NFT is still keeping its heat. What is NFT? Why does the NFT take so much spotlight? Why is it so valuable? Why do people invest in it? Twendee will decode the charm of NFT through this article.
What is NFT?
“Fungible”, which is commonly used in economics, means that the individual units of an asset are essentially indistinguishable from each other. For example, two $5 bills are completely interchangeable with a $10 one and each $10 bill can be exchanged for any other $10 bill.
The opposite of “fungible” is “non-fungible” – when each unit of an asset is distinct from all others and are not interchangeable.
Token is understood as a cryptocurrency developed based on an existing coin, currently Tokens are mainly created and used on Ethereum (A service network based on Blockchain technology).
The NFT is essentially a digital authentication certificate that cannot be copied. It is used to represent ownership of an item. Thanks to the secure nature of blockchain technology, a record of ownership is always available, cannot be modified, and ensures the ownership.
NFTs can represent any type of asset: digital paintings, music, domain names, tokenized versions of real assets (land, collectibles, paintings, etc.)
The origin of NFT
The idea of NFT is not new. The token system running on the cryptocurrency has been tested for almost a decade. In 2012, Yoni Assia first announced the Colored Coin on the Bitcoin for just one satoshi, the smallest unit of Bitcoin.
Although not yet complicated, the idea of Colored Coin already has many similarities with current NFTs. It’s about using blockchain as a certificate of title for assets, like digital collectibles, coupons, properties, stocks… and more. Unfortunately, Colored Coin immediately failed, because Bitcoin was simply not created to support this kind of thing.
Even so, the crypto community has begun to realize the potential of blockchain-hosted assets. In 2014, an open source peer-to-peer financial platform called Counterparty was built. It was the one who created the first NFT 2.0 and also a place for users to form their own tradable assets.
In 2017, the emergence of the ERC-721 standard allowed the issuance and trading of assets on the Ethereum. Therefore, third-party platforms such as Counterparty will no longer be needed to trade NFTs. Ethereum perfects NFT and becomes the market leader for blockchain-hosted assets.
What can NFT be used for?
Thanks to these special properties, NFT is widely applied in many fields: digital artwork, collectibles, in-game items, and sports NFT,…
NFT can make it possible for players to actually own in-game items, characters, and trade with less risk.
For traditional games, publishers provide and sell in-game items. To own them, you need to recharge the game to buy them. But the actual ownership is the publisher (virtual item), your item may be lost if the server has a problem or the account is hacked.
However, your item is tied to a data token. You can easily exchange it for anyone who owns the underlying blockchain coin (like ETH). And the entire activity of that item is recorded and stored on the blockchain, no one can affect or change.
With NFT, a person can buy a painting, convert it into a digital file, upload it and attach it to a token to prove their ownership. This will help artists a lot when they often face problems such as copyright protection.
Example The NFT – The painting Everyday: The First 5000 Days by artist Beeple sold for 69.3 million USD.
Brands’ NFT applications have progressed far beyond the boundaries of quirky experiments or artistic purposes. The fashion industry is no exception to the new trend of technology through the application of NFT to its collections. Many fashion houses have thought of using NFT as a way to boost sales of exclusive physical products.
For example, Virtual sneaker brand RTFKT Studios has partnered with artist FEWOCiOUS (real name Victor Langlois) to mass produce new shoes. Potential buyers can try on virtual shoes on Snapchat. As a result, the company sold 600 pairs for a total value of $3.1 million.
NFT is one of the newest uses of NFT. NFT Sports offers fans new ways to support their favorite teams and interact with them. You can think of a sports NFT as a traditional soccer or basketball player trading card. Thanks to blockchain technology, these physical tokens are converted into various forms of NFTs that sports fans can collect—memorabilia, GIFs, video highlights, game badges, and more.
In the future, NFT can be widely applied to all areas of life, encrypting all assets and potentially digitizing all intellectual property rights. We can put assets like land and encode ownership in NFT, solve the problem of fake red numbers in real estate. In addition, items that can be tokenized for exchange and trade such as domain names, e-tickets, etc.
Storing identity and ownership data will enhance data privacy and integrity for many users. Also, the easy transfer of these assets could reduce trade friction in the economy.
Why is NFT so valuable and expensive?
Since each item is unique, the NFT has great collectible value. In addition, gamers and investors can make money through NFT by selling in-game items, in virtual casinos like The Sandbox.
For example, an investor purchased the F1 Delta Time racetrack as an NFT. This means that he will receive a 5% dividend from the races that take place on this stretch, including entrance tickets. Or a gamer who made $80,000 selling lots of land in Decentraland.
NFT does not need to go through a third party. This will save the artists a significant portion of the profits, and each time the work is handed over to the new owner will receive royalties.
Properties of NFT
- Uniqueness: each one has its own properties that set them apart from the others.
- Scarcity: NFT is unique and cannot be replaced by any other form, which creates value for NFTs. For example, the more unique and scarce the items are, the higher the value, such as paintings painted by famous artists: Mona Lisa – Leonardo da Vinci, The Starry Night – Vincent van Gogh…
- Inseparability: a special feature of the NFT is that the NFT cannot be divided in any way. Unlike cryptocurrencies, which can be broken down and transacted as fractions. For example, 10 ETH can be divided into 10 parts, but not with NFT. You cannot divide a picture into different parts.
- Cannot be destroyed or copied: Each NFT is unique. All NFT data is stored on the blockchain platform through smart contracts, independent of any company.
- Verifiable: Thanks to the storage of ownership data on the blockchain, there is no need for a third party or expert to participate, and anyone can trace back to the creator of the work.
Risks of NFT
Anyone can create NFT, which is one of its main weaknesses. Everybody on the Internet can make an NFT out of anything. That means there are a lot of worthless tokens on the network. The scarcity of an item does not guarantee its value will increase, so players can suffer heavy losses when the NFT fever cools down.
The NFT market is subject to great volatility in part because there are not yet any mechanisms to help people value assets. In 2020, the value of some popular types of NFTs has been increased by about 2,000%. However, in a market where many participants can use fake names, fraud is also a risk.
Last but not least, NFT transaction fees are very high, to transfer ownership of NFT from the creator to the buyer must pay 50 USD.
Every transaction such as creating NFT, bidding, transferring ownership on virtual marketplaces like Rarible or OpenSea, users will have to spend a large amount of money and create a huge carbon footprint.
How to keep your NFT safe
There are several things you can do to reduce your risk of NFT theft, the first of which is to use two-factor authentication for your account. For example, if you have an OpenSea account, make sure you use two-factor authentication so hackers can’t access your account directly without verification from another source, such as email or text.
Also, when you click on any kind of link, you first use a link checker site – which will tell you if the site is legit or not. Most phishing scams take place through fake links, so using a link checker tool can be incredibly effective.
You should also check any accounts that send you messages with Airdrops or NFT giveaways. If the account holder claims to be a major NFT artist but only has a handful of followers, they’re not who you think they are. You can also report these fake accounts to Twitter and remove them from the platform.
Finally, make sure you always store your private keys and seed phrases in a super secure way, as they provide the gateway to your NFT. You can use a digital wallet to store your NFTs, but many of them are connected to the Internet, making hacking easier.
Therefore, Twendee recommends using a wallet without an Internet connection or a seed phrase capsule to store this sensitive data. Alternatively, you can simply write them down on paper or store them on your hard drive, but you need to make sure they’re always in a safe location.
The NFT field information
This platform is known as a place to provide rare digital collectibles and items. To be able to use this platform, you must create an account. You’ll be able to sort works by sales in order to discover new artists.
It is an open, autonomous marketplace that allows artists and creators to self-publish and sell their work. The RARI tokens developed on this platform allow holders to consider features such as costs and community rules.
On this platform, artists must receive a lot of votes or invitations from colleagues to be able to post their work. The exclusivity and cost of participation in the community necessitate the purchase of gas in order to mint NFT.This means that the products on this market will reach a new level of profitability in the long run.
While there are thousands of NFT creators and collectors on the platform above and others, make sure you do your research before you buy. Some artists have fallen victim to imposters who list and sell works without any permission from those artists.
Additionally, the verification process for creators and NFT listings is inconsistent across platforms—some are more stringent than others. For example, the two NFT marketplaces, OpenSea and Rarible, do not require ownership verification for NFT listings. Customer protections seem to be lax, so when buying an NFT, it’s best to be careful.
How to invest in NFT effectively
Publishing, buying, and selling works of art
Up to the present time, works of art such as paintings, digital songs, etc. are among the most popular and profitable NFTs created in the market. According to Crypto Potato, the most expensive NFT right now is The Merge, a digital painting created by an anonymous artist named Pak and sold on December 6, 2021, for 91.8 million USD.
Join the trending NFT games in the market
Players can collect tokens by playing games and doing quests. Earned tokens can be converted to cryptocurrencies. Besides, players can also collect, own, and sell exclusive items and accessories in the game to collect money through NFT technology. The games that are attracting users in the Vietnamese market can be mentioned as Axie Infinity, The Sandbox, Evolution Land, and CryptoBlades,…
Invest in original NFT projects
It is easy to see that there are many NFT game projects that develop at breakneck speed and receive a huge amount of investment. Therefore, pouring capital into NFT startups can create an opportunity for investors to make quick profits. However, this way requires investors to have knowledge as well as experience in selecting potential projects.
In this article, Twendee has generalized some information about NFT. If you have a passion for blockchain, you can invest in NFT and make money from NFT. In addition, readers can also read more articles about blockchain here.