Some people really understand what NFTs are all about and how they are beneficial to different categories, whereas most people are confused about the term. All they understand is that it stands for Non-Fungible Tokens but are clueless about its existence, its usage, benefits, and drawbacks. Well, it is not as tough as it sounds. Let us help you with the confusion.
What is an NFT?
To start with, NFT stands for Non-Fungible Tokens. So what? Let’s begin with what is fungible and what is non-fungible. Fungible tokens are the ones that can be exchanged or replaced; for example, a ten-rupee note can easily be exchanged with two five rupees coins. But, non-fungible tokens cannot be exchanged in the same manner.
They are unique and irreplaceable; just like the original Mona Lisa painting; there are hundreds of recreations of the Mona Lisa but nothing can replace the original. Just like your home; it cannot be replaced with any other house in the locality because each one has its own distinct worth.
Each NFT is irreplaceable because it is characterized by some unique property – Unique Identifying Codes associated with each NFT to make it distinctive. But, for what purposes can NFTs be used? NFT’s can be created and traded in any form; including photos, videos, audio, and many other types of digital artworks. NFTs not only consist of the artworks but also the digital requirements including digital IDs, healthcare records, search history, someone’s precious time, credit history, and much more stored in the digital networks.
Coming to the point that why can’t we just download the piece from the internet and access it for free in place of paying millions? In that context, how do digital artists sign their artworks given that everything can be downloaded and cropped to remove the watermark? The NFT is the answer! NFTs offer legitimate ownership transferability.
With every piece of information being stored in blockchain technology (the digital ledger), NFTs offer traceability to provide the owner with proof of ownership which has greater esteem than a copyright issuance. The blockchain tech records everything from the digital signature to the basic details of the creator, past owners, and the current owner! Everyone who has access to the network will know to whom a particular NFT belongs, at any given time, thus, it prevents fraud.
What else is included in NFT?
Are NFTs only created for money and trading? What are the other Real Life examples of NFTs?
- A supermarket can use it for tracking its product range and to access the database of product availability.
- A supply chain manager can use NFTs to track ownership details, commutation, and accessibility of their supplies and suppliers.
- A school can use NFTs to offer certified diplomas to students to fight against duplicity fraud.
- A hospital can use NFTs to provide patients with their record history in a digital and traceable format.
All of these examples use NFTs to secure transaction history, ownership details, and transferability records.
Benefits of NFTs for you?
How do NFTs benefit users apart from legitimizing the ownership and supporting the transaction history? Let’s dive in together:
- NFTs make it easy for the creators to get identified and credited for the actual work or their digital assets. They will be receiving the worth that exactly matches the demand for their artworks/digital assets.
- NFTs ensure a platform that helps artists and investors to easily sell and purchase artworks. They are getting a very accessible and ready-to-be-marketed market in their hands!
- The artists are getting recognition for their original art pieces in terms of legal ownership as the artwork will be minted on blockchain and everyone will be knowing the real creator and the current owner as well.
- Even replicated editions can be legally monetized on NFTs in form of editions whereas, in physical terms, with each duplicity the artwork’s worth and recognition decreases.
- Royalties are another form of income that helps creators to earn a specified proportion on each subsequent sale under the Royalty Agreement.
- NFTs are a motivating factor for digital artists to be active with their creations, commercialization as well as talent acquisition.
- One of the most important aspects of NFTs is the diversification of investment portfolios that tend to benefit investors in terms of efficiency, investment acquisition as well as credit ratings.
Drawbacks of the NFT Revolution
With all the above-mentioned advantages of NFTs, they come with some challenges as well.
- NFTs are unstable, implying a sudden boost and a sudden fall anytime in the market share.
- They are based on the cryptocurrency model but cryptocurrencies are themselves unstable because they are not owned by any single entity, making the regularisation of supply a huge challenge!
- Energy wastage is a major deterioration of our natural resources caused by NFTs and other technologies based on blockchain; because they are a massive consumer of hefty computing energy used for processing transactions. NFT energy consumption impacts negatively on ecological footprint.
- Apart from energy deterioration, the excessive gas fees charged are also a major roadblock for investors as well as creators. Even if the charge fee keeps changing on an hourly basis, it is TOUGH!
- Last but not the least, people are not aware of the background and framework of NFTs. Just knowing the full form for NFT is not sufficient. Thus, without the proper education on the subject, it is not possible for NFTs to reach the real talent of the world.
Every coin has two sides and the same goes with NFTs. Keeping aside all the drawbacks of NFTs and the technology on which it is based, it is a GREAT DEAL! The thing is, people need to be aware of the topic and what benefits can be availed from NFTS. The greater the awareness, the bigger the marketplace and the final market share. I Hope NFTs make sense now! We would love to know your views on the subject; ping us in the comments.