What is NFT and Why it is Gaining Popularity

a blue and white tiled floor: What is NFT and Why it is Gaining Popularity

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What is NFT and Why it is Gaining Popularity

In present times, there are plenty of cryptocurrencies like Bitcoin, Ethereum etc. which are being hailed as the digital answer to currency, the Non-fungible Tokens are seen as the digital answer to collectables. NFT is a type of digital asset that gained popularity in March this year after NFT artworks sold for millions of dollars. Later, musicians such as the Kings of Leon rock group also embraced them for their latest album. Even though its popularity is increasing, many economists think it is all a bubble that will burst soon.

What are NFTs?

In economics, the assets having units that can be readily interchanged are known as Fungible assets. Example – currency notes. You can swap a Rs 10 note for two Rs 5 notes and it will have the same value.

The non-fungible assets have unique properties and cannot be interchanged. The non-fungible assets could be a house or a painting having unique properties, qualities and characteristics. You can take a photo or printout of the original painting, but there will only ever be one original painting.

In the digital world, NFTs are known for their quality of “one-of-a-kind” assets. Like any property or piece, NFTs can be bought and sold. However, its sale and purchase happen digitally. NFTs do not have tangible forms of their own.

How do NFTs work?

All the available NFTs have a unique digital signature. Usually, it is seen that NFTs are bought with the cryptocurrency Ether or in dollars. A blockchain keeps a record of transactions that took place for NFTs.  The digital objects available on the internet like images, videos, music, text and even tweets, can be turned into an NFT through a unique process.

The artwork and other assets available in digital format can be “tokenised” by its creators. They do it by creating a unique digital certificate and signature of ownership, hence creating NFTs. Later, they sell it digitally.

Future of NFTs

Even though many economists do not see its future in the long run, many see NFTs as the future of ownership of properties and other assets. According to enthusiasts of NFTs, all kinds of properties will see their ownership status tokenized digitally.

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