WHY HAVE NFTS BECOMES SO POPULAR? 

Every year, there is a new kind of crypto asset eating up the market and for the last 12 months, we have seen exponential growth in NFTs. Many projects have successfully completed multi-million-dollar sales within weeks after their launch and this has left every investor astounded. 

For most of the years, either the bull run or the crypto adoption by a major brand used to be the reason for the headlines. However, things have changed since early 2020 and NFTs are trying to dominate the space. 

So, the situation begs a question – what it really is? 

What is an NFT? 

For an end–user, NFT is a cryptocurrency and all the basic principles for security, validity and privacy apply to this asset as well. However, the use case is quite different. 

All mainstream crypto coins are divisible, implying that the user is not bound to buy or sell a whole amount. In fact, if we talk about BTC, you could buy 0.005 coins as well. But in the case of NFTs, you do not have that liberty as they are always offered in the whole amount. There is no fraction for each coin and it’s not divisible. 

The reason for implementing it as such is because NFTs need to prove uniqueness against an entity. For instance, if an artwork is being sold, it is practically impossible for someone to prove its ownership if it’s broken down into, let’s say 1000 fractions. Therefore, in order to prove that a particular entity belongs fully to a unique owner, an NFT is always pegged against an entity as a whole. When this token is sold to someone, the ownership of the underlying asset is also transferred automatically. 

The Reasons Behind Growing Popularity 

In the digital world, the likelihood of fraud and copyright violation is immense and the division of tokens just makes it complex. Therefore, making the tokens indivisible curbs such issues and makes the entity (that it is pegged to) unique. As a result, it can never be reproduced nor the copyrights can be violated. 

It should be noted that the concept is pretty much similar to what the core of blockchain offers that one coin cannot be owned by more than a person at any given time. 

In order to understand their importance and the reason for the boost in the market, it is important to consider an example, so let’s go ahead with artworks in this case. In the physical world, if a painting is destroyed, it cannot be determined whether it ever existed, let alone the actual owner. However, in the case of NFTs, they can never be destroyed once a token is created because it is recorded on the blockchain ledger. This immutability is one of the major reasons for its popularity in the world of artworks as it provides a near-perfect solution to this grave problem. 

Apart from that, NFTs also allow the public to track provenance of the digital asset that they are pegged against. For instance, if an artwork was created 10 years ago and has been passed on to 20 people, the entire history would be kept forever.