwork
It is the most common use case of NFT. Mike Winkelmann, also known as Beeple sold his digital art “ Everydays - The First 5000 Days” at $69 million at Christie’s auction in 2021.
Collectibles
Collectibles like Cryptokitties were the initial use cases of NFTs. A Cryptokitty named “Dragon”, which is a cute digital cat, costs over $390,000.
Memes
Many meme creators have sold their internet memes associated with NFTs. In June 2021, NFT of Doge (an image of Shiba Inu dog) was sold for $4 million.
Are NFTs worth it?
The value of NFTs largely depends on the demand rather than other indicators (eg: fundamental and technical indicators determine the price of stocks). So, you may consider buying an NFT if you have a few bucks to spare or if it holds some value to you. But one must be careful since NFTs might lose their value over time.
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