News: Explainer: NFTs are hot. So what are they?.
(Reuters) – Non-fungible tokens (NFTs), a type of digital asset, are growing in popularity this year. NFT artwork sells for millions of dollars, and musicians like rock group Kings of Leon embrace it for their latest album.
The trend confuses those who might wonder why so much money is being spent on items that only exist in digital form and can be viewed by anyone for free.
Here are some facts about NFTs:
WHAT IS AN NFT?
An NFT is a digital asset that is present in a blockchain. The blockchain serves as a public ledger that anyone can use to verify the authenticity and ownership of the asset.
Unlike most digital objects, which can be reproduced endlessly, each NFT has a unique digital signature, which means that it is unique.
NFTs are usually bought with the cryptocurrency ether or in dollars, and the blockchain records transactions. While anyone can view the NFTs, the buyer has official owner status – a kind of digital boasting right.
What kind of NFTS are there?
All kinds of digital objects – pictures, videos, music, text, and even tweets – can be converted into an NFT.
Digital art has seen some high profile sales while fans in sports can collect and trade NFTs related to a specific player or team.
For example, on the National Basketball Association’s Top Shot platform, enthusiasts can purchase NFTs to collect in the form of video highlights of moments from games.
While these highlights can be seen for free on other platforms such as YouTube, users acquire the status of the owner of a particular NFT, which is unique due to the digital signature.
NFTs can also be tracts of land in environments of the virtual world or the exclusive use of a wallet name for cryptocurrencies.
An auction for the first tweet from Twitter Chef Jack Dorsey – “I’m setting up my Twttr” – ends on March 21st. (Graphic: Current high profile NFT sales,)
HOW DID THE MARKET GROW?
NFTs, which have been trading since around 2017, rose in 2021. Monthly revenue for the OpenSea NFT marketplace was $ 95.2 million in February, compared to $ 8 million in January.
According to NonFungible.com, which aggregates data from NFT marketplaces, the total NFT trading volume on the Ethereum blockchain is over $ 400 million, almost half of which was done in the last 30 days.
NBA Top Shot, which is not included in NonFungible.com data, has 683,000 users and $ 396 million in revenue, including $ 232 million in February.
Some attribute this to bans forcing people to spend more time online at home. But NFTs are also a way of having possessions that can be viewed by the owners’ online friends.
For others, the attraction lies in rapidly rising prices and the prospect of high returns. In recent years, many crypto millionaires have also spent money using Ethereum.
WHY ARE YOU IMPORTANT?
Enthusiasts see NFTs as the future of property. All types of real estate – from event tickets to houses – will ultimately mark their ownership status this way, they believe.
For artists, NFTs could solve the problem of how to monetize digital works of art. They can get more revenue from NFTs as they can receive a license fee every time the NFT changes hands after the first sale.
NFTs could also change music. Kings of Leons NFT allows buyers access to vinyl or limited edition seating at future concerts.
WHAT ARE THE RISKS?
Since anyone can make NFTs, the scarcity of each piece does not guarantee value. Losses can pile up as the hype subsides.
In a market where many participants use pseudonyms, fraud is also a risk.
(Interactive diagram tmsnrt.rs/3rKq8k0)
Reporting by Elizabeth Howcroft in London; Additional coverage by Munsif Vengattil and Subrat Patnaik in Bengaluru; Arrangement by Alison Williams
Original Source © Reuters