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There has been a lot of conversations about Non- Fungible Tokens in recent days. However, the majority of the people are yet to understand why they have become so popular.
In this article, I will be doing deep a deep dive into the whole concept of non-fungible tokens. To understand the NFT concept, you need to understand what fungibility is.
In the financial world, fungibility means something that can be broken down into smaller pieces still maintaining the original value. A great example is money.
You can break money down into small denominations notes/coins and still give the original value If you add them up. So, when we talk of “non-fungible” we are talking of assets that you cannot break down to smaller units of value.
This makes Non-Fungible Tokens digital assets that can be traded but are not tangible or fungible. These assets include things like art and music in form of pictures, audio, or video forms.
They are traded in form of tokens. Through the trading platforms, traders are able to buy and sell these NFT tokens. Once the digital assets are tokenized, a certificate of ownership is issued.
This happens on the blockchain network. Blockchain is the ledger-based technology that is used to create cryptocurrencies. A good example of a cryptocurrency is Bitcoin.
Related article:Three important things you need to understand about Bitcoin
Examples of NFTs And Where You Can Find Them
NFT technology is relatively new however, it is gaining a lot of interest due to the huge amounts of money changing hands in the NFT Market.
There has been a lot of successful sales in the NFT market place including the recording-breaking sale by Beeple that sold his work “The first 500 days” for $69 million.
Twitter founder Jack also sold the first-ever tweet for $2.5 Million. These are just some of the millions of tokens that have sold in the NFT market.
Below are some of the top rated platforms that you can buy and sell NFTS today.
Openseas is one of the biggest markets of NFT. It contains millions of tradable Digital NFT assets transacting millions of dollars on a daily basis.
One of the reasons why traders use Openseas is due to the lower trading costs than most of its peers. It also allows traders to create their own NFT tokens making it an all-inclusive platform.
One thing to note about Openseas is that you need to own Ether tokens to transact.
This is a custom marketplace that allows users to create and trade NFTS. The Superfarm platform is based on the abilities of making NFT easily accessible and acceptable by provide an all-inclusive ecosystem.
Mintable NFT marketplace allows buying and selling of digital tokens. Some of the items you can tokenize on Mintable include, files, art, PDF, images, and music.
Just like the other trading platforms, you must open a wallet where your tokens and funds are stored. This list includes some of the sites you can buy and sell NFT tokens.
The idea is still new hence more sites are coming up every day. I believe that the process of trading in these assets will keep getting easier and cheaper as more people embrace the idea. Now that we know what NFTS is, let us evaluate its pros and cons.
There are several pros emanating from the buying and selling of NFTS as shown below.
Decentralization has made it easier to buy and sell art without the need for third parties that existed in the traditional setups. These include the brokers.
NFTS runs on a blockchain ledger which is an open network without centralized control. This makes it easier to buy and sell no individual has control of the market.
Another benefit of decentralization is that it has resulted in to increase in the number of art buyers as the entry barriers are minimal. An increase in the number of buyers means the content creators have the opportunity of making more from their works.
One of the biggest challenges in the art industry is counterfeiting. Through tokenization of these digital assets, counterfeiting is no longer possible.
This advantage comes from the use of blockchain. With less counterfeiting, the creators of the NFTS are able to make more income as the value increases.
NFT’S allow the creator of the digital token to maintain the ownership rights even after transferring the tokens. This enables them to benefit from the future loyalties.
Difficult to use and Understand
The concept of blockchain and NFT is still in its early stages of development and acceptability hence only a few numbers of potential users understand it.
Lack of understanding means that only a few privileged people can benefit from the product offering resulting in the lack of inclusivity.
Cyber security threats
NFT’S are digitally held in online wallets exposing themselves to cyber threats. In the past, we have seen attacks of blockchain assets.
This presents an inherent risk to the Non-Fungible Tokens owners as their assets could be illegally accessed or transferred.
High transactional Fees
There are costs involved when transacting these assets. These fees have remained high as the industry is yet to develop. High costs discourage potential traders from transacting and also result to low earning for those that are trading.
There have been questions lately about the cost of blockchain products on the climate. This is because the creation of these digital assets uses a lot of power.
This comes at a time when the world Is shifting to clean energy sources. Non-Fungible Tokens, directly and indirectly, are involved with the cryptocurrencies as most of the brokers require transactions to be done using the cryptocurrencies.
The case scenario is on the Openseas marketplace whereby you can only trade NFT’S if you have Ethereum Crypto.
Very little has been done from the policy point of view to control the NFT market. Therefore, there is little or no legal protection for the traders in this market.
This means you are operating in an unsecured market and in case of any disputes, there will be little or no legal remedy.
NFT trading is a new concept and therefore it would be ambitious to make a conclusive opinion on whether they will succeed or fail in the long run.
Based on previous experience with cryptocurrencies, you cannot rule them out yet. Currently, the market is divided. There is a group that believes NFT’S are just a bubble waiting to burst while at the same time, there are traders making millions selling their creations.
The only point to note is that in this type of market, it is advisable to invest only that you are willing to lose. What are your thoughts on NFTs? Let me know in the comment section below.