What does NFT stand for? A beginners guide to NFTs in 2022.
So what does NFT stand for again?
Non-fungible token, or NFT, describes a token that you cannot exchange for another. Each token is distinct from every other token, and you can trace it back to its original issuer on the blockchain, unlike fungible cryptocurrencies like Ethereum.
Since each token is unique, its history is equally unique. With Ethereum, it doesn’t matter which one you hold. The worth of each is identical.
Now, since this is the most pressing query, let’s begin with the basics and answer the question: What does NFT stand for?
NFT stands for a non-fungible token and is a simple acronym.
The word “fungible” is probably unfamiliar to you, but it’s only a fancy way to say “unique,” so it’s not a big deal.
Each NFT that conforms to the Ethereum blockchain’s ERC-721 token standard is unique.
Fungible tokens, like cryptocurrencies, are a prime representation of this type of token. Crypto is fungible as it does not matter which token you have. In the Bitcoin economy, one Bitcoin is equivalent to another.
With NFTs, you cannot divide them into parts until they are “fractionalized,” but with crypto, you can divide them easily into fractions.
Real-world examples of fungible assets include commodities like gold, oil, and more. In contrast, you can classify most real estate as non-fungible assets.
So, an NFT is…
NFTs are immutable digital records stored in a blockchain. It is a form of digital property used to signify ownership or rights, such as ownership of an artwork.
As digital entries on the blockchain, NFTs are immutable once they are “minted,” meaning that no one can change the information they contain.
NFTs’ functionality and the ease with which people can trade and transfer between them are two of their most appealing features.
The tamper-proof nature of the blockchain can mean that you no longer need middlemen to transfer assets or prove your ownership.
Currently, most NFTs traded signify ownership of an artwork or, at the very least, a specific digital image.
The worth of these NFTs comes from more than just the images themselves. Their worth is mostly based on the symbolism of the prestige they represent.
For example, if you own Bored Ape, it grants you membership in an exclusive club and also ownership of a digital asset with a market value of over a quarter a million dollars.
What’s the difference between NFTs and cryptocurrencies
Someone who deals in non-fungible tokens is likely to own some cryptocurrencies. Since their underlying technology is the same, cryptocurrencies and NFTs offer alternative investment opportunities.
However, even if traders regard crypto as a token rather than a coin, non-fungible tokens are still not a cryptocurrency. Although cryptocurrencies and NFTs share many similarities, there are also significant distinctions.
Let’s start with the similarities
Cryptocurrency and non-fungible tokens rely on blockchain transactions to confirm their authenticity and record ownership. Usually, you need cryptocurrency to purchase NFTs.
While cryptocurrency was the first of the two, widespread awareness emerged in the late 2010s. Another thing they have in common is that they are both kept safe in digital wallets.
Similar, but not the same
The most notable distinction is that cryptocurrencies are inherently fungible, while NFTs are not. For example, one Ethereum is equivalent to another Ethereum, but one NFT is not equivalent to another NFT. Each NFT is unique and commands a price that fluctuates based on supply and demand.
Cryptocurrency’s value is entirely economic and derives from its usefulness as a store of value or investment. However, non-fungible tokens (NFTs) are valuable in more ways than one.
One use of NFTs is to facilitate the distribution, monetization, and even autographing of a work of art by its creator. It’s an art that a crypto investor or collector can purchase.
NFTs and the future of Social Media
Speaking of popularity, where else would it begin and end on social media?
While NFTs are not (yet) made, bought, or sold on social media platforms, their algorithms designed for virality bridge the gap between buyers, sellers, and mediators.
In fact, the virality of social media platforms determines the monetary value of an NFT. Remember how much was Jack Dorsey’s tweet?
Yes, that’s worth over $2.9 million.
Crazy, right? Well, it seems like the more you step into the network of 3D virtual worlds, aka Metaverse, the more extraordinary things happen — a $2.9 million tweet is nothing.
And stepping into the space of the Metaverse is what the social media giants are doing.
The latest news is that social media giants like Meta, Twitter and Reddit are embracing NFTs onto their platforms.
With the social media influencers, businesses, and celebrities advocating for NFTs.
I mean, they have to, right?
At the heart of it, NFTs will play a bigger role in social media as an essential commodity, revolutionizing how people use the platforms.
Indeed, with the rise of NFTs, social media will be a whole new experience.
NFTs and music
As soon as you think you’ve seen it all with NFTs… think again.
It’s because your music listening experience is about to be completely transformed.
You can characterize an NFT as a valuable collectible kept on a digital ledger. Independently developed NFTs allow musicians and artists to sell digital content to their audience for crypto, like Bitcoin or Ethereum.
They can either have several investors participate in the NFT or have only one. As with physical copies, the artist can collect royalties whenever there is a sale. It gives creators a new avenue for making money from their digital creations, giving them a much-needed boost.
In the coming years, NFTs might significantly impact streaming services that don’t pay artists enough. A time is coming when musicians can sell their NFTs to music stores directly, cutting out middlemen.
It’s evident in 2021 when DJ and music producer 3LAU earned $11.6 million in 24 hours through the sale of music NFTs. Canadian musician Grimes grossed $5.8 million in just 20 minutes. Post Malone auctioned off a non-fungible token (NFT) to play beer bongs against DJ Steve Aoki, who made $4.2 million in the first week of March 2021.
So, NFTs have established a new distribution paradigm for artists. It allows them to connect with fans and earn the money that would have taken years to accrue in the past.