Non-Fungible Tokens (NFTs): Meaning, Misconceptions & Marketplaces

Non-Fungible Tokens (NFTs): Meaning, Misconceptions & Marketplaces

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In the past few months, you may have come across the term ‘NFT,’ which stands for Non-Fungible Token. People from all over the world are investing their money in NFTs. In fact, the hype for NFTs is reaching perpetual heights, which if continued linearly can start its own pandemic.

Masses want to be a part of the trend that is making people millionaires but there are a lot of misconceptions about NFTs that we need to clear first in order to understand their true potential. To begin with, let’s start with the very basics, from the meaning of NFT.

What are NFTs in Layman Terms

NFTs are digital tokens that represent artistic items like paintings, songs, videos, in-game offerings and even blogs and articles. Their representation further extends to real-estate properties, sculptures and watches. Basically, any digital or physical tradable item can be represented by an NFT.

As stated in the introduction, NFTs are non-fungible. This means that they are unique and cannot be replaced by any other item even of the same value. For example, general commodities are fungible items. You can exchange a bag of rice with another bag of rice, a gold brick with another gold brick and a gallon of gas for another gallon of gas. The value of these items will remain the same even after exchange.

However, you cannot exchange the painting of Mona Lisa with any other painting, be it The Last Supper or The Starry Night. All these paintings are unique and that is what gives them their value. When exchanged, it will be an exchange of inequivalent values, which many investors may not favor.

So basically, an NFT is just a digital item like a wallpaper or song that you can buy on the Internet but it will be unique and only belong to you until you sell it to someone else.

Are NFTs a Cryptocurrency?

People often misinterpret NFTs as cryptocurrency. This misinterpretation occurs because of the following reasons:

  1. NFTs use the same technology as cryptocurrency for security reasons. This technology is the blockchain technology, which is a type of digital ledger that uses a structure or chain of blocks to store transactional records. These records are stored in public databases and are maintained on a daily basis. When a block can no longer store any more records, a new block is added to the chain. Being decentralized and publicly available, it is not possible for a hacker to make changes in a previous block.
  2. The majority of NFTs are minted on the Ethereum blockchain network, which also has its very own native currency of the same name. NFT’s Ethereum blockchain network is misinterpreted with Ethereum cryptocurrency and the misinterpretation extends to NFTs.
  3. Another reason why people misinterpret NFTs as a cryptocurrency is because NFTs are minted from already existing currency on blockchain networks. This implies that to create an NFT, creators are required to purchase a small amount of cryptocurrency. However, that doesn’t necessarily affect buyers.
NFT Cryptocurrency
NFTs are a digital token representing real life things Cryptocurrencies are decentralized digital currencies
NFTs are minted on a blockchain network with the help of a digital image and already existing cryptocurrency Cryptocurrencies are mined on a blockchain network with the help of a Proof-of-Stake Consensus
NFTs are unique and non-fungible Cryptocurrency is easily replicable
No two NFTs are same and thus, they are collectible items Cryptocurrencies are not collectibles. Instead, they are stored like any other currency

Do I Need Cryptocurrency to Purchase NFTs?

As said above, the creation or ‘minting’ process of NFTs requires some cryptocurrency as the minting fee. But for buyers, that depends on the NFT marketplace’s policies from where you are looking to purchase an NFT.

Earlier, online marketplaces only used to accept cryptocurrency for trading but with an increase in the popularity of NFTs and influx of investors, they started accepting regular currencies as a payment method for NFTs. Recently, Mastercard also announced that its cardholders can buy NFTs completely crypto-free. Below in this article, we have named some NFT trading marketplaces that accept card and eWallet payments as well.

Build your Own NFT Trading Marketplace with Custom eCommerce Development

Although NFTs were first introduced in 2012, they rose to popularity in 2021 when an artist named Beeple earned $6.6 million by selling a 10-second video as an NFT. Later on, many prominent personalities all over the world started investing in NFTs and led to a total sales volume of $24.9 billion in 2021 alone.

  • World’s Richest man, Elon Musk was selling a song about NFT as an NFT
  • CEO of Twitter Jack Dorsey sold his tweet for millions as an NFT
  • Singers like Eminem, Snoop Dogg, Shawn Mendes, Jay-Z and Post Malone released entire collections of NFTs
  • YouTube star Paul Logan invested in NFTs
  • Movie stars from all over the world such as Matt Damon, Lindsay Lohan, Yun Songa, Amitabh Bachan, and Salman Khan also launched NFTs
  • Saudi Princess Reem Al Fazal invested in NFTs
  • Even tennis player and 23 times Grand Slam Singles Title winner Serena Williams invested in NFTs

These were the names of celebrities who invested in NFTs. Below is the list of some world-recognized brands that are selling their NFTs.

List of Brands that Launched their Own NFTs

Disney Warner Bros Hasbro Funding Coca-Cola
Pepsi McDonald’s Burger King Taco Bell Nike
Adidas K-Swiss Puma Reebok Citröen
Mercedes McLaren Gucci Louis Vuitton Prada
CNN Fox Forbes Budweiser NBA
MLB Air Europa Clinique Redbull Ubisoft

 
As per the statistics, 23% of millennials in the US collect NFTs. When diversified by gender, men are 300% more likely to invest in NFTs than women. Moreover, the growth of NFTs is equally rampant in developing countries with five Asian countries having the highest NFT adoption rates.

Why are NFTs Gaining Popularity? or Their Uses

NFTs are an innovative technology that people did not expect to perform so well. If taken into consideration, 2012 to 2022 is not a long period for many technologies to evolve and become an instant success. However, in the case of NFTs, several factors lined up and paved the way  for its popularity.

1. Economic Profitability and An Additional Source of Revenue

Entrepreneurs, celebrities, and financially aware people always diversify their investments for risk minimization and better returns. Investing in stocks, cryptocurrencies, real estate, etc. is a proven strategic way for them to build money. Adding on to the list are NFTs that act as an additional and passive source of income. Since the emergence of NFTs, they have been widely promoted by YouTubers and celebrities who at the same time invested in them to increase their revenue channels. This is one of the primary reasons that made NFT investments desirable for other people.

2. Support Artists and Collectors

NFTs are a futuristic technology for artists and hold the potential to revolutionize the entire art industry in many ways. To begin with, NFTs create an open space for all types of artists to create their art, be it an image, video, song or video game on the blockchain network and gain access to worldwide markets. People of color and minorities can get access to helpful funding that the mainstream media often fails to provide. Instead of subjectivity, only true talent will come to limelight on blockchain networks. Moreover, the way current masterpieces are sold, which is via auctions, also does not give enough control and authority to artists over their own creations. Thus, selling art via NFTs on blockchain will not only give artists more power but also help collectors in accessing great artwork. Underprivileged talent will be recognized and the entire art industry may thrive from the NFT boom.

NFTs are such a great way of levelling the playing field for people of colour, for women, for any community that you can imagine that has been disenfranchised or been left out in some way,” – Bilali Mack, a New York-based VFX supervisor in an interview with Creative Bloq.

Create an NFT Marketplace for Experts

3. Are a Mark of Authenticity and a Solution to Counterfeit Articles

Artists and creators are facing a large-scale problem of plagiarism and copyright infringement where their artwork is copied and sold as a digital image or printed on t-shirts or mugs without permission. Moreover, multiple copies of digital artwork are uploaded on piracy websites as a free downloadable. Hardly on such websites any credit is given to the original creator nor does the creator earn any monetary benefits.

Thus, to prevent this piracy, many critics vouch for NFTs to be a mark of authentication for the artwork. For that to happen, each and every artist will be required to make a digital signature of the artwork as an NFT and sell the signature during the transfer of ownership. The same method can be used for transferring copyrights. While some complexities do exist in using NFTs for authentication, the solution looks quite optimistic.

4. Branding and Targeting High-income Audiences

New social technology means new forms of marketing and branding for brands. The same is happening with NFTs. Primarily, NFTs drive engagement and are one of the most efficient ways to increase brand awareness. For example, this happened in the case of Taco Bell that launched and sold an entire NFT collection for Taco art.

This action not only emphasized Taco Bell’s interest in technology but also garnered attention from NFT and cryptocurrency enthusiasts. Similar to Taco Bell, McDonald’s also jumped on the NFT bandwagon to reward loyal customers and give them a sense of exclusiveness.

The next in our list is Adidas who launched an entire collection of digital clothes for Metaverse users.

Another shoe brand, K-Swiss, made its limited collection more unique and limited with the help of NFTs.

Nike, which is Adidas’ direct competition, stepped up to launch its NFT sneakers that were sold for a whopping $134,000.
Some other ways global brands are using NFT for branding and marketing purposes are for ensuring authenticity, launching promos and organizing digital events.

Warner Bros., the world renowned film production company used NFT to promote the movie Matrix Resurrections.

Warner Bros is also stated to launch 6 million DC character NFT trading cards that will be sold at $50 to $120.

5. Potential in the Gaming Industry

The gaming industry is one of the world’s largest industries with an estimated revenue of $196 billion in 2022. In 2021, the actual digits were $178.2 billion. With these statistics, the global gaming industry easily surpasses movies and music industries even when combined. However, the industry still faces many obstacles. To begin with, launching a new  game on a global level is very expensive and risky. For the same reason, gaming enthusiasts don’t get to see new versions of successful game series for years over years while the same old versions transcend across various generations of gaming consoles.

But, with NFTs, the gaming industry has found new ways to generate more revenue. As we are already aware that NFTs are digital products, they can be used to create in-game accessories that your avatar can wear. Moreover, NFTs can also be used as invitation tokens for online events and real life gatherings. They can be used as an in-game currency, traded to unlock new characters and items, or even given away as rewards for defeating difficult game bosses. All such use cases of NFTs will boost the revenue of the gaming industry.

NFT and Metaverse
The scope of NFT is widely spread in Metaverse. Encompassed with AR and VR technology, NFTs can be used as identity proofs of metaverse avatars and used for owner authentication. Also, NFTs can easily bring real-life objects into the metaverse without the need for heavy programming. This implies how the metaverse can become the virtual space for trading and introducing NFTs whereas NFTs can assist in the creation of life-like virtual worlds.

Where to sell and purchase NFTs? Top 5 NFT Marketplaces

Being digital assets built on blockchain networks such as Ethereum, Polygon Hyperledger, Tazos and Stellar, it is not that simple to sell and purchase NFT. Thus, to make that possible, there are several NFT marketplaces that help you trade. On these marketplaces, thousands are ready to invest in unique NFTs, which means most of the NFTs can be only purchased on a “first come first serve” basis.

List of few NFT trading marketplaces are:

1. OpenSea

OpenSea is the leading marketplace platform for NFTs. It was launched in the year 2017 and gained the first-mover advantage. Also, the platform was quite easy to use and allowed users to create their profiles for free. Plus, users could also create their own NFTs and trade NFTs with over 150+ crypto currencies. With an extensive range of NFTs representing images, videos, music, etc. OpenSea became one of the world’s largest NFT trading marketplaces. Recently, OpenSea also started accepting credit card payments along with cryptocurrency.

2. Nifty Gateway

Nifty Gateway is an NFT trading marketplace that often closes huge NFT deals. These large size tickets and its dominating presence on Twitter make Nifty a popular and ideal marketplace for NFT traders. A big reason due to which people choose Nifty over OpenSea is that it accepts all government-accepted currencies such as your local credit cards, debit cards and even eWallets. However, Nifty Gateway also stores all purchased NFTs on its own network instead of your ewallet, which is subjectively a pro or con for various collectors.

3. Rarible

Rarible NFT trading marketplace features some great brands along with the collections of individual creators. It supports a wide range of NFTs, such as art, music, videos, and in-game assets. All NFTs on Rarible are minted on Ethereum, Flow, and Tezos blockchain. The choice of blockchains gives more flexibility to NFT creators and assists in lowering the carbon footprint while minting. Although Rarible uses its own crypto currency token, RARI, for trading, for fixed cost NFTs it also accepts credit card payments.

4. SuperRare

SuperRare is strictly dedicated to artists. In fact, it only accepts true art pieces as NFT. For this reason, it is also not crowded by celebrity and brand NFTs. Instead, SuperRare stays true to its name as NFT collectors can find rare and impressive art collections on this NFT trading platform. Apart from art NFTs, SupeRare accepts 3D images, music and video NFTs. It relies on Ethereum blockchain and recently announced its own crypto currency token as well.

5. Binance NFT

The cryptocurrency marketplace Binance has launched a subset for the sale and trade of NFTs only. On Binance NFT, any cryptocurrency holder can purchase various types of NFTs. Due to its large scale and trust, Binance NFT is one of the most successful NFT trading platforms. Moreover, to support NFT trading operations, all transactions on Binance NFT are supported by its very own blockchain network.

Discuss your NFT marketplace idea with us

Conclusion

Considering that it hasn’t been much time since NFTs were first introduced, they are still in their nascent stage. This means that their innovation will continue and the world may discover new use cases for them. Till then, the NFT boom will continue to increase. As more and more people invest in NFTs, their value will also increase. Stating this, it is possible for first-adopters or early buyers to have an advantage. The role that brands and celebrities play in inflating the price of NFTs also cannot be ignored. As the AR/VR and metaverse technology is also developing, who knows what the amalgamation of these technologies may bring in collaboration with NFTs. But what’s sure is that the NFT industry is here and it has come with endless opportunities for all collectors, celebrities, brands, artists and even the general public.

If you want to launch an NFT marketplace, FATbit can help you reduce the time to market and streamline operations with its online marketplace solution Yo!Kart, which is also fully customizable to support NFT business model. Contact our experts to get started.

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