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Understanding NFTs. Introduction | by Jenny Imeh

Introduction

NFT stands for Non Fungible Token. It is a digital asset that shows ownership of a unique item. These NFTs have different characteristic unlike fungible tokens that makes it unique, valuable and desirable.

NFT work on blockchain platforms that support smart contracts. Smart contracts enable the creation of self executing contracts with predefined rules, including ownership and transfer of NFTs. The blockchain technology behind NFT ensures transparency, immutability and security and every transaction and ownership transfer is recorded and verified by the decentralized network.

Features of NFT

  1. NFTs can be sold, bought, traded on various online marketplaces.
  2. The ownership authenticity can be verified by anyone on the blockchain, making it a reliable way to prove ownership of a digital asset.
  3. Each NFT has a distinct identity and cannot be replicated or interchanged with other tokens. Just like every human has a unique feature that makes all different, so is NFT, this uniqueness adds calue and scarcity to the NFT.
  4. NFTs are indivisible by nature, meaning they cannot be divided into smaller units. However, some platforms allow the fractional ownership of NFTs where multiple individuals can collectively own a percentage of an NFT.

Challenges associated with NFTs

  1. The NFT market being new, it has no regulation, meaning there are no official rules or law. This can lead to uncertainties regarding legal ownership or copyright infringement, as a result, sellers and buyers need to be cautious when engaging in NFT transactions.
  2. The NFT market has experienced significant volatility, with prices flunctuating dramatically. The value of NFT can be influenced by various factors, celebrities endorsements, hype, market trends,etc.
  3. While NFTs have gained significant attention and attracted high-value transactions, there are concerns about the accessibility and inclusivity of the market. High transaction fees and the requirement for crypto currency holdings can create barriers for some artists, collectors and enthusiasts who may be interested in participating but lack of necessary resources.
  4. The long term value and sustainability of the NFT market are still uncertain. The sustainability of the market will depend on factors sich as continued interests from collectors, adoption of NFTs in various industries and the ability to address environmental concerns.

Conclusion

The rise of NFTs has transformed the world of digital assets and opened up new possibilities for creators, collectors and investors. NFTs have revolutionized the way we perceive and value digital art, music, virtual real estate and other forms of unique digital content.

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