In the world of cryptocurrency and play-to-earn gaming, NFTs are everywhere. Cryptocurrencies, tokens, and digital assets are fast becoming an evolved form of value. Powered by blockchain technology, NFTs contain valuable information recorded in smart contracts. They can often be confusing, so many people are turned off by the idea of NFTs and crypto.
NFTs are frequently necessary to earn whilst playing games, but what are they, and how do they actually work?
What is a Non Fungible Token?
In its simplest terms, a non fungible token is a unique digital asset that cannot be replaced or changed. Fungible means something is replaceable, whereas non fungible is non-replaceable. Think of a non fungible token as a unique trading card that cannot be replaced or altered, but it can be traded.
Each NFT is a cryptocurrency asset living on a blockchain. It has unique metadata that makes them individual and non-interchangeable. Every single NFT is unique, adding to its value.
How Do NFTs Work?
NFTs are like digital collector’s items and use blockchain technologies, the same technologies that power cryptocurrencies. NFTs are generally created and kept on the Ethereum blockchain, making the ownership of these assets easy to be verified and traced. At the same time, NFT owners are kept anonymous, ensuring maximum security among transactions. After all, some NFTs are sold for millions of dollars, hence why blockchain security is so crucial. Often, NFTs represent in-game items, artwork, fashion, and sports players. These are digital tokenized goods used in games to earn more rewards. They have unique properties and cannot be swapped for other items due to their unique properties.
NFTs are minted (making it available and genuine on the blockchain) through smart contracts. These smart contracts give true ownership to NFT owners, as well as totally anonymous and secure security features. When an NFT is minted, codes are stored within these contracts. In these contracts, information about the NFT and its transaction history is added to the blockchain. This will also ensure that information is continuously validated on the blockchain.
What is the Benefit of a Non Fungible Token?
NFTs have vast benefits, and people who do not know what they are tend to focus on the disadvantages of NFTs. Of course, NFTs are a completely new digital asset, but their benefits are becoming evident. Some advantages of NFTs include:
- Authenticity and security of funds
- Inclusive growth for asset owners and creators
- Transferability and ease of sale
- Brand new economic opportunities and revenues
- Proof of ownership
One of the biggest advantages of NFTs is the ability to prove ownership. Due to their existence on a blockchain network, NFTs can link ownership to a single account. They are indivisible assets, and there is no risk of false ownership. Additionally, due to their existence on the blockchain, they have authentic records and transaction history unique to each. This showcases their potential value and allows the creators of these NFTs to distribute their work to a small circle, introducing economic scarcity.
What is an Example of a Non Fungible Token?
We know what digital NFTs are, but it may help to put the idea into real-life context. When you think of something holding a unique value that cannot be exchanged, you may not have many things come to your head. However, these things are in your everyday life. For example, a domain name is an example of a non fungible token, and so is a movie ticket. These things hold their own value, and they are entirely unique. A movie ticket contains the information for a specific movie at a specific time. A domain name has a specific name that is unique to a single address with certain qualities.
How Do Non Fungible Tokens Gain Value?
NFTs increase in value through supply and speculation, as well as many other factors. When creators sell NFTs, buyers will buy them and sell them off for a higher price when they trade them again. The value of an NFT increases when market demand increases. Market demand may increase through speculation as well as general interest in new markets. Market demand may also increase from scarcity. The fewer NFTs there are in circulation, the more valuable they will be.
How Much Does it Cost to Create an NFT?
NFTs can be created for a cheap price, but also hundreds of dollars. Creating an NFT on the Ethereum blockchain is the most expensive, costing an average of $70-$100. However, certain NFT ranges have been known to cost over $500 to mint. The cost will also depend on the type of NFT you mint.
Who Buys NFTs?
There is a vast range of people who are interested in buying NFTs. These range from professionals, fans, gamers, and investors. Young people with disposable income are often interested in buying NFTs, with Gen Z making up 8% of NFT buyers. Celebrities, artists, and stars can be thanked for the popularity of NFTs, but these people are not typically interested in buying and trading NFTs. Research shows that young millennials were the most interested in purchasing and selling NFTs, with Gen X and Gen Z only slightly behind. Baby boomers had the lowest statistic of people interested in NFTs, with only 2% purchasing NFTs.
Are NFTs a Good Investment?
NFTs can be a good investment for collectors, but they are also a great way to act as secure ownership. As digital assets, NFTs confirm ownership through smart contracts, making them an ideal way to build value in your assets. Suppose the ownership of the asset is tokenized, which an NFT is. In that case, you can enjoy the benefits of ownership and not worry about it being stolen from you. NFTs can also be a good investment because they are available and accessible for everyone due to the ranges in price.
What NFT is the Most Valuable?
The most expensive NFT to ever be sold is a collection named The Merge. This NFT collection unbelievably sold for $91 million last year.
Final Words
NFTs sound complicated, but when we get into it, they’re pretty simple. It is expected that NFTs will become a major part of the metaverse, being used in all types of sectors and corporations. Investing in an NFT may be worthwhile if you want to increase its worth and create a collection.
