✍Aenco Academy #32: NFTs — The New Form of Cryptographic Assets
Non-fungible tokens, also known as NFTs, are cryptographic tokens that leverage blockchain technology to represent unique digital assets. Although some of them may represent the same object, they are not mutually interchangeable as each of them contains unique information. In other words, the non-fungible nature makes them differ from the fungible cryptocurrencies, such as bitcoin.
Unlike cryptocurrencies, NFTs cannot be exchanged or traded at equivalency. Cryptocurrencies like Bitcoins are generally indistinguishable from each other, and each of them has the same market value.
On the contrary, each NFT is rare and unique. They may exist in the form of digital collectibles, in-game assets, virtual real estate, or crypto art — any one-of-a-kind assets held and managed on the blockchain. When artists want to sell their works, they create NFTs that will exist as a title to ownership for the pieces.
They are then registered on open blockchain ledgers. Given the unique nature, various NFTs are valued differently. The only thing they share in common is their asset interoperability across diverse platforms. Therefore, the digital ownership of NFTs can be traded and moved easily in different particular applications.
NFTs have surged in popularity since 2017, when CryptoPunks released. CryptoPunks are the “first unique collectible characters with proof of ownership stored on the Ethereum blockchain,” which inspired the current CryptoArt movement. Later, there are more different forms of NFTs. An animated image of a flying cat leaving a rainbow trail which sold for nearly $600,000, or video clips that sold for $6.6 million and $200,000 respectively, for example.
People are paying several million to make transactions and own NFTs. Some NFT owners also take the chance to make investments, earning profits by selling their NFT tokens. Among a number of NFT trading spaces, CryptoPunks, CryptoKitties, wrapped tokens, and NBA Top Shot is the most popular ones. Individuals can buy NFTs by using USD or cryptocurrencies like Bitcoins and Ether (ETH, the most popular NFT currencies), depending on different platforms’ policies.
Above all, the boom in the Bitcoins and NFTs markets are signs that cryptographic assets are taking off. In the age of technology, it is believed that more parts of our lives will involve blockchain technology and cryptocurrency networks. It is therefore important for us to take proper security precautions seriously, and for regulators to set up measures and protection, to limit losses.
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