An NFT makes a digital file unique. In fact, when you buy an NFT or buy NFTX you buy exclusive ownership of the original work included in this NFT. However, the artist retains his copyright and reproduction rights. The buyer acquires certain rights such as publishing the work online. An NFT can be associated with:
- digital painting;
- a video, such as NBA Top Shot basketball videos;
- a meme;
- a patent ;
- a photograph ;
- a collector’s item, a card for example;
- a video game element (avatars, skins), such as those of Cryptokitties;
- a ticket for concerts and other types of events;
- a movie;
- a virtual object that can be used with a virtual reality headset;
- an audio file, like “When you see yourself” created by the group King of Leon.
For an artist, an NFT makes it possible to sell a digital file as he would sell a physical work. For a buyer, the NFT makes it possible to support an artist, to collect digital works of art and to speculate on these works.
The benefits of NFTs
Here are some of the advantages of NFTs that are often cited:
They give artists ownership of a digital asset. When content creators and artists create a digital asset, an NFT gives them the opportunity to not only demonstrate authenticity but also to profit from their work.
With things like memes getting widely distributed, this can mean a big revenue stream for the creator.
They are unique and can be collected. Many people enjoy the excitement of collecting a unique or rare item. NFTs lend additional legitimacy to collectible content, especially in the form of digital assets.
They are immutable. Since non-fungible tokens are blockchain-based, they can never be changed, erased, or replaced. Again, when it comes to proving the authenticity of created content, this is a valuable quality.
Also, they can include smart contracts. These are other features of blockchain technology that is quite intriguing. In principle, they can store instructions that are executed when certain conditions are met. So an NFT with a smart contract could give artists a percentage of the profit when the NFT is sold in the future.
Disadvantages of NFTs
Of course, as with any fresh new technology, there are potential downsides. The disadvantages of NFTs are:
It is a speculative market. The big question is whether NFTs have any real value. Is this a long term investment? Or just a passing fad? It’s hard to say. At this moment, the only value is based on the emotional quality of NFTs.
Digital assets can be copied. Just because someone owns the NFT of a digital asset doesn’t mean copies of it don’t exist. Artwork can be copied and pasted, GIFs retweeted thousands of times, and videos posted on various websites. Just because you own some NFT doesn’t mean you have control of the property – you simply have a token of authenticity.
Environmental costs. Much has been said about the environmental impact of blockchain-based cryptocurrencies, such as Ether and Bitcoin. These take a lot of computing power to enter data into a blockchain. It is debatable whether blockchain-based assets are sustainable.
They can be stolen. Although the technology behind NFTs is relatively secure, many exchanges and platforms are not. Thus, several cases of NFT theft have been reported after cybersecurity breaches.
It is hard to say whether NFTs will be widely used in the coming years. It is clear that they are currently attracting great interest and that they have several potential advantages. However, this new technology is still in its infancy, and there are still many challenges to overcome.