Why NFTs Are Essential to Cryptocurrency

Why NFTs Are Essential to Cryptocurrency

NFTs are crypto assets on the blockchain that include unique reference codes and metadata that separate them from others. Art, music, in-game items, and films are examples of real-world items that can be purchased with NFTs. These assets are bought and traded online, often using cryptocurrency, and they’re usually encrypted with the same software as many other cryptos.

Essentially, NFTs produce digital scarcity,” which contrasts sharply with the vast majority of digital creations, which are almost always available in endless quantities. If a certain asset is in demand, cutting down the supply should theoretically increase its value.

They are referred to as Non-fungible tokens which represent symbols that are available on an advanced level with some standard credits, making them indispensable. When the phrases fungible and non-fungible are defined, the former refers to something interchangeable, whereas the latter refers to something that cannot be replaced. They exist in the form of handicrafts, GIFs, and other such expressions, and the components through which these features are traded are known as “Non-Fungible Tokens.”

Although NFTs have been introduced in 2014, They only started gaining their notorious popularity in 2017, due to their usage in the sale and purchase of digital works of art. However, many NFTs are Virtual works that are already in existence somewhere on the internet, such as video clips from games or securitized versions of digital artwork.

Which begs the question, if samples of such work already exist somewhere on the internet, why buy it with NFT instead of just taking a screenshot or downloading it at no cost?

The rationale for this is that a non-financial transaction permits the buyer to keep the original object. For someone who chooses to purchase, it comes with built-in authentication, which acts as proof of ownership whose digital points are almost as priceless to the collectors.

Differentiating an NFT and Cryptocurrency

The term “non-fungible token” refers to a token that is not fungible. It’s usually programmed in the same way as cryptocurrencies like Bitcoin or Ethereum, but that’s where the similarities end. Cryptocurrencies and fiat money are both “fungible,” which implies they may be traded or exchanged one for another. They’re also worth the same amount of money, that is one dollar is equivalent to a dollar and the same for Bitcoin. The fungibility of cryptocurrency makes it a secure way to execute blockchain transactions.

NFTs aren’t like other materials. Each contains a digital signature that prevents NFTs from being substituted for or compared to one another, which is why it is non-fungible.

Why do you need to use NFTs?

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

NFTs can be used for more than just making money. To raise money for charity, companies like Charmin and Taco Bell auctioned off themed NFT art. Nyan Cat, a 2011 GIF of a cat with a pop-tart body, sold for about $600,000 in February, and NBA Top Shot had sold over $500 million by late March. NFT sold more than $200,000 for a single LeBron James clip.

Celebrities are not left behind, such as Snoop Dogg and Lindsay Lohan among others who have jumped on the NFT train, by releasing securitized memories, artwork, and moments.

Procedure for NFT procurement

To begin with, you need to keep cost in mind when weighing your options and know that you need to own some virtual currency that can hold both NFTs and cryptocurrencies. Depending on what currencies your NFT provider takes, you’ll probably need to buy some cryptocurrency, such as Ether, Coinbase, Kraken, eToro, and even PayPal and Robinhood now allow you to buy cryptocurrency with a credit card. After that, you’ll be able to transfer it from the exchange to your preferred wallet.

The Author

Ajisebutu Doyinsola

Doyinsola Ajisebutu is a journalist and prolific writer who takes a special interest in Finance, Insurance, and the Tech world.