Remember when people learned that in 2010, a man from Florida bought two boxes of pizza from Papa John’s? What’s the big deal about that? Well, it was the first-ever Bitcoin transaction. For 10,000 Bitcoin, that man was able to enjoy his pizza.
Fast forward to today, those 10,000 coins would be worth $630 million. That sum can probably buy each family in the world a box of pizza. That was when the world first saw the legitimacy of cryptocurrencies. However, many people still doubt that cryptocurrencies will be as crucial as fiat money in the following years between then and now.
The Internet World Keeps on Rolling
While some still wallow in doubt and disbelief, the digital world just keeps progressing, and the internet keeps on revolutionizing all fields. Even for businesses, the digital competition is cutthroat. This is why online services that provide web optimization strategies are booming. Every company wants to be at the top of every search engine results page. Meanwhile, the crypto world keeps moving forward as well.
In the middle of the COVID-19 pandemic, a new virtual craze started. In February 2021, a 10-second video clip was sold for $ 6.6 million. Yes, it is a video clip, and it’s only ten seconds. Pablo Rodriguez-Fraile bought this clip in October 2020 for around $67,000. In just a few months, they turned a huge profit.
This digital artwork is just one of the many NFTs out there. And the world is on the lookout for the next move in the virtual world.
What Are NFTs?
The abbreviation NFT stands for “non-fungible token.” To understand this, you have to go back a bit to your economics lessons. When something is fungible, it has a value that you can exchange for something else. Currency is one perfect example.
Look at the US dollar and the South Korean won: 1 US dollar equals 1,178 South Korean won. So if you have 1,000 US dollars, you can buy around 1,178,000 South Korean won. If the market changes and the dollar’s value fluctuates, the Korean won needed to buy it also changes. That is what fungibility is. These two currencies are exchangeable. This also applies to gold, company stocks, and precious minerals.
Now, when something is non-fungible, it is the opposite. You cannot exchange a non-fungible asset with something else. Simply put, you can’t exchange houses with your friend. It is not fair trade because your houses are worth different values.
The same goes for paintings. Even if two paintings are both by Van Gogh, one is not worth the same. Hence, they are not exchangeable.
In cryptocurrencies, non-fungible tokens come as digital artworks, collectible sports cards, and even virtual lands. This can also be in the form of songs, movies, video game skins, and more. In layman’s terms, these things are collectibles. They are the modern CDs and action figures and signed posters from celebrities.
All these virtual assets are available for trade on blockchain networks. A blockchain is like a virtual ledger where all transactions using cryptocurrencies are written. The existence of virtual assets on the blockchain ensures that only one person has ownership over the artwork. Because the thing with digital art is that it can be replicated millions of times—even a screenshot can do that. However, all the replicas are worth nothing. Only the original piece has value.
How Do People Earn with NFTs?
It’s also through trading like they do with Bitcoin and other cryptocurrencies. There are NFT marketplaces where you can buy a crypto collectible (what other people call NFTs). In some sites, they have a fixed price; in others, they are up for bidding.
There are also games where you can start collecting NFTs. One is CryptoKitties. This is a website backed by the Ethereum network where you can grow, feed, and take care of digital kittens. Every kitten you breed is unique and only yours. You can trade them within the game using the site protocol imposed by the Ethereum network.
These protocols exist to guide trades. As mentioned previously, NFTs have values that are non-exchangeable. That is why is it is difficult to trade them because it is hard to gauge how much they are worth. With the help of such protocols, trading is feasible. These protocols also set the criteria for what is considered an NFT and what is not.
So should you invest in NFTs? The answer is actually up to you. The idea of spending real money on virtual things might not appeal to everyone. At the same time, this is a relatively new market. You need in-depth research, especially because you will be using hard-earned money. As always, trade at your own risk.