The top two cryptocurrencies – Solana and Terra – grew 11,000% and 12,000% last year.
By R. Chandra Mouli
If you’re reading this, it must be your lucky day. You don’t often hear about an investment route that rose by 21,000% in 2021. No, it’s not a typo, and we’re not talking about crypto either.
The top two cryptocurrencies – Solana and Terra – grew 11,000% and 12,000% last year. So now that I have your attention, here’s the dope on non-fungible tokens (NFTs) that generated a total of $5.4 billion in profits from the sale of tokens in 2021. A source of information on skyrocketing NFT sales is a study developed with a research firm owned by BNP Paribas, which estimates that trading of NFTs has risen to 17. .6 billion, up from 82 million in 2020.
Now sit back and turn off any device that pings, beeps, or interrupts as I unravel the all-new virtual platform, a real silver lining in the cloud. Let’s get down to earth first, to auctions in the physical world.
Connoisseurs of fine art and jewelry, often of high value at auctions in the West, are familiar with the term “provenance,” which refers to the ancestry or heritage of a bequest. Provenance is clear evidence of ownership say from a particular duke to a duchess to a lord and then his daughter, who may be the current owner and may have handed it over to Sotheby’s or Christie’s for open auction or private sale.
In a post-pandemic phase where contactless purchases are favored, the relevance of physical auctions is declining (except in cases such as the recent IPL bids). In all other situations, bidding is best conducted online, and what we look for in an auction, in terms of past and present ownership and its authenticity, is presented for inspection and verification as a non-fungible token – a unique digital identifier that cannot be copied, subdivided or replaced, as its truth is recorded in a blockchain.
NFTs are a brand new asset class moving beyond cryptocurrency. While crypto’s doubting Thomases writhe, even as the currency’s early adopters are laughing all the way to the bank, this story, intended to demystify NFT, is to give you enough knowledge to help you make an informed decision — whether you want to jump to the bandwagon or not.
As a first step, let’s be inspired by movie stars and artists – trendsetters we admire and trust. Let’s start with Mr Amitabh Bachchan. The Bollywood superstar, always a trailblazer, whether it’s choosing contrarian roles, headlining a never-before-seen show like KBC or supporting social causes, partnered with Guardianlink last year to create an NFT launch collection.
From Big B to Salman Khan, and from Sonu Sood to Dulquer Salmaan in India, to world famous movie stars and rappers from the West, many creators have launched their own NFT collections.
Like tickets to many of Mr. Bachchan, his digital holdings also sold out in just four days in November. The online auction on Guardianlink’s website Beyondlifeclub brought in a total proceeds of Rs. 7.18 million. The inventory included the actor’s father’s famous poem “Madhushala” and seven autographed vintage posters of himself (from films like Deewar and Sholay), along with his other works.
Bachchan’s Poem Recital, which was packaged as an audio NFT, sold for $756,000. Two sole owners now own the audio asset, one in Hindi and another in English. As for the smaller works of art in the collection, more than 300,000 fans worldwide had signed up.
Unlike the IPO which is open for a few days, an NFT collection (e.g. a limited edition of 10,000 tokens) can be sold online in less than an hour or within a day. On International Women’s Day, when Guardianlink launched an NFT in honor of Kalpana Chawla, the astronaut who died in the space shuttle disaster in Colombia, the collection sold out in minutes.
The closest term to “Offer Opens Today” is “NFT Drop”, the release of a non-fungible token project. The date, time and coin price are important to the maker and collector.
Coins? Like a commemorative coin, a token must also be minted, ie. created and listed as a virtual asset. This is the job of the NFT maker, but now that we got into the domain let’s get to know all the aspects. The owner of a work of art, poster or music, who wants to digitize (tokenize), works with a marketplace to create and store the asset. The first coinage service fee is known as “gas fee”, which offsets the computational energy used by the market to process the transaction on the blockchain. The marketplace also pays the creator a royalty fee every time a token is sold.
Since most of us are less makers and art collectors and more investors and gamblers, let’s understand monetization. Remember that ownership of the non-fungible asset, be it images, video, or other collectibles, is captured in the cloud.
The owner of the NFT can hold the token forever or, as with blue-chip stocks and stocks, wait for demand to rise and make a profit. In short, the owner decides whether to remain a collector or transfer to a dealer.
As an aside, anyone who admires a piece of art or is a fan of a star can get a copy of the token online by clicking Save As. That’s about all you can do…because you won’t be identified as the digital owner of the NFT.
For the creator, the benefit is the liberation from centralized control (e.g., content on a social media handle, created and curated over the years, may one day become nothing at all if the government bans the platform (e.g. TikTok) or if the platform close the handle of the individual (happened to a former US president).
How fast is NFT space growing? Faster than you can say Jack Robinson or Non-Fungible Token! In 2020, the global valuation was $20 million, the current figure is $24 billion, and the skyrocketing figure starting with T is not far off.
Unlike cryptocurrency, of which there are about 3,000 in the market and just over 100 actively traded, NFTs are highly scalable because almost any product, art form, or commercial document can be customized in an NFT. Remember these are the first days and usage and usability will evolve in the near future.
More auctions from online marketplaces will be announced in the coming months, not all of them celebrities. Artists, painters and sculptors can put their work up for sale, and an entire NFT movie can be put on the block. The Twitter CEO sold his first-ever tweet for $2.9 million and donated the proceeds to charity, a move that indicates the medium is open to any kind of message.
If there’s a time to dive into NFTs, it’s now. But before you opt for the investment stream, be aware of some pitfalls:
To bid in an NFT auction, you need to open and fund a crypto wallet. In India, the government is pensive and apprehensive about cryptocurrencies and has taken the position that mining of currency by individuals should not be allowed.
The Honorable Minister of Finance Smt. Nirmala Sitharaman has set up a working group of experts to help the government decide whether to ban or allow virtual currencies.
Also remember that every new opportunity to make money comes with risks. Therefore, do your due diligence by verifying the provenance before buying an NFT, and steer clear of fake Drops by sticking to legit marketplaces.
The good news is that upcoming bidding events will definitely give the evolved collector or a novice dummy like me an equal opportunity to own tradable tokens. It is worth the entry and the wait. All you need is enough gas to get you to Cloud Nine, if not the moon.
The writer is a communications consultant, columnist and former journalist. Views are personal
This post Unfunctioning Tokens: Decoding NFTs For Dummies was original published at “https://www.financialexpress.com/digital-currency/non-fungible-tokens-decoding-nfts-for-dummies/2465450/”