NFTs are on a rampage these days. Taking the first view at it, they may seem like a lively sidetrack during the pandemic, a Twitter trend aimed at stirring collectors to change their profile pictures to colorful little avatars, like the Selena Williams CryptoPunk pin Alexis Ohanian wore to the Met Gala, valued at $280,000.
Isn’t it surprising that a pixelated cartoon is valued at $280,000? Maybe NFTs are worth a more extensive look.
With more financial advisors getting to learn, non-celebrities. are also beginning to embrace NFTs. Most expectedly, your client may likely demand that you add NFTs in their portfolio.
The NFT community used jargon that may lead to shakiness, yet, there’s something peculiar to these pieces of digital art.
This technology isn’t so hard to grasp itself (at least not on a theoretical level), but what’s truly fascinating is the prospective this technology brings forth – and where it is liable to take us in the future.
So what exactly is this new trend called NFT? And how can one advise clients when they are skeptical if they should buy digital tokens? A breaking down of this new form of a digital asset will ensue below.
What are NFTs – and are they going to live up to the hype they have built?
The acronym “NFT” stands for non-fungible token. That’s an elaborate way of calling the tokens irreplaceable, or not interchangeable. Money notes, for example, are fungible.
A 5 naira note represents is the same thing as the next 5 naira note. As long as none are counterfeit, the note is accepted everywhere.
Most cryptocurrencies are also fungible. One bitcoin, for example, is equal to one bitcoin. The factual file transfer is insignificant to its value, even though a finite number of bitcoin is out there.
Non-fungible tokens are not fungible. Minted through the blockchain, these digital files, therefore, represent an asset that is distinctive and therefore scarce.
Those adorable CryptoPunk cartoons may harbor similarities to one another, but the digital record engraved upon the blockchain can identify which one is which, and, more essential, who is the owner. If ownership is transferred, the blockchain would record that, too.
Technically minded it doesn’t take a lot of imagination to understand how this new technology opens up a world of prospects that could change the way we record and transfer digital ownership.
An average user knows how to send digital files, however, NFTs adds a layer of data validation.
There are also smart contracts that enable creators to code royalties into their NFT such that when their asset is sold again on a secondary marketplace they (and anyone else they wish to write into the code) keep getting paid.
NFTs aren’t just about cartoons, though art is the most popular discussed context surrounding NFT right now. Technically, an NFT can be any kind of file, says Jordan Lyall, the chief product officer and co-founder of the NFT marketplace Nifty’s.
“It’s almost just a kind of new file format,” he says. “Netflix used to put movies in the mail, but when the technology got good enough, they started streaming. It’s kind of the same thing.”
Now, NFT technology is winning in the art community, but it’s just a jump away from using it for ticketing, property deeds – and maybe even for financial security ownership, says Lyall.
“I can see at some point Nasdaq is running completely on a blockchain,” says Lyall, who started the NFT farming site dontbuymeme.com before he founded Nifty’s.
Having experienced firsthand the kind of innovations that come about through experimentation, he believes that NFT technology to keep snowballing until it is everywhere.
But now this is all speculation (see how easily excitement creeps in?). Let’s redirect and discuss where and how interested clients can trade NFTs.
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