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What are NFTs?
NFTs, or non-fungible tokens, are unique digital items stored on a blockchain, the same network that runs cryptocurrencies.
– Anything digital – images, videos, music, online version of various articles – can be converted into an NFT and monetised.
– NFTs are not the digital art but instead certificates of authenticity, and most use the blockchain of ethereum, the second-biggest cryptocurrency.
What are the concerns associated with NFTs?
– Trading of NFTs has no legal backing yet. This lack of regulation means NFTs are prone to price manipulation.
What are the use-cases for NFT?
Many consumers who had put money in crypto were introduced to NFTs as a new medium of investment.
Some users have taken to NFTs due to speculation, as the value of a token is derived from what buyers are willing to pay for it.
NFTs also enable digital content creators and owners of IP (intellectual property) to monetise their work or assets without a ‘middleman’ and earn a royalty every time the NFT is resold.
The appreciation of crypto market capitalisation along with mainstream users adopting crypto has driven NFT popularity.
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|In 2021, NFT sales reached $25 billion compared to just $95 million in the previous year, according to Reuters.|
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Source: This post is based on the article “NFT: How crypto tech made it possible to own, trade digital art” published in Times of India on 18th Jan 2022.