What is NFT simple terms? And why are they needed?

23.06.2022
What is NFT simple terms? And why are they needed?

Posting photos on Instagram and think you still have exclusive copyright on them? Prepare to be disappointed – it’s not. And it’s not even around Internet pirates, but about the policy of using social network. Yes, yes, the very document that few people read to the end during registration, simply by clicking “accept”.
But in vain: after all, at the time of publication, the right to dispose of your content passes to Facebook Inc. And she, as the copyright holder, can at any time remove them, sell them or transfer them to third parties to be used, without even notifying you hereof.
Thus, having hundreds of intangible objects on the Internet, you actually own nothing. It is a problem NFT tokens solve by securing the ownership of digital assets to a person.
According to Entrepreneur, in just one year, the NFT market grew by 18,000%. According to Dune Analytics, on average, users around the world conduct transactions with non-fungible tokens in the amount of $150 million or more per month.
We understand what is NFT simple terms, and why everyone is crazy about these tokens.

What is NFT?

An NFT, or Non-Fungible Token, is a unit of account which creates a digital impression of any unique item. Among them can be: paintings, photographs, videos, music, gifs – in a word, any content that claims to be at least some kind of uniqueness. They are highly prized among collectors, gamers and art lovers, and are bought and sold through auctions.
These same tokens are stored in the so-called blockchain – a huge chain of blocks, each of which contains information. Unlike, for example, servers, where data is stored in one place, these blocks are located on many devices in various parts of the world.
This kind of encryption makes the blockchain very difficult to hack, because at best you will be able to hack just one block of information, and not the entire chain. That is why most of the cryptocurrencies work on the blockchain.

A token is just a record in one of the blocks, and, as a rule, there can be a lot of such records of the same type. Let us say, each individual bitcoin is an exact copy of another such bitcoin. It makes it possible to compare them with a currency.
But what if you need to create a unique token that has no analogues? The answer is NFTs.
Simple terms an NFT token is a way to transfer unique items from the real world to the blockchain. Each of these tokens is unique, inseparable and exists in the singular. In addition, all the necessary information about it is securely stored in the blockchain.
Uniqueness may vary. So, the author sold the very first SMS for 150 thousand dollars, and the first tweet of Twitter founder Jack Dorsey sold for almost 3 million. After that, other stars began to look at the NFT.

When NFT they appear?

Cryptokitties is a hit game on the Ethereum blockchain that has broken all possible records.
Cryptokitties is a hit game on the Ethereum blockchain that has broken all possible records.

Blockchain and cryptocurrencies have been during years, but it was NFTs that appeared just a few years ago. In many ways, they owe their popularity to the CryptoKitties game, where you need to grow and breed virtual crypto cats. The cost of one such kitten can sometimes exceed hundreds of thousands of dollars.

But big names and celebrities have the biggest impact. They popularize the NFT and stir up interest in the topic. Every day you can read the news on how another celebrity sold something in the NFT for a huge amount of money. It’s one thing when specialists can hear about NFT in narrow cryptographic circles. And it’s completely different when such information giants as Elon Musk, Jack Dorsey, Mark Zuckerberg and others come into play.

Where apply they?

Although, as planned, NFT tokens were created as an opportunity for digital content creators to earn money on collectors, gamers, and simply art connoisseurs, now the main direction is the monetization of popularity.
Let us say, Elon Musk, the founder of Tesla, auctioned his NFT tweet $1 million. In the end, Elon Musk never sold it, but it got a lot of online media attention.

Then why are needed?

Yes, after buying tokens dedicated to some films or art objects, we can use them, but it is not important. In simple terms, the most valuable thing in NFT is exclusivity. You have a single and unique token, and the platform securely captures all the information about it. For collectors, art lovers or gamers, it’s like buying an original.
But that’s not all. Consider NFT tokens not only as something valuable and unique. It is also an excellent investment tool.
But if in the real world we have a rough idea of ​​how the price of art objects is formed, then in the case of the blockchain, a completely new and incomprehensible creative market appears, where the price does not depend on artistic factors at all.
E.g., in 2020, you bought an NFT picture for two ETH (at the time, $170 each). And decided to sell it now. At the moment, the cost of the coin is already $2300. And this dynamic is still relevant today. You need to understand the NFT market in detail and follow all the trends in order to acquire only promising NFTs.

What’s next with the Non-Fungible Token market?

NFT has become the buzzword of 2021 and it looks like interest in this topic is only going to grow. Platforms are already announcing various innovations and attracting investors, and artists and musicians are starting to show more and more interest in a new niche. At the same time, for everyone else, this time is a great opportunity to invest and earn on NFTs.