Like the introduction of Bitcoin and the Ethereum blockchain, with smart contracts and tokenization came a new wave of “crypto-millionaires” fueled by one single entity: Bitcoin. You can get an automated trading experience by accessing the best-in-class trading bots and strategies. Similarly, there is one single entity today that has been driving the growth of this particular asset tokenization trend. If you are interested in trading NFT, you must consider the Things Before Venturing into NFT Trading.
A wave of ICOs has raised over $300 billion since 2021, and our understanding of what is possible with intelligent contracts grows with each passing day. However, because the market cap for all tokens traded on exchanges is hundreds of billions, most “whales” are people or groups who have made a fortune from cryptocurrencies or ICOs and have their wealth measured in billions.
Because of the recent hype over NFTs and their potential, we are seeing a sudden surge in the price (and hype) of NFTs. While some believe that an explosion in use will come quickly, others are more pessimistic. With small but growing community-building research projects with NFTs as a focus, it will be interesting to see how things play out.
Why are people buying jpegs and gifs?
NFT is a programmable deed of ownership to an asset on a blockchain. Initially used for digital music and video files, the concept of ownership is mostly unchanged. The real difference lies in the “programming” layer.
Using programs written in a language that is not human-readable with a Turing-complete scripting system, the programs on a blockchain can manipulate data stored on its blockchain without consensus from other nodes in the network. This is why this form of coding is called “Turing complete.”
Unlike Bitcoin and Ethereum, which use blockchain to create new money or rights to resources, NFTs create non-fungible tokens (NFTs) like images and audio files that do not usually have any real-world counterpart. However, these digital assets can be tokenized in that they can be used as a store of value or utility in the same way as money or an exchange of rights but are not “naturally” representative of something physical.
Because NFTs are new on the market, more and more applications for them have been created. Moreover, they might trigger a revolution in how we think about ownership and recordkeeping because they provide the possibility to create tokens that grant access to services and goods (like tickets, flights, or storage rentals) and which can be easily transferred peer-to-peer between users.
What’s in it for buyers?
When an NFT is created and registered on the blockchain, it becomes a form of digital gold cold stored off-blockchain (what is called a “tokenized bond” on Ethereum) or as an ERC20 token that can be sent and traded between users (such as used as a means of payment in games or “smart contracts”). The main idea behind NFT is that people can use them to participate in the value-creation process for companies and applications. Some clients have already been created for NFTs, providing services such as asset storage, P2P lending (“credit wallets” on Request Network), tracking, or auctions.
The next significant point of interest will be creating user-friendly and efficient programs. Right now, the most popular NFTs are created on Ethereum, which means that even today, developers have to learn to use one language (Solidity) and another blockchain (Ethereum). On the other hand, when a user needs to download a program, for example, on Ethereum dAPPs or smart contracts, it does not matter whether they know Solidity.
So what is in it for companies?
The main idea around NFT is that it can be used as an “internal tokenization” tool in government-backed securities. A company can issue these digital securities that people can use to access company services (such as voting rights, access to a loan, or if an employee wants to sell its shares, it is still the stock market and not the tokens that are the purpose of those things).
Companies and developers will be seeing a lot of demand for this class of tokenized legal contracts, so it would be a good idea to start implementing your NFTs-ready programs soon. Just like Bitcoin and Ethereum, which are representing today a great alternative to the traditional fiat bank system, NFTs may become an alternative to the current e-government programs that offer people online voting and identity management. Just think about how NFTs could help people prevent fraud or provide a more efficient way.
In other sectors, such as music or art, ownership of an asset can be transferred seamlessly and instantly through the blockchain with just a few clicks.
The Bottom Line
NFTs are becoming popular because they solve problems that have been around for longer than cryptocurrencies: the issues of paperless intermediary institutions (stock market), inefficient management of commodities (gold), and inefficient tracking of assets (services).