What is an NFT and why is it trending?
These days, it is almost impossible to avoid the acronym NFT when you browse through major news articles. Just what is NFT and why is it so hot right now?
Disclaimer: Our content is intended to be used and must be used for informational purposes only. It is very important to do your own research and analysis before making any investment based on your personal circumstances.
A non-fungible token (NFT) is a token with unique characteristics, and whose value may be different from one token to another. But it still has common attributes among all goods of the same type.
What IP could you turn into an NFT? The short answer – literally any digital products! From art, music, tweets, playing cards, gaming to property and the list goes on.
Take for example, Pokémon Trading Cards – if tokenized, would be NFTs. Indeed, although all cards are made of cardboard, some are rarer than others or have more attributes such as shine.
We previously published a beginner guide on NFT in April. For a more in-depth understanding of NFT, do give our previous article a quick read.
Although NFT has been around for a while, it is only in 2021 that this crypto trend has picked up momentum, fast! Monthly sales on NFT marketplace OpenSea hit $95.2 million in February, up from $8 million in January this year. Given the wall of money flooding into NFT, It is no surprise that Coinbase has just opened their waitlist for an NFT marketplace that allows users to mint, trade and collect non-fungible tokens.
Why is NFT trending at the moment? For a start, with the ongoing pandemic, we have shifted gear from the physical to the digital world for social and recreational resources. The spike in digital revolution has birthed new metaverses and communities that are very much like the real world we live in. Secondly, with NFTs, it is more than just pixels and images. Each NFT comes with a unique code that lives on the blockchain and cannot be replicated or faked. The creators have perpetual ownership to their creations and earn a royalty each time the NFTs transfer in sale to the next owner. Lastly, the creativity application for NFT is limitless. There is no stopping the creative minds as to what type of NFTs to create and apply.
Common use cases of NFTs
An NFT art exists completely in the digital world. You can’t touch it but you can own it.
If you have been researching NFTs, you are probably familiar with Beeple. In March 2021, the artist sold an NFT of his artwork through a first-of-its-kind auction at Christie’s for $69 million. This revolutionary sale gave him the title of “Top 3 most valuable living artists”.
The most recent case saw Visa purchase an NFT CryptoPunk for $150,000 in August 2021. This is just the beginning of Visa’s foray into the world of NFTs. This week, Visa announced on its website that it will be partnering with artist Micah Johnson to launch a program that highlights and promotes NFT artists.
In the world of gaming, NFTs are making huge leaps forward. Gamers have multiple ways to get into NFTs. With some games, players can claim actual ownership of in-game items or assets. These items can be resold on secondary markets, loaned out, taken off-platform, and even fractionalized. Nobody, not even the developers, can just take it back from the gamers, and therefore these items now represent an “investment” — making them much more than just a one-way purchase.
Alternatively, gamers can choose to create their own game assets on marketplace such as airnfts.com and even trade their assets. And this is just one of many such platforms. There are NFT games that allow players to play, collect, train and trade their assets.
On top of these options, gamers are also able to play NFT games that earn them crypto rewards. NFT is revolutionizing the world of gaming fast and the future looks like it belongs to the gamers!
Famous British supermodel, Kate Moss collaborates with art collective MITNFT to launch a 3-part series one-off NFT in April this year. Known as “Drive with Kate, Walk with Kate and Sleep with Kate”, the buyer of the Kate Moss NFT will also receive an audio certification recorded by the fashion maven.
Luxury fashion brands such as Balenciaga, Louis Vuitton and Burberry have also joined the NFT party. For the Fall 2021 collection, Balenciaga launched a multi-platform game, Afterworld, an immersive gaming adventure combining fashion, technology and gaming elements. With Burberry, they took the route of partnering with Mythical Game and launched their own very first NFT collection that sold out within 30 second of launch. Paying homage to their 200 year anniversary, Louis Vuitton launched an adventure-based game along with the LV trunks. Louis the Game takes users through six different worlds with missions and rewards at every stage.
NFT in the music arena is akin to a first edition of a book signed by the author, a print of a painting signed by the artist, or a limited-edition vinyl record signed by all the members of the band.
King of Leons, Aphex Twins, Grimes, Lil Pump and Steve Aoki are just some of the artists who are on board the NFT bandwagon. If you think that it’s only the famous musicians who have huge followings that can command a high price in NFT, it is totally not the case. The artist, Young and Sick has only 25,000 followers on Instagram yet his NFT sold for $865,000.
What gives your NFT value?
Largely based on speculation and demand, it is hard to pin down one or more reasons that give an NFT value. Having said that, the importance of your NFT associating with other assets does play a big role in demands and prices. For example, it is clear that for the above projects we have mentioned, it is more than users buying a piece of NFT artwork. Often, there are other components that go with the launch of the NFT, be it association with an adventure-based game, popularity of the creators or having a community that allows users to apply and use their NFTs in the digital world.
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Should you go into NFT? Unfortunately, there is no straight forward answer to this. Before diving into the world of non-fungible tokens, it is important to decide which role you plan to take on – the part of creator or investor? Further narrow this down to – if it is the role of a creator, how do you add value with your NFTs, assuming that you are an average Joe without the celebrity status. Once you have clarity on the above, proceed with a thorough research, gaining full understanding of the NFT process, end to end.
Once you’ve done the above and you are convinced that NFT is for you, we suggest you take baby steps and start with a small project. One thing is for sure: if you are fuelled by passion and interest, and not let money be the sole driver, it is very likely that you may find the pot of gold at the end of the NFT rainbow; albeit ironical as this may sound!