NFTs is an abbreviation of non-fungible tokens. These tokens exist on a Blockchain. Blockchain is a decentralized ledger system that enables users to create, store, and manage data safely and transparently without the need for a centralized authority. Applications of blockchain include cryptocurrencies, such as bitcoin, and NFTs.
NFTs are distinct digital assets that represent a variety of non-fungible items, both physical and non-physical. They represent unique items such as digital arts, video highlights, gaming collectibles, music, virtual land, and other digitally stored items. NFTs are created and stored in a blockchain network. As the name suggests, NFTs are tokens, meaning they are tradable assets that reside on their own blockchain hence the holder can use them for investment or economic purposes. Therefore, ownership of these NFTs can be transferred from one person to another.
As mentioned before, NFTs can be replications of already existing, physical artworks. Let us assume Mona Lisa had an NFT representing it. This token contains all the details about the art such as its description, trading history and ownership. The NFT token will not be a replacement but an enhancement for the art, because it adds validated and not manipulatable proof about its existence and ownership. Therefore, the Mona Lisa NFT Art can be traded in a blockchain environment while the real art remains in a safe museum. Once someone has bought the NFT Art, they take ownership of the art, which makes trading of the art easier. It also promotes trustworthiness by fighting to eradicate identity fraud.
In addition to the digitization of existing physical works of art, the field of "digital art" in particular has grown strongly in recent years. This was initially due to the fact that many artists were unable to exhibit their works in galleries or the like during the Covid 19 pandemic. In the meantime, however, digital art has established itself as a category of its own, and in 2021 the trading volume for digital art exceeded the volume for physical art for the first time. An investment in this newly emerged investment segment is therefore worth considering and artworks like “The Merge” by Pak, which was sold for $91.8, show possible dimensions of sales volumes.
Indivisible:
NFT Art cannot be split into smaller denominations. They exist as a whole and dividing them makes them useless.
Non-interoperable:
A NFT can only work on its ecosystem. For example, in-game items such as gaming characters can only function on the game software they are designed for and not any other game.
Indestructible:
The underlying blockchain network where NFTs are built uses smart contracts to ensure that the data such as the item description and ownership remains immutable against destruction, removal, or duplication. Smart contracts are computer programs that automatically execute, control, and document contract terms or agreements without the need of a third party. They only execute the contract upon meeting all coded requirements.
Verifiable:
Any user of the decentralized network can easily authenticate NFTs on the network without the need of a third party.