A lot of people are confused about nfts, or non-fungible tokens, which are digital creations that can be bought, sold or traded. NFTs are tied to a specific cryptocurrency, like Ethereum’s ether, which you can buy with a regular bank account (just be sure to secure your wallet’s private keys). NFTs are different than bitcoins, however; they don’t store value, but rather records of ownership that can’t be changed once they’re minted.
The biggest benefit of NFTs for creators is that they can monetize their work without relying on third-party marketplaces. Instead, NFTs can be traded directly between users through blockchain networks like Ethereum’s. This can lead to huge profits, especially for games that allow players to sell unique in-game items and avatars.
In addition, NFTs have a few other advantages over traditional digital files. For instance, while you can copy a digital file as many times as you want, NFTs are designed to give you something that can’t be copied: ownership of the artwork. That’s why NFTs are often referred to as “non-copyable digital objects.”
Some NFTs, like a re-styling of famous paintings or a video composite by Mike Winklemann, better known as Beeple, have been traded for millions of dollars. But don’t confuse NFTs with copyright ownership; that’s governed by laws outside of the blockchain networks that track NFT ownership.
For gamers and collectors, NFTs can give them a sense of ownership over virtual worlds that otherwise might not be accessible to them. For example, NFTs can make it possible for users to become the immutable owners of one-of-a-kind in-game weapons and armor, or even whole buildings like casinos or theme parks. Artists are also finding the technology useful, as NFTs can allow them to sell works of art to a global audience without requiring an established gallery or auction house.
NFTs are also being used to create entire communities around certain projects. The popular NFT yacht club, for instance, is the brainchild of product studio Yuga Labs and has attracted a huge following, with owners getting access to a members-only Discord channel, exclusive merchandise, votes on future NFT projects, tickets to virtual meetups and more.
While there are a wide variety of NFTs available, buyers should be careful about purchasing ones that promise high returns. Be especially wary of nfts advertised through aggressive marketing campaigns that are likely to be scams, and don’t be fooled by “wash trades,” which are transactions whose sole purpose is to artificially inflate demand for a particular NFT. This practice, also called shill trading, is often executed by well-connected insiders who get NFTs for free and then resell them for higher prices once they’re released to the public. This has been found to be a significant driver of NFT price increases, and the industry is working hard to curb it.