Decoding NFTs - The What, How and Why?

With the advancement of technology and easy accessibility to the internet, the entire world has conveniently shrunk down to fit right in our pockets. Cryptocurrencies like Bitcoin and Ethereum have taken the fintech market by storm. We belong to an era where cashless transactions and unified payment interfaces are widely utilised by a vast majority of the population. Every day, newer ideas emerge, with the vision to revolutionize the fintech sector. One such revolutionary innovation in recent times is an NFT.

What is an NFT?

Non Fungible Tokens

Let us try to decipher what it means.

The word "non-fungible" is used to describe something unique and invaluable. Cryptocurrencies like Bitcoin and Ethereum are fungible assets. It means that if you trade one bitcoin for another, you will have an exact replica of the former bitcoin that you possessed, even in terms of monetary value.

However, in the case of non-fungible tokens, every single asset is one of a kind. They hold a unique identity and exchanging a particular non-fungible asset for another will definitely not ensure a transaction of equal monetary weightage. Additionally, in case of a non-fungible asset, the owner information regarding the original asset is stored in the form of information blocks and replicas do not have similar value.

Now that we have cleared this, let us move on to the next topic of concern!

How does an NFT work?

Demystifying the working of NFT seemed like an ordeal in the beginning but we finally managed it. Phew!

NFT is a revolutionary innovation in the field of blockchain and cryptocurrency. Here, information is stored in the form of a blockchain digital ledger trail. Currently, the Ethereum blockchain has been widely acknowledged for its non-fungible properties. Each block contains information about the owner and authenticity of the token making this information not interchangeable. Thus, NFTs cannot be tampered with or stolen from the original owner!

This is exactly why the creative population have been enthralled by this revolutionary development in technology. NFTs have the potential to help digital artists and creators make maximum profit on their creations without running the risk of having their creations plagiarized. NFTs can be auctioned not only as digital artwork but also in the form of GIFs, memes or even tweets. In fact, very recently Amitabh Bachchan's NFT collection has reached an epic $5,20,000 right on the first day of the auction!

Securing authenticity and generating profits are the two main reasons why NFTs have led to an unparalleled hype from the creator's community.

NFT is the future - Yay or Nay?

Whether you should invest in an NFT or not is completely subject to your personal choice. Truth be told, NFTs have some alluring USPs. Firstly, they widely benefit the artist community by providing easy yet authentic ownership over digital assets. Secondly, they are unique identities that cannot be mutated or cloned to form a replica. This gives investors ultimate investment satisfaction. Thirdly, NFTs can be incorporated with smart contract blockchain technology to ensure that creators can receive a percentage of profit if their content gets sold in the future.

Although the advantages of NFT are multifold, whether they will become widely popular and frequently used in the future is hard to say! Nevertheless, there is a roaring craze in the crypto sector about this revolutionary technology. Only time will tell whether they will be a hit or a flop investment scheme!