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What is NFT? Learn more about the technology that moves billions

Many people, despite being aware of the great movement that these assets are generating, still do not know what NFT is and why it is such a promising technology for the future.

If you are one of those, no problem! Follow this article as we will tell you everything about what NFT is, the technology behind these assets, and the advantages and disadvantages, among other factors. Check it out below!

What is NFT?

In translation of the acronym into English, NFT (non-fungible token) is a non-fungible token. This term, however, may be unfamiliar to many people. Therefore, let’s separate the explanation so that you have a better understanding of what NFT is.

Examples of NFTs:

  • Among the items that can become NFTs are, for example, goods from different segments: physical and digital works of art, photographs of important moments in sport and history in general, memes, game items, and videos, among others.
  • Even social media posts can become valuable NFTs. A classic example is the first tweet in history, made by Twitter president Jack Dorsey.
  • In the publication, made on March 21, 2006, the executive tweeted: “Just setting up my Twitter” (in free translation: just configuring my Twitter). This simple tweet, due to its meaning and representation, was sold as an NFT for a value of 2.9 million dollars.
  • Another example of an item that was transformed into an NFT is the digital work “Crossroad”, by American artist Mike Winkelmann. In it, former US President Donald Trump appears naked and with swear words scrawled on his body.

Uses of NFTs

  • NFTs can be a symbol of a “select group”, which configures them not only as a source of status but also as an asset that can be valued financially due to their importance and scarcity.
  • There are even groups of holders of these assets that organize exclusive meetings only for those who own certain NFTs, and it is even a practice used by companies to separate their most loyal audiences and guarantee exclusivity.
  • Some companies distribute or sell NFTs to guarantee benefits, such as participation in meetings with notable people, meetings, exclusive events, and advance information, among other actions.

The benefits mentioned above are the great advantage of these assets. Therefore, anyone who thinks that this is just digital art is mistaken. Some NFTs give access to exclusive benefits and serve as a “ticket” for their holders.

It is for these factors that many NFTs are highly valued and also used as an investment. After all, many people would pay a lot of money to be part of certain select groups.

Advantages of Investing in NFTs:

  • Possibility of appreciation: Compared to works of art, NFTs can increase in value over time. There is no shortage of examples, such as the CryptoPunks and Bored Apes collection, which are now worth millions of dollars.
  • Scarcity: As they are non-fungible assets, NFTs are unique. Therefore, even though there may be copies, the owner of the asset is the only one who has possession and can trade it whenever he wishes.
  • Exclusivity and status: As much as it is an advantage more focused on personal satisfaction, the exclusivity of assets can bring benefits to their holders. Two examples are the case of gamers, who can boast achievements in online games, and NFTs which offer benefits — such as access to select groups, events, and other advantages.
  • Ease: Unlike physical works of art, which involve great cost, transportation logistics and security to be transported, NFTs can be transferred in a few minutes to anywhere in the world.

Disadvantages of Investing in NFTs:

  • Great speculation: Just like any new and disruptive technology, NFTs do not escape the mass creation of baseless or even fake options. For those who want to invest in this market, it is important to study the history behind the assets before purchasing, as there is a risk of permanent loss of capital.
  • Volatility: Due to being something new, NFTs are still going through a price establishment process. Therefore, it is common for their value to experience great volatility and exaggerated pricing. Investors need to be aware of this possibility so as not to be caught by surprise after investing.
  • Liquidity: Just like the physical arts market, the universe of NFTs also has low liquidity. Therefore, in most cases, it is likely that the investor will take a while to find a buyer for the asset if they need to sell.
  • Scams: Another characteristic of new and booming markets is fraud. There are cases, for example, in which scammers appropriate works that are not theirs and sell them as NFTs. Therefore, before investing, it is important to check the seller.

As measures to ensure the security of NFTs and cryptocurrencies grow, this new way of seeing the financial system has everything it takes to consolidate itself in society and facilitate the way we deal with money and financial operations.

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