Non-Fungible Tokens, or NFTs, are an excellent example of how art and blockchain technology can come together. This concept creates an entirely new paradigm of art, collectibles, and ownership. The space is a bit confusing to newcomers but offers tremendous potential in the long run.
Modernized Trading Opportunities
The concept of collectibles and rare items is not new. Many companies have turned it into their full-time business and come out successfully. There is a certain appeal to collecting something that is either very limited or has enough mainstream appeal to make a quick profit. Whether it is trading cards, physical art pieces, or anything else, there will always be a market for these types of items.
Taking this concept into the modern era has given rise to NFTs, sometimes referred to as “crypto art”. It is a different way of owning a collectible or rare item, but one that ensures the ownership of said items cannot be disputed. Owning digital collectibles is a more modern approach to dealing with physical items which may get lost, stolen, or suffer from water and/or fire damage.
Verifiable And Indisputable Ownership
Contrary to how physical collectibles and rare items often result in disputing ownership of the goods, NFTs are a different breed. As a Non-Fungible Token contains specific information regarding its owner and blockchain address, no one can ever claim they own something that isn’t theirs. This is made possible thanks to the ERC-721 and ERC-1155 token standards on the Ethereum blockchain.
Using these token standards makes it easy for creators to deploy NFTs to the people who purchase them and ensure there can be no forgeries in existence. Every NFT has distinct characteristics that prevent the creation and circulation of fake copies. Every NFT can be traced back to the original creator, introducing a different “level” of scarcity and uniqueness. Through this method, there is no need for third-party verification.
Additionally, these token standards ensure no two NFTs are interchangeable for one another. Every Non-Fungible Token has its own value and appeal, and there is no way to provide something equal in return. Even within the same ecosystem – for example, a blockchain collectibles game – you will not find two identical NFTs.
Lack Of Interoperability
Regardless of how many types of NFTs may be issued on the same blockchain, the different ecosystems are not interoperable. Adhering to the same token standard makes no difference. You cannot use collectibles from one game, project, or art gallery in any other project. Although some may see this as limiting the collectible purpose and value, it also provides more “rarity”.
No Dividing Or Destruction
What makes NFTs different from other types of collectibles is how you can never destroy them. All Non-Fungible Tokens’ data will live on the blockchain forever, ensuring the art or collectible remains visible. More importantly, the person buying the NFT will always retain full ownership of their purchase unless they decide to sell it to someone else. The user is also the only one who can exert ownership over the NFT.
Similarly, it is not possible to divide a Non-Fungible Token into smaller subsets. These are not cryptocurrencies like Bitcoin or Litecoin, but rather one full item that resides in your Ethereum wallet at all times. It is possible to transfer it to another user in total, but that also means giving up ownership of that NFT.
An Excellent Tool For Artists
It is very difficult for artists to monetize their work in a verifiable and transparent manner in the current ecosystem. There are always people who will try and steal your digital creations for monetary gain. By leveraging the NFT concept, those concerns will become a thing of the past. Every artist can sell digital artwork to a global audience without relying on intermediaries.
The key benefit of NFTs is how artists keep a more significant share of the revenue from every sale. Rather than having intermediaries take their cut, the artist can earn close to 100% of the sale amount, barring any platform fees or network costs when withdrawing funds.
Furthermore, there may be a solution to incorporate royalties into digital artwork or collectibles, allowing the creator to keep receiving small amounts of money every time their work is used or sold to a new owner. There are still many potential use cases waiting to be explored by developers and artists.
Will Demand Remain?
Currently, NFTs are a very hot commodity, with individual pieces fetching thousands of dollars. Whether that will remain the case is impossible to predict. Similar to any other market, it all comes down to supply and demand. New industries and concepts often gain initial traction, but the long-term outlook can differ significantly.
As NFTs are scarce by default, it all comes down to the overall demand for these items. Considering how their use cases include collectibles, games, virtual land, art exhibitions, and other use cases, the demand may not diminish that quickly either. However, if artists churn out pieces en masse instead of creating top-notch quality, the industry may not have a long shelf life.
Should You Invest In NFTs?
As is always the case when making any investment, performing thorough research is mandatory. No one can decide for you when it comes to NFTs and their investment potential. It comes down to looking at Non-Fungible Tokens as an investment or a collectible approach, as either will require a different approach and mindset.
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