NFTs are gaining more and more mainstream popularity since 2021. Since the possibilities of NFTs seem plentiful, real-world examples and use cases of this new technology are essential to gauge their value, sustainability, and future. As such, people in business and potential investors are wondering whether NFTs are legitimate or not. So the question arises: What are NFTs?

What are NFTs?

NFT stands for Non-Fungible Token. It is a unique digital asset that verifies one-of-a-kind ownership of digital or real-world assets. As such, anything can be backed up as an NFT: art, real estate, computer programs, photographs, music, or videos.

Fungible means replaceable by another identical item. Fungible assets can easily be traded with one another because their value is not tied to their scarcity, for example, trading a $1 bill for another $1 bill. By definition, the meaning of NFT is “one-of-a-kind.” So one NFT token is unique and is not worth the same value as other similar NFT tokens.

Generally, digital assets are fungible, meaning that one can quickly reproduce a digital code, photograph, or video. It is challenging to assign uniqueness or ownership of such assets, resulting in digital scarcity and intellectual property issues. 

NFTs assist in resolving this issue by representing each unique asset, whether digital or physical, and thus granting ownership to these fungible assets. They can be viewed as a type of digital authenticity certificate. They exist on digital ledgers known as blockchains, which cryptographically assign and publicly prove ownership of digital assets.

NFTs, like cryptocurrencies, can be purchased and sold on blockchains. Because they can only have one owner at a time, ownership can be publicly verified using blockchains.

The technology behind NFTs and Minting:

A blockchain is a decentralized, public ledger where cryptocurrency and NFT transactions are made and recorded.

These NFTs are created using smart contracts, which aid in the transfer of ownership. Because there can only be one NFT owner at a time, the NFT buyer has sole control over the transaction via a unique ID. When a person creates an NFT, they run code stored in the form of smart contracts.

To put it simply, NFT minting is the process of converting a digital file (such as a JPEG, GIF, or PNG) into a digital asset or crypto collectible on the blockchain. You can sell your unique token once it has been published on the blockchain. To mint an NFT, you must pay a small amount of cryptocurrency. 

The minting process can be completed using two methods: Proof-of-work and proof-of-stake. The proof-of-stake method implements randomly chosen validators to ensure that a transaction is reliable and legitimate. The proof-of-work method requires validators to have massive computing power so that their computers can solve the cryptographic algorithms that prove the transaction’s reliability and legitimacy. The end product of both methods is a crypto collectible.

A crypto collectible can be created as a single image or a series of images. You can add a name, description, and other metadata to your token depending on the marketplace where you host your NFT. You can also specify royalty amounts on your NFT, which are percentages of subsequent sales on the secondary market.

So if an NFT exists on the blockchain, how do you store an NFT that you own? Simple. Using a crypto wallet tool, you create a password key for your NFT. Without the password key, the NFT is not accessible by anyone. So even though it is stored on the blockchain, it is accessible only with the password key in your crypto wallet. It’s like keeping an asset in a bank safe: the asset is kept in the bank, but it is only accessible if you provide the key. 

NFTs are a cornerstone of Web 3.0 technology. The digital scarcity represented by NFTs will allow users of this new internet to exchange everything from video-game skins to medical records. These transactions are backed by immutable blockchains, allowing profitable sales and purchases. 

Applications of NFTs

Simple and enjoyable applications are necessary for NFTs to be used for businesses and consumers. As NFTs gain popularity, the biggest obstacle to adoption is not technology but usability.

Theoretically, digital tokens can be used to back up and secure any item, be it a virtual asset or a real-world asset. NFTs offer two new means of making money.

  1. By creating digital tokens to monetize intellectual property.
  2. By verifying the authenticity of physical assets on the internet. 

As the market develops, although the broad-based application of NFTs has not yet occurred, the groundwork is being laid for advanced NFT use cases. Digital tokens are being applied increasingly to establish the authenticity of various unique, collectible, and valuable items. In the digital artwork industry alone, NFT sales reached $29 billion between June 2021 and June 2022. Influencers and celebrities are jumping on the NFT bandwagon, releasing securitized memories, artwork, and moments.

Selling NFTs has been a lucrative business in the art world. Here are a few examples:

Benefits for Businesses

Some digital experts believe that NFTs have the potential to be profitable in the long run. They can help businesses capitalize on digital opportunities and gain a competitive advantage. Here are a few ways that NFTs can help businesses:

  1. Connecting an NFT with virtual reality can be beneficial. Allowing a more immersive experience can create brand awareness and customer interaction like never before..
  2. A company can use NFTs to track supply chains, identify replica products, and drive revenues based on distinct ownership of assets.. 
  3. An NFT ensures that your products are authentic and non-replicable. This simplifies conducting free trade and creating brand identities with NFTs.

Top NFT Marketplaces

There are numerous NFT sites to choose from once you’ve created and funded your wallet. The top marketplaces for NFTs right now are:

Foundation: A community-curated marketplace in which creators must be invited by other creators already on the platform.

Nifty Gateway: An art-focused marketplace that collaborates with well-known brands, athletes, and creators.

OpenSea: One of the first and largest marketplaces for NFTs for a wide variety of collectibles.

Rarible: Provides a variety of NFTs with an emphasis on art. It rewards members with its own RARI token.

SuperRare: A marketplace dedicated to curating and selling digital art.

NFTs can be purchased, sold, traded, and created using online exchanges or marketplaces. The creator or current owner can specify a price. Alternatively, there can be an auction in which you must bid on the digital asset.

Although these and other platforms house thousands of creators and collectors, do your homework before purchasing. Like any other technology, NFTs are also prey to scammers and impersonators. Impersonators who listed and sold their work without permission have victimized some artists.

Implement NFTs in Your Business

NFTs can help your business improve customer interaction and raise brand awareness. Here are some pointers on how to use NFTs effectively:

  1. To differentiate yourself from the competition, use NFTs in the form of GIFs.
  2. Allow your audience to buy NFTs within a specific time frame. It contributes to the formation of a community around your company.
  3. NFTs can be used in charity auctions. This allows you to raise awareness for the charity you support.
  4. Create contests with NFTs as prizes. This will entice people to purchase your NFTs.
  5. Allow customers to purchase NFT versions of your products. This will assist you in expanding your business.

Future of NFTs and Environmental Sustainability

The possibilities with NFTs are endless, especially when viewed as a part of developing technologies like Web 3.0. NFTs can be used to document degrees, academic certificates, licenses, qualifications, medical records, birth and death certificates, driver’s licenses, passports, and vaccine verification. 

NFTs have a promising future in supply chain and logistics because they are immutable and transparent proofs that keep supply chain data authentic and reliable. NFTs can also provide information about each material and component in a specific product for businesses such as the auto industry. This could aid in cost management. NFTs could also help industries track the use of recyclable and sustainable materials.

But with sustainability comes another issue that is yet to be figured out. The process of listing, purchasing, and storage of NFTs is highly energy intensive. This is because blockchain technology requires the use of extensive computing power, resulting in the use of massive amounts of electricity. As such, it can contribute heavily to climate change if renewable energy resources are not used. 

Although blockchain technology and NFT minting is energy-intensive, it is important to note that it does not have to be this way. There are proven ways of conducting business on blockchains that have a much lower carbon footprint. There are two ways of reducing the carbon footprint:

  1. By using a proof-of-stake method to verify an NFT. The proof-of-stake method uses much less energy since it does not depend on a competition of powerful computers.
  2. By making sure that the computers used in the proof-of-work method are using renewable energy, such as solar power or hydel power.

Both the mechanisms of reducing the environmental impact are being practically implemented right now. Therefore, it is just a matter of regulation and conscious choice by the business community. Examples of blockchains that use renewable energy are Solana and Cardano.

Conclusion

Remember that the value of an NFT is entirely determined by what someone else is willing to pay for it. As a result, demand will drive the price, and you can resell an NFT for more or less than you paid. If no one wants it, you won’t be able to resell it.

However, treat NFTs like any other investment: conduct research, understand the risks, and proceed cautiously.

Although NTFS is still in its infancy, you should focus on incorporating NFTs into your brand’s marketing strategies. You can use them to create memorable ad campaigns and mint luxury designs for your product. You can also work with NFT creators.

Thus, the distinct nature of NFTs enables you to stand out in the market by engaging with your audience in novel ways, increasing engagement, and growing your brand.

Please reach out to us for more information on NFT applications, blockchain, Web 3.0, and other emerging technologies!

I am a technical content writer at Genetech Solutions, one of Pakistan’s leading software houses. I have done a bachelor in Social Sciences, majoring in Political Science, from IBA. Thinking critically and reading is my passion. I like meeting new people and travelling to old historic places to experience life from different perspectives.

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Muhammad Abdus Samad