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Decoding NFTs -Comprehending The Buzz Around It

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20 MIN TO READ

April 28, 2022

Decoding NFTs -Comprehending The Buzz Around It

by

Blog Writer

linkedin profile

20 MIN TO READ

April 28, 2022

Table of Contents

Unless you’ve been living under a rock, you’ve surely heard of the latest conversation starter in the cryptocurrency universe- NFT development. NFTs seem to have created quite a ruckus with billion-dollar deals happening on the internet, via the internet, and in a way IN the internet!

From people “buying” old tweets and animated GIFs to Humongous names like the NBA “selling” monumental moments in the history of all games as tokens, everything around us seems bizarre!

If you’ve been struggling to make sense of the same, you’ve stumbled just upon the right place! Stay tuned to find out more!

NFTs = Cryptocurrency?

A lot of people seem to have the notion that NFTs are a type of cryptocurrency like Bitcoin that can be used to conduct a transaction. The truth, however, is a bit far from this. Before delving into the category it falls under, let’s take a look at what exactly an NFT is and what that means. 

NFT stands for Non-Fungible Token; which means it is a token or a virtual entity that is unique and is not interchangeable with others of its kind. These tokens, since unique, become capable of being owned/sold despite their non-tangible nature. Transactions are recorded and verified on the blockchain to authenticate the exchange and thereby prove the ownership of an individual on the said token.

So basically, NFTs can be any digital entity. They can be jpeg images, GIFs, or even a tweet! Almost anything that exists on the internet can be “minted” as they call it in their terms and converted into a non-fungible token that can later be sold, purchased, owned, and further resold, etc.

But How Can You Own Something That Doesn’t Physically Exist?

To understand this, you need to see things from a different perspective- a broader one at that. For instance, Upon being asked, any blockchain development company would assert that owning something digital is not the same as owning something in the real world.

When you buy something in the real world, you can possess that item. Which is to say that

  • You can physically possess it
  • You are the only person who has access to it
  • Other individuals can buy similar articles or even an identical article but that would not be the same article that you possess.
  • It remains personal to you under any and all circumstances. I.e. the object does not cease to exist outside the store/environment. 

For example, a sword you bought from a store can be physically held by you, and you can take it with you anywhere you go (wherever permitted). Now people can buy similar swords or identical ones with the same model number, but you will still own that particular sword you bought.

But when you buy something online, like skins or shields in a game, an avatar for a platform, and similar things that are not NFTs, the terms for owning them differ. Which is to say that

  • You cannot physically possess them but you have virtual access
  • You are the only person who has access to it
  • Other individuals can buy similar articles or even an identical article but that would not be the same one you possess.
  • It does not remain personal to you under any and all circumstances. I.e. the object may cease to exist outside the virtual platform it is bought in. 

For example, a sword you bought in a game can be solely accessed by you virtually which means you own it, but you cannot possess the shield outside the game. This makes your purchase less valuable and absolute as terms to its existence and implementation in the real world arise.

So What Exactly Does It Mean to Own An NFT?

We just discussed what it’s like to own something in the digital world when compared to something in the real world. But to understand what it means to buy an NFT, we need to make a more relevant comparison.

What makes NFTs different from any virtual purchase is that NFTs are tokens that are one of their kind, so only one like that exists in the whole world. Which makes them all the more precious. Like the Mona Lisa in the real world.

Suppose you bought a unique, non-replaceable item in the real world. That would mean

  • You can physically possess it
  • You are the only person who has access to it
  • Other individuals can see or copy the entity but they would not be able to claim ownership.
  • It remains personal to you under any and all circumstances. I.e. no matter where you are, you will always own your asset
  • You can verify your claim with a certificate of authenticity provided to you upon purchase

So if you bought the Mona Lisa, you will own and possess it permanently (or until you sell it). People can possess copies of it, or use its pictures like we did, but the original painting will be named after you.

Now, to understand the craze behind NFT marketplace development, let’s finally jump to NFTs. Owning it is very much like making a real-world purchase except for just one thing: it exists virtually. So that would mean

  • You cannot physically possess it, however
  • You are the only person who has access to it
  • Other individuals can see/save/download or even copy the entity but they would not be able to claim ownership.
  • It remains personal to you under any and all circumstances. I.e. no matter where in/on the internet you are, you will always have access to your NFT (if supported by the platform)

To understand this better. Let’s revisit our previous example of a virtual sword. Let’s say you buy a sword specially designed by a famous designer. Now that you own the sword you can use it in any game (that supports it) or take it anywhere with you all over the internet.

NFTs- Good Investments?

Now that you know what NFTs are, should you buy one? Will it be of any use to you? Is it just Hype? Will it turn out to be a lucrative investment? Let’s discuss.

A major concern critics have pertaining to NFTs is their utility and practical implications. They point out that in a practical sense, NFTs serve no purpose other than being mere tokens of ownership. You cannot use NFTs to do something with them, you can only keep them or sell them. 

To that, we argue that the value of something cannot be solely determined by its utility. By this measure, all the rich art containing the history and heritage of generations would be worthless, as much like NFT Art Marketplace it can also just be kept and appreciated.

It doesn’t matter if you can use them or not, what you need to care about is whether investing in them is the right decision and whether they have the potential to be worth something to you!

YES and YES!

NFTs, as we mentioned, can be copied or downloaded by anyone on the internet, but no one else can own them. This kind of leaves some room for misacts like stealing or fraud pertaining to them. 

People can conduct various maleficence like halting the project midway after taking the money to create an NFT or increasing the value of a token by deceiving means like ‘whitelisting’ (listing it to a smaller audience first to drive the price and then launching it for the general public), and whatnot.

But is that something exclusive to NFTs? NO!

Such scams and frauds happen everywhere in the real world too, so in any case, you can never be careful enough before making an investment, however, you can take calculated risks and invest in a budding technology that is set to transform the virtual space as we know it in the time to come.

Parting Words

If you’ve made it this far, congratulations! You just came a step closer to mastering NFTs and understanding how they can be of use to you. We hope this helped you grasp the general concept of what NFTs are and why they are different. 

There is still a lot to unpack, but let’s take it one step at a time. If this appeals to you in any way, don’t wait any longer and reach out to a dedicated company with NFT and blockchain development services so you can explore the potential for your growth with Non-Fungible Tokens.

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February 23, 2024

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