How Do NFT Work And Why All The Hype?

Non-Fungible Tokens (NFTs) are becoming more and more prominent in the crypto market recently. They began as a very niche phenomenon revolving around crypto artists yet now are on the verge of transforming into an ecosystem with billions of dollars floating around. 

Before going too far into the matter of why they are attracting so much interest, it makes sense to first clear up what NFTs actually are. They are a form of digital assets, much like cryptocurrencies. Only instead of carrying monetary value, NFTs are used to contain the value of something that comes as a unique item. For this reason such tokens cannot be replaced by another. This makes them different from normal cryptocurrencies, where each coin carries value of the same type.

Due to their peculiar characteristic, non-fungible tokes have been compared to various luxurious things, like works of art. And it was in this field that they originally found their usage. As representations of distinct, one-of-a-kind digital assets, like in-game collectibles. Their implementation in the blockchain game project CryptoKitties is particularly well-known.

The usage of non-fungible tokens for digital art allows a person to demonstrate clear proof of ownership over a specific art piece. The nature of digital things often does not permit exclusive right of access to them, because they can be duplicated pretty much endlessly. But with NFTs the holder of the original piece can monetize the right to own it.

The NFT market is showing signs of hyper-inflation due to some truly tremendous valuations of some of the items that get sold. At the end of 2020, the total capitalization of this market worldwide amounted to $8 billion. One of the biggest recent cases would be the sale of the digital artwork “Everdays: The First 5,000 Days” by the artist Beeple, which sold for over slightly over $69 million.

The full potential and use cases of the NFT technology are yet to be discovered in their entirety. But its proponents believe that non-fungible tokens are representative of a future towards which we are going. One where this technology will be integrated into key aspects of life, and the concepts of data integrity and ownership become reimagined. 

Whether or not this future will come to pass is something that we’ll have to wait and see. For now NFTs are  in their infancy, but the data available regarding this market so far shows indication that they have plenty of room to grow.