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What are NFTs & why are some worth millions ?

NFT : Non - Fungible Tokens

From the last previous months, these NFTs have created a lot of buzz in the market. Because something that did not even exist years back; is now even worth millions of rupees. But the question here is Why would anyone pay such outrageous rates for them, such as Beeple's EVERYDAYS: THE FIRST 5000 DAYS NFT, which was sold for $69 million. Let us break down the concept of NFTs and look at it in detail to get a better understanding of it -

Before moving on to NFTs, let us first understand the difference between a fungible asset & a non- fungible asset. Basically, in Economics, Fungible assets are those units which can be changed/easily replaced. Let us now take an example of money, Mr. A hands you a 500-rupee note and asks you to give him five 100-rupee notes. Will you agree to this as well? The majority of us would say yes because this is how it works because the value of money in your pocket remains the same. So here money can be termed as a fungible asset. However, there are some things in the world that have unique characteristics that cannot be changed. It could be anything, such as a Taj Mahal or a Monalisa painting..& so on. We might be able to photograph or duplicate it, but there is only one original in the world. So, NFTs or Non- Fungible Tokens are ‘’one of a kind’’ digital assets which cannot be exchanged with any objects. They can be anything from images, GIFs, or videos to in-game items & so on. Also, because they lack a replaceable Fungible form, a digital token is issued to them so that they can claim ownership of the asset. They are more popular and expensive due to their "unique identity codes."

They're bought and sold online, often with cryptocurrency, and they're usually encoded with the same software as many other cryptos. Despite the fact that they've been around since 2014, NFTs are gaining popularity now as a popular way to buy and sell digital artwork. "Essentially, NFTs create digital scarcity," says Arry Yu, managing director of Yellow Umbrella Ventures and chair of the Washington Technology Industry Association's Cascadia Blockchain Council. To put it another way, no one can claim ownership of copies of a file released into the public domain in the digital world. The original file will be available only with the owner having a token issued by NFT. i.e., a digital token is issued to that file so the ownership of that asset can be claimed. 

What are NFTs used for?

Artists and content creators have a one-of-a-kind opportunity to monetize their work due to blockchain technology and NFTs. Artists, for example, no longer have to sell their work through galleries or auction houses. Instead, the artist can sell it as an NFT directly to the consumer, allowing them to keep a larger portion of the profit. Additionally, artists can programme royalties  so that they receive a percentage of sales when their work is sold to a new owner. This is a desirable feature because most artists do not receive future proceeds after their first sale.

What Is the Difference Between an NFT and Cryptocurrency?

 NFTs are usually programmed the same way as cryptocurrencies like Bitcoin or Ethereum, but that's where the similarities end. Cryptocurrencies and physical money are both "fungible," meaning they can be traded or exchanged for one another. They're also worth the same amount of money—one dollar is always worth another dollar, and one Bitcoin is always worth another Bitcoin. The fungibility of cryptocurrency makes it a secure way to conduct blockchain transactions. NFTs aren't like other materials. Each has a digital signature that prevents NFTs from being substituted for or compared to one another (hence, non-fungible). Simply because they're both NFTs, one NBA Top Shot clip isn't the same as EVERYDAYS.

Is it possible for anyone to make NFT?

Yes, anyone with the right cryptocurrency ownership can create an NFT.

How to Buy ?

Investors interested in purchasing NFTs will need a digital wallet that can store NFTs as well as other cryptocurrencies. If paying with cryptocurrency, the buyer must first purchase crypto coins that the NFT provider accepts. People can also buy NFTs with credit cards on some platforms, such as PayPal and Robinhood. The NFTs can be transferred from the NFT exchange to a specified digital wallet once they have been paid for. People can also buy NFTs with credit cards on some platforms, such as PayPal and Robinhood. The NFTs can be transferred from the NFT exchange to a specified digital wallet once they have been paid for. Because each platform has a large number of NFT creators and collectors, purchases should be based on research. When purchasing NFTs, you should also consider the verification process, security, and transaction fees.

Are NFTs good investment?

It's important to remember that the price of an exclusive digital asset is solely determined by demand. A particular NFT may be worth millions to one collector but not to another. Investing in NFTs is usually more of a personal choice than a financial one. It is worth investigating if the investor has the funds and the NFT has a special meaning.

Lastly to sum this up; It is better to conduct a proper research, understand the risks & rewards before investing in a NFT.