NFTs are making waves in crypto news with their high selling rates and prices. These new cryptocurrency token, NFTs, are tokenized, collectible items. They are worth more than many physical artworks, are valued for their uniqueness and rarity and are popular on Binance Smart Chain (BSC) and Ethereum.
What Are NFTs?
NFTs are Non-fungible tokens which are computer files, a representation of data in form of blockchain holding a certificate of ownership and authenticity of non-interchangeable items. The NFTs can be a representative of unique digital items like pictures, art, music, sports cards, memes, etc.
One of the most popular NFTs includes that of Twitter CEO, Jack Dorsey, who sold the first ever tweet as an NFT for $2.9 million.
What Are NFTs Used For?
In the current world where everything has become digitized, artists have found ways where their NFTs can get their artwork to the general public and also monetize it. With NFTs, digital artists are able to benefit financially.
Digitizing and monetizing: artists have been creating easily accessible art online for years, oftentimes with nothing to show for it – especially in a monetary sense. NFTs give digital artists the ability to truly own and sell their creations while benefiting financially by trading for different assets.
Who Uses NFTs?
Generally, artists are the main users of NFTs. But they aren’t only for high-end collectors. Tech-savvy people have begun to show interest as buyers, purchasing them to show support to their favorite artists, athletes, or celebrities. While there are people who are just jumping on the trend because other people are buying NFTs. In general, NFTs can be used by anyone.
Things You Should Know About NFTs
- It Is A Risky Business
All businesses and investments have risks attached to them and NFTs are not exempt. They’re unregulated and decentralized hence, they share the volatility that cryptocurrency faces.
The price of NFTs can also deteriorate over time. It also has risks of not finding a buyer who might appreciate the NFT when an owner intends to liquidate it.
- It Is Environmentally Unfriendly
Although digital assets are not lying around in the form of paper and in other physical material forms, it doesn’t make them eco-friendly. The computers, storage, and security required by NFTs are the same as that of cryptocurrency in general. Hence it demands the use of a lot of energy.
- NFTs Are Not Tax-free
Trades surrounding NFTs are taxable events. This tax is not only limited to fiat currency but also when the transaction is done in cryptocurrency because NFTs are treated as collectibles.
- NFTs Are Volatile
The NFT market is similar to the cryptocurrency market so it’s susceptible to volatility. Also, most people are exploiting the market and setting high market prices which might later affect sustainability.
- The Creator Retain Its Intellectual Property
There is a clear difference between the owner of the NFT and the owners of the underlying intellectual property (IP). An NFT buyer has the ownership of a unique hash on the blockchain with a transactional record and also, a hyperlink to the file of the artwork. These are just tools to represent the artwork.
In summary, the purchase of an NFT only grants ownership to the buyer but not the right to other copies or versions of the artwork, unlike a python artwork like The Monalisa.
- There’s A High Chance of Breaking the Law With NFTS
A buyer’s right over an NFT is restricted to the right to trade, sell, or give away the NFT. The buyer does not have the right to reproduce, distribute, communicate and/or show the artwork which the NFT represents.
Once the agreement is breached by the buyer, there is a high chance of getting sued which may attract a fine or jail term.
- They Are Not Eco-friendly
NFTs require much energy in their creation and storage. The impact of NFTs has become a growing concern. A lot of people are worried about energy requirements. They require a high-powered computer system which contributes to the carbon footprint in the environment.
- NFTs Are Considered Luxury Items
Most NFTs are expensive. Some NFTs by digital artists are worth millions of dollars which equates it to a luxury item.
The popularity of NFTs is still soaring high and expanding. Every week, creators rake in millions of dollars from sales – there’s definitely a future for NFTs in the cryptocurrency community.