Non-fungible Tokens: Decoding NFTs for Dummies



The top two cryptocurrencies, Solana and Terra, grew by 11,000% and 12,000% last year.

By R. Chandra Mouli

If you are reading this, it must be your lucky day. It’s not often that you hear about an investment avenue that skyrocketed 21,000% in 2021. No, this is not a typo, nor are we talking about cryptocurrencies.

The top two cryptocurrencies, Solana and Terra, grew by 11,000% and 12,000% last year. So now that I have your attention, here is the dope on non-fungible tokens (NFTs) that generated a total of $5.4 billion in profits through token sales in 2021. Just to assure you this is not a scheme. Ponzi or Pyramid, the source for the skyrocketing NFT sales is a study, developed with a research firm owned by BNP Paribas, that estimates NFT trading rose to $17.6 billion, versus $ 82 million in 2020.

Now sit back, silence any device that rings, beeps or interrupts, while I unravel the new virtual platform, a veritable ray of light in the cloud. First, let’s go down to earth, to auctions in the physical world.

Fine art and jewelry connoisseurs who frequent high-value auctions in the West are familiar with the term “provenance,” denoting the ancestry or heritage of a bequeathed asset. Provenance is a lucid record of ownership, say from a certain duke to a duchess to a lord and then his daughter, who may be the current owner and may have given it to Sotheby’s or Christie’s for open auction or private sale.

In a post-pandemic phase where contactless buying is preferred, the relevance of physical auctions is declining (except in cases like the recent IPL auction). In all other situations, bidding is best done online, and what we seek at auction, in terms of past and current ownership and its authenticity, is presented for viewing and verification as a non-fungible token, a unique digital identifier. that cannot be copied, subdivided or replaced, since its veracity has been registered in a chain of blocks.

NFTs are a completely new asset class that outperforms cryptocurrencies. While the dubious Thomases of cryptocurrency squirm even as the coin’s early adopters laugh all the way to the bank, this narrative, aimed at demystifying NFTs, is to give you enough knowledge to help you make an informed decision, whether to jump to the bank. band wagon or not.

As a first step, let’s take inspiration from movie stars and artists, trendsetters that we admire and trust. Let’s start with Mr. amitabh bachchan. the Bollywood Always a trailblazer, whether it’s choosing roles that go against the grain, headlining a never-before-seen show like KBC, or supporting social causes, the superstar partnered with Guardianlink last year to launch an NFT collection.

From the Big B to salman khanand Sonu Sood to Dulquer Salmaan in India, to world-renowned movie stars and rappers in the West, many creators have launched their own NFT collections.

Like tickets to many of Mr. Bachchan’s hit movies, his digital asset also sold out in just four days in November. The online auction on Guardinalink’s Beyondlifeclub website produced total profits of Rs. 7.18 crores. The inventory included the famous poem “Madhushala” by the actor’s father, and seven vintage autographed posters of himself (from films such as Deewar and Sholay), along with his other works.

Mr. Bachchan’s poetry recital, which was packaged as an audio NFT, sold for $756,000. Two sole owners now own the audio asset, one in Hindi and one in English. As for the smaller works of art in the collection, more than 300,000 fans had signed up worldwide.

Unlike the Initial Public Offering on the stock market that is open for a few days, a collection of NFTs (for example, a limited edition of 10,000 tokens) can be sold online in less than an hour or a day. On International Women’s Day, when Guardianlink released an NFT dedicated to Kalpana Chawla, the astronaut who died in the space shuttle disaster in Colombia, the collection sold out within minutes.

The closest term to ‘Offering Opens Today’ is ‘NFT Drop’, the launch of a non-fungible token project. The date, time, and mintage price are important to the maker and collector.

coinage? Like a commemorative coin, a token must also be minted, ie. created and listed as a virtual asset. This is the work of the creator of NFT, but having entered the domain, let’s get to know all the aspects. The owner of a work of art, poster, or music, which he wishes to digitize (tokenize), collaborates with a marketplace to create and store the asset. The service fee for initial minting is known as the “gas fee,” which offsets the computing power used by the market to process the transaction on the blockchain. The marketplace also pays the creator a royalty fee each time a token is sold.

Since most of us are less art creators and collectors and more investors and gamblers, let’s understand monetization. Remember that the property of the non-expendable property, whether it is images, video or other collectibles, is registered in the cloud.

The owner of the NFT can hold on to the token forever or, as with tier one stocks and shares, wait for demand to rise and dump it for profit. In short, the owner decides whether to remain a collector or switch to a trader.

A quick note: Those who admire a piece of art or are a fan of a star can get a copy of the token online, simply by clicking Save As. That is all you can do…because you are not identified as the digital owner of the NFT.

For the creator, the advantage is freedom from centralized control (for example, the content in a social media handle, created and curated over the years, may one day become zero if the platform is banned by the government (example TikTok) or if the platform closes the control of the individual (it happened with a former US president).

How fast is the NFT space growing? Faster than you can say Jack Robinson or non-fungible token! In 2020, the global valuation was $20 million, the current number is $24 billion, and the sky-high number starting with T is not far off.

Unlike cryptocurrencies, of which there are about 3,000 on the market, and just over 100 are actively traded, NFTs are highly scalable, as almost any product, art form, or commercial document can be adapted into an NFT. . Remember, these are early days and use and utility will evolve in the near future.

More marketplace auctions will be announced in the coming months, and not all of them will be celebrity auctions. Artists, painters, and sculptors can put their work up for sale, and an entire NFT movie can be put up for sale. The Twitter CEO sold his first tweet for $2.9 million and donated the proceeds to charity, a move that indicates the medium is open to all kinds of messages.

If there’s ever a time to get into NFTs, it’s now. But before you opt for the investment stream, be aware of some of the pitfalls:

To bid on an NFT auction, you will need to open and fund a crypto wallet. In India, the government is thoughtful and concerned about cryptocurrencies and has considered that coin mining by individuals should not be allowed.

The Honorable Minister of Finance Smt. Nirmala Sitharaman has created a task force of experts to help the government decide whether to ban or allow virtual currencies.

Also, remember that every new opportunity to earn money comes with risks. So, do your due diligence on provenance before buying an NFT, and stay away from fake Drops by sticking to legitimate markets.

The good news is that the upcoming bidding events will surely give the evolved collector or a dumb newbie like me an equal chance to own tradable tokens. It is worth the entrance and the wait. All you need is enough gas to get you to Cloud Nine, if not the Moon.

The writer is a communication consultant, columnist and former journalist. Views are personal and not necessarily’s. Cryptocurrency and NFT transactions are subject to risk. Consult your financial advisor before doing so.