What Is Non-Fungible Token (NFT) And Why It Is Gaining Traction? 

From Amitabh Bachchan to Salman Khan, several celebrities have launched their own collectibles in the form of digital assets
What Is Non-Fungible Token (NFT) And Why It Is Gaining Traction? 

The New York Stock Exchange is stepping into the non-fungible tokens (NFT) market with plans to do for digital assets what it does for stocks, Bloomberg reported on Thursday. 

Back home, several celebrities and sportspersons and stepping into the world of NFTs. 

Indian pacer Bhuvneshwar Kumar is set to launch his own NFTs, however, he is not the first one to do so as he joins Yuvraj Singh, Dinesh Karthik, Sunil Gavaskar, Rishabh Pant, Virender Sehwag, among other cricketers who have already joined the bandwagon. 

Earlier, Veteran India pacer Jhulan Goswami was among the first sportsperson from India to dive into the NFT world. 

From Amitabh Bachchan to Salman Khan, several celebrities, too, have launched their own collectibles in the form of digital assets. 

The NFT market experienced its best year in 2021, generating over $23 billion in trading volume, according to report by DappRadar. 

Game NFTs have amassed over $4.5 billion in trading volume, accounting for 20% of the total NFT sales in 2021.

NFTs made news for exponential sales from just $106 million sales in 2020 to $44.2 billion in 2021, according to a report from Blockchain firm Chainalysis. 

So this invites a question, what is an NFT and why is it gaining popularity in India? 

It's become a trend lately to collect digital art amid the cryptocurrency boom. From Bored ape to CryptoPunks crypto enthusiasts are splurging on everything.

NFTs are a type of digital asset which uses the blockchain to document the ownership of items such as music, images, videos, etc. They are purchased using cryptocurrency.

Non-fungible means that it’s unique and can’t be replaced. For example, money is fungible — you can trade one for another, and you’ll have the same value. Even cryptocurrency is fungible. However, NFT is unique -- one digital art may not be equal to the other in value. 

NFTs also bring exclusive ownership rights, so, a digital artwork can have only one owner at a time. 

Difference between NFT and Cryptocurrency 

NFT is generally built using the same kind of programming as cryptocurrency, but that’s where the similarity ends. 

However, cryptocurrency is fungible which means it can be traded or exchanged. 

But NFTs are unique because of a digital signature that makes it impossible for it to be exchanged for or equal to one another. The value of one NFT may not be equal to the other. 

How Does an NFT Work? 

NFTs exist on a blockchain, and mostly on the Ethereum blockchain. You can convert your picture, a doodle, music, or even video into an NFT and sell it. 

Even a tweet can be an NFT -- Twitter co-founder Jack Dorsey's first-ever tweet was sold for more than $2.9 million. 

It's a way creators can monetize their artwork by selling it directly, moreover, they can also get royalties whenever their art is sold to a new owner. 

Are there any risks involved with NFTs? 

Since NFTs are not controlled by any authority, there are risks involved with these digital assets.

Moreover, in the Budget 2022 speech, Finance Minister Nirmala Sitharaman announced a 30 per cent tax on virtual digital assets. Just a day later, Finance Secretary TV Somanathan said Bitcoin, Ethereum, or non-fungible tokens (NFT) will never become legal tender in India.

Related Stories

No stories found.
Outlook Business & Money