NFTs are non-fungible tokens. In economic terms, a non-fungible asset is something of value that cannot be interchanged. NFTs are becoming valuable and the demand is steadily increasing. Let’s find out why they are so valuable.
1. What do you think the NFT is?
In simple words, NFTs are non-fungible tokens. When we say non-fungible, it means that these tokens or assets are unique, irreplaceable, and provide exclusive ownership on the blockchain. They are something of value that cannot be exchanged.
For example, a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind trading card, however, is non-fungible. If you traded it for a different card, you’d have something completely different.
NFTs can be anything digital, such as a piece of art or drawings, or music. This means that you own digital work in any form that no one else can possess. And depending on what its value is in the NFT space, you can decide to either keep it as a collectible or trade it for profit.
2. Why Are NFTs So Valuable?
NFTs are valuable because they verify the authenticity of a non-fungible asset. This makes these assets unique and one of a kind. Picasso’s paintings are non-fungible. While anyone can make copies of his paintings, the original painting remains irreplaceable and unique. The original will still have value if its authenticity can be proven. What this does is create the authenticity and credibility of the source of that work or the type of NFT that you are buying.
Cryptocurrencies are fungible — fungible tokens are divisible into smaller units. Some examples are Bitcoin and Ethereum. For example, you can split up Bitcoins into Satoshis, and Ethereum can be broken down into base units known as Wei.
NFTs cannot be broken down like Bitcoins into smaller units. There is a unique piece of data that is usually rare and limited in number. Couldn’t any artwork be copied and shared endlessly? Of course, it can be, but the aspect of NFT is that it can be made into a token, which means that it has a digital certificate of ownership that can be bought and sold along with the artwork.
NFTs are different from cryptocurrency in the sense that you can exchange cryptocurrency to purchase valuable products, so they are fungible in that way. They are not, and that is why they are such a huge investment tool.
Other factors that make NFTs such valuable investments are utility, ownership history, underlying value, perception of the buyer, liquidity premium, and future value.
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