5 Things You Didn’t Know about NFTs

Non-fungible tokens, or NFTs, have taken the world by storm, especially in the art world. However, there’s more to NFTs than just digital art. Let’s explore five surprising facts about NFTs that you may not be aware of.

What are NFTs?

Blockchain and NFTs

NFTs are digital tokens stored on a blockchain, a decentralized digital ledger. They represent ownership and uniqueness of a digital or physical asset. Each NFT has a unique identifier, making it impossible to interchange with other tokens.

Smart Contracts

NFTs are powered by smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. Smart contracts automate transactions, making NFTs secure and ensuring that the original creator receives royalties from resales.

1. NFTs Are Not Only for Art 🖼

Gaming and Virtual Worlds

Though NFTs are widely recognized for their role in digital art, they also have a significant presence in gaming and virtual worlds. Gamers can buy, sell, and trade in-game items and characters as NFTs, allowing them to maintain ownership and value.

Collectibles and Domain Names

NFTs also encompass digital collectibles, like trading cards, and even domain names. By tokenizing these assets, NFTs enable a new level of ownership and value appreciation.

2. The Environmental Impact 🌳

Energy Consumption

One of the lesser-known aspects of NFTs is their environmental impact. The creation and transaction of NFTs on some blockchains consume significant amounts of energy, leading to a substantial carbon footprint.

Eco-Friendly Alternatives

However, not all NFT platforms are created equal. Some use eco-friendly consensus mechanisms, like proof-of-stake or layer 2 solutions, which significantly reduce their environmental impact. As a result, the NFT community is gradually moving towards greener alternatives.

3. NFTs Provide Royalties 🤑

Resale Royalties

NFTs have a unique feature in that they allow creators to earn royalties on secondary sales. The smart contract ensures a percentage of the resale price goes back to the creator, providing a continuous revenue stream and incentivizing artists to create more work.

The Future of Royalties

The royalty system of NFTs has the potential to revolutionize the way creators are compensated. As the NFT market matures, we may see new royalty structures emerge, benefiting both creators and collectors in the long run.

4. NFTs Can Be Fractionalized 🧩

Fractional Ownership

Another fascinating aspect of NFTs is the ability to fractionalize ownership. This means that an NFT can be divided into smaller portions, allowing multiple people to own a share of the asset. This process makes high-value NFTs more accessible to a broader range of investors.

Implications for Investors

Fractional ownership of NFTs can democratize access to valuable assets and create new investment opportunities. It also enables the formation of NFT-based investment funds, allowing investors to diversify their portfolios with unique digital assets.

READ ALSO: Top 10 NFTs Projects To Invest In June 2023

5. NFTs Can Expire ⌛

Time-Limited NFTs

While NFTs are often considered permanent, some creators are experimenting with time-limited NFTs. These tokens have a built-in expiration date, after which the NFT ceases to exist or loses its value. This concept introduces a new level of scarcity and intrigue to the NFT market.

Evolving Digital Art

Time-limited NFTs can also be used to create evolving digital art, where the artwork changes over time or expires to reveal a new piece. This innovative approach challenges the traditional notion of permanence in art and encourages collectors to engage with the work in a dynamic way.

Conclusion

NFTs are far more diverse and complex than they first appear. Beyond digital art, they encompass gaming, virtual worlds, collectibles, and more. Their environmental impact, royalty systems, fractionalization, and expiration possibilities are just a few of the lesser-known aspects of this rapidly evolving market. As the world of NFTs continues to expand, we can expect to see even more innovative applications and surprising developments.