An NFT, “Non-Fungible Token”, represents a work of art, idea, or other items. These include music, paintings, brand accessories, game rewards. The best way to think of an NFT is comparing them to special trading cards or high-end art auction. The exclusivity of an NFT is its value. If Pablo Picasso was alive today he could sell an NFT of ‘The Old Guitarist’ that would give the buyer ownership of the original. However, it’s important to remember we’re talking about are digital files.
NFTs are developed with the same software as many other cryptos. What distinguishes NFTs from Bitcoin is its unique digital signatures. Because NFTs are Non-fungible, songs, paintings, games, they cannot be exchanged for other items of the same value. Whereas stocks, bonds, dollars and crypto can be traded interchangeably. Each NFT is unique.
How are NFTs stored?
NFTs are stored on a blockchain, with reference to the digital signatures established during the minting process. The minting process is the process by which cryptocurrency tokens or coins are created and distributed.
When NFTs are created a digital signature is created which is always carried along, like a sales receipt tracking NFTs ownership. The blocks of data containing information about the asset and the owner’s digital signature are linked together and stored as blocks. Finally, these blocks are added to a blockchain.
A blockchain is a ledger of all transactions that have ever been executed. The digital signature is an encrypted code that confirms the ownership of digital assets, such as cryptocurrencies and tokens.
NFT Disclosure
Before we go any further, we will address one concern you are almost certain to have.
What about the longevity of that file?
Trading digital assets has risks. It is risky to have only a digital file of something you invested in. There are possibilities that overtime the file quality of your digital asset will decrease, because advances in the latest technology may leave a file source out of date or unsupported. A physical property, such as painting or sculpture, needs maintenance and proper storage, which may be expensive. Furthermore, there is always a risk to take. However, when it comes to making any investment this discretion is afforded to the investors.
NFT Companies
NFT companies deals with the production and distribution of non-fungible tokens. These companies have a wide and varying degree of operations. There are companies ranging from developing block codes to opening crypto wallets. As NFTs gain popularity many mainstream corporations see them as opportunities to grow with their audiences. Many have placed stake in these platforms. Nike, Coca-Cola, even professional sport organizations like the NBA, have begun advertising campaigns for their new merch.
Though, artists and musicians have particularly benefited from the security measures on their digital assets.
NFT Art
For the artist, it’s a great way to secure intellectual property rights and reinforcing creative control. Consequently, artists can sell directly to their audience and cut the middleman out of the picture.
In addition, the artist can encrypt a code into the NFT that allows them to get a kick back anytime it is sold to a different buyer. For this reason, artists can get paid for the initial sales and receive a percentage of future sales.
For the collectors, it is an investment that you can buy low and sell high. It supports your favorite artists and brands; you get bragging rights. The excitement comes with making a good trade. The most important thing as a collector is to make sure the NFT you are interested in buying is exclusive and authenticates value beyond the price tag. Let’s bring Picasso back for this example, Picasso is alive and well and creates an original (digital) masterpiece. One of a kind – it’s unique and nowhere is it available for free. You can be sure Picasso has influence and respect in the art world. This could be a great NFT to invest in. Great artists’ work will receive higher appraisal as their careers take on more notoriety.
Reward and Risks
On the otherhand, there are things to consider. As many investors have seen, the unexpected fall of FTX, be careful of a bad investment. All things considered, more developments are to be made into crypto before safe investments can be held in its future.
Ultimately, ownership of digital assets is based on preference for potential risk. As an investor, would you prefer physical book copies, albums, and canvases? Do you prefer Ebooks, digital music libraries, and digital files?
It’s not certain yet if NFTs will just be a fad, like Beanie Babies, or the real deal that will be around for years to come. As of right now, there are many individuals and corporations interested and continues to be a matter of research. NFTs may be a viable way to reinforce artists and investors, but only time will tell.
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