Over the past year, NFT (non-fungible token) sales have exploded. But what is a non-fungible token and why are people suddenly so into them?
The idea behind non-fungible tokens is simple: it’s like trading cards or signed baseballs—one item is different from every other item. However, unlike traditional collectibles, these are verifiably unique via a “unique identifier” on the blockchain.
With that said, let’s look at some of the main reasons NFTs took off.
1. Better Marketplaces For Creators
NFT markets allow you to sell your digital assets, aka non-fungible items, with provable ownership and authenticity back to the buyer. As a seller on an NFT market, you can list your digital items and set details like price and rarity.
This is particular useful for artists and other creators to be able to finally profit off their work. For example, the virtual land project Next Earth is soon launching an NFT marketplace, enabling users to trade digital replicas of real estate, whether it’s the virtual White House or the cyber Statue of Liberty.
2. Distributed Markets vs Centralized Markets
To be able to trade your digital item you must first own it: Unlike centralized marketplaces where one entity has complete control over user data and personal information, NFTs are built on blockchain technology which requires people to store their private keys—a secret code only used by the owner—in order to access their digital assets or NFTs.
This approach means there is no single point of failure, so your data is not stored centrally on computers owned or controlled by others, but rather on decentralized blockchains where each node stores its own copy of it.
For this reason, blockchain advocates recognize that a central authority is unnecessary, and distributed markets are the next stage in the evolution of trade.
3. Distributed Notary
One of the most exciting features of blockchain is that it allows for a distributed ledger system without centralized control, and therefore eliminates fraud.
The same is true for non-fungible tokens and their unique identifiers which take on the properties of each digital asset allowing you to verify the uniqueness of that asset via blockchain’s notarization process.
If someone tries to send your digital item or claim it as their own, they can’t, because its unique identifier cannot be replicated or cloned in this way.
For years, people have been storing their private data in centralized cloud servers operated by companies like Microsoft, Facebook and Google. As we’ve seen with recent privacy scandals, this can be a security issue—your data can be compromised and you no longer have control over it.
So it’s exciting that a more secure and private alternative exists—self-custody of your data in the blockchain. Unlike traditional cloud storage which stores your files on remote servers controlled by someone else, the blockchain ensures that your data belongs to you.
5. Shifting Consumer Behaviour
In the last couple years, we’ve spent more time online than ever before. When COVID-19 locked down the world, there was little else to do other than explore cyberspace.
The prolonged shutdowns, quarantines, and social restrictions meant that this effect has been on-going for nearly two full years, which has dramatically increased people’s exposure to the crypto world, and of course to NFTs. Simulatenously, many people lost their jobs due to restrictions that battered the economy, inspiring them to find new ways to earn money online, such as by creating and selling NFTs.
With all these powerful forces coming together at the same time, it’s no wonder that NFTs took off in 2021, and they’re shaping to be a major part of the way we create and consume content.