What are NFTs, and why are they getting famous?

During the last few months, NFTs have been gaining momentum worldwide. They have become so popular that they regularly come up in the news, conversations, etc.

We have become interested in NFTs and thus, read different sources about them. We compiled relevant information to explain what they are and why they are popular.

What are NFTs?

NFTs, or “Non-Fungible Tokens,” are unique digital assets that are not replaceable with something else.

By non-replaceable, we mean that if you were to exchange it with another token, you would have something completely different. You can think of art, for instance. If you have Van Gogh’s “Starry Night” (estimated at $100 million) and you exchange it with Jean-Michel Basquiat’s “Boy and Dog in a Johnnypump” (estimated at $101.2 million), you would have an asset of similar value (though, congrats, you have made a $1.2 million gain). However, the assets are different, and thus the experience you get from each of them is also not comparable.

This is the exact core principle of the NFTs, though they are not physical but digital.

Indeed, NFTs are built on the same technology as cryptocurrencies and stored on blockchains (most of them on Ethereum, although other cryptocurrencies also support them). It is a bit more complex than this, but remember that they are individual tokens with valuable information stored in them (as they are unique, each NFT has different information stored).

Ok, but what ARE they?

NFTs are a new form of art, digital art. They can take many forms, from “classic” videos and pictures to tweets, songs, and virtual lands, everything that is digital is susceptible to becoming an NFT. An increasing number of artists are embracing NFTs, either buying or selling, such as Daft Punk, or the DJ, Steve Aoki. Even the music festival Coachella launched a collection at the beginning of 2022.

Here are some examples of NFTs, as you can see, the styles vary.

When I say everything digital can become an NFT, I mean it. The founder of Twitter sold his first tweet for the “modest” amount of $2.9 million…

just setting up my twttr

— jack⚡️ (@jack) March 21, 2006

“How does it make sense to buy something that people can still access and download for free on the internet?“

you might ask. Well, it’s true; people can still download and have access to the NFTs that other people bought. However, the person who purchased the NFT takes digital ownership of the work, more than the digital asset in itself.

People like them, and the most expensive transaction was $69.3 million. It is “Everydays: The First 5000 Days“, a photo collage by Mike “Beeple” Winklemann. This work of art is also said to be the one that started the craze around NFTs.

“Everydays: The First 5000 Days”. The collage of daily images started in 2007 is the most expensive of the NFTs ever sold.

In 2021, the NFT Market value surpassed $40 billion, up from “only” $340 million in 2020.

Why are they so popular?

Well, there is for sure a “cool” factor, as you get to take ownership of an artist’s work, but not only. NFTs are a new form of art, and like all arts, people become connoisseurs. When someone buys a painting, they appreciate the artist’s work, talent, message, etc. It is the same with NFTs, with the bonus of owning the artist’s work.

Moreover, Non-Fungible Tokens have provided digital artists a market for digital art, which was lacking previously. Digital artworks are harder to display and give a physical platform to, thus this market is important for those artists.

Is it perfect?

As with everything, there are some risks involved with trading NFTs.

As they are gaining popularity, scams are becoming increasingly sophisticated. If you are interested in trading/buying them, be extremely cautious of what you buy and from who.

Furthermore, NFTs, like all investments, are volatile. The fact that they are unregulated increases the risk of volatility. It might be the case that you buy something for a high price and discover later that it is not worth as much.

The Non-Fungible Tokens can make good money. In the same way, they can lose a lot of money. If you plan on investing, educate yourself, read from different sources, and carefully consider all your options. Beware of scams!