What is NFT? Why do people spend 1600 billion to buy NFT?

Elon Musk with the first NFT work

What is NFT?

NFT stands for “Non-fungible token”, which is a unique cryptocurrency. NFTs usually represent a digital asset that is authenticated by blockchain technology, with the digital signature of the owner.

Notable features of NFT:

Indivisible: The NFT is an indivisible property. Unlike cryptocurrencies like Bitcoin or Ether, which can be broken down and transacted as fractions.

Cannot be destroyed or copied: Each NFT is unique. All NFT data is stored on the blockchain platform through smart contracts, independent of any company.

Digital artworks sold as NFTs will always be original, unique, and no second copies can be made.

Verifiable: Thanks to the storage of ownership data on the blockchain, there is no need for a third party or expert to participate in validation, and anyone can trace back to the creator of the work.

The Crossroads digital painting is priced at $6.6 million, transacted using blockchain technology.

Why is NFT so valuable and expensive?

Since each item is unique, the NFT has great collectible value. In addition, gamers and investors can make money through NFT by selling in-game items, in virtual casinos like The Sandbox.

For example, an investor purchased the F1 Delta Time racetrack as an NFT. This means that he will receive a 5% dividend from the races that take place on this stretch, including entrance tickets. Or a gamer who made $80,000 selling lots of land in Decentraland.

When selling, works in the form of NFT do not need to go through a third party (such as an auction floor, a gallery, etc.). This will save the artists a significant portion of the profits, and each time the work is handed over to the new owner, royalties will be received.

Risks from NFT

NFT transaction fees are very high, to transfer ownership of NFT from the creator to the buyer must pay 50USD.

Every transaction such as creating NFT, bidding, transferring ownership on virtual marketplaces like Rarible or OpenSea, users will have to spend a large amount of money and create a huge carbon footprint.

Some critics argue that NFT is a short-lived investment fad (two or three years) like the 2017 ICO bubble burst.

Nadya Ivanova, managing director of L’Atelier, shared that the NFT market is very new and has many risks, it takes many different cycles to establish their true value.