https://ift.tt/3tWNdE5 NFT Advantage: 6 Things You Need To Know

Non-fungible tokens or NFTs are as profitable as they are controversial. From Sports NFTs to art NFTs, you’ve likely heard of the hundreds of thousands of dollars moving around. Then again, the potential of non-fungible tokens exceeds even how many use them now.

With so much hype right now, NFTs provide a way to make money, build scarcity, and create unique tokens. There are more things these tokens can do than these. Here are 6 things you need to know about NFTs, the advantages they give, and why they’re the technology of tomorrow.

What Are Non-Fungible Tokens (NFT)?

NFTs are digital tokens that adhere to a specific set of rules. These tokens start with tokens that can also be classified as crypto-collectibles. These tokens aren’t like cryptocurrencies like Bitcoin, Ether, or Litecoin.

NFTs don’t rely on blockchain tech for security or verification, unlike cryptocurrencies. NFTs work on Ethereum’s ERC-721 protocol, allowing easy token encoding and exchange. Think of them as the digital equivalent of a physical collectible, such as baseball cards, Pokémon cards, or Beanie Babies. These tokens have unique characteristics that distinguish them from one another.

NFTs are valuable because they provide scarcity. This scarcity creates value because NFTs are rare. You can also see NFT history within a digital ledger, which means you can track the provenance of the entire token.

1.    Builds Scarcity

Due to the ERC-721 protocol, NFTs can be built to have scarcity. Although crypto-collectibles aren’t as scarce as precious metals, they are scarcer than cryptocurrencies. These tokens are unique, so you only hold a certain number of them. There are never two of the same NFT at a time.

The scarcity of NFTs makes them valuable, which drives demand. With Bitcoin, it’s nearly impossible to create scarcity. Scarcity provides value, and value creates demand. NFTs allow users to build scarcity into tokens, making NFTs more valuable.

Every NFT has its own value, depending on the type of content the token carries. This can be a moment in sports, a unique type of art, or the original pressing of a song.

2.    NFTs Can Track Ownership, Provenance

Let’s say you’re a collector, and you collect baseball cards. You collect cards of your favorite players, as well as cards of Hall of Famers. You track these cards in a physical binder that lists all the cards. Over time, you slowly add cards to the binder.

That physical binder is your digital ledger. The digital ledger tracks the provenance of the cards, and you can prove that you have all the cards.

That’s exactly what NFTs can do. By encoding an NFT, you can prove that you have that token. You can track the provenance of all your NFTs, and you can build a digital ledger that verifies the origin of all your tokens.

Provenance adds value because it creates authenticated ownership and history on the token. By creating history, proving ownership, and authenticating them through the blockchain, you can prove that the NFT is the genuine article. This would create value, primarily if the token were owned by someone significant at some point.

3.    You Can Use Them To Build A Decentralized Marketplace

NFTs can also be used as decentralized marketplaces. With NFTs, you can allow buyers and sellers around the world to buy and sell NFTs without worrying about exchange rates. It also cuts out third parties who handle sales and marketing in exchange for a fee.

With normal collectibles, you’re limited to trading between friends, family, and dealers. You can trade tokens on platforms that trade NFTs. You can even build your own marketplaces for buying and selling NFTs. These marketplaces can scale, which means you can make your own and get big.

There’s no shortage of NFT marketplaces these days. You can sell your NFTs to a third-party market, so you can mint your own and start selling your original pieces. At the same time, you can simply build your own market if you have a big enough following and get all the profits yourself.

4.    They Make Good Investments

NFTs have the potential to be a good investment, especially if they’re rare. There are only so many copies of baseball cards, for example, and there’s high demand for them. Land, art, and music have value too, and there’s a limited supply.

NFTs have the potential to be a good investment, especially since they have the potential to go up in value. The value of these tokens can rise with demand, and the value of NFTs can increase with scarcity.

It’s important to note that NFTs won’t go up in value forever. Crypto-collectibles don’t maintain their value as physical collectibles do. NFTs have the potential to go up in value, but only if you have the right content in your NFTs.

5.    NFTs Help Boost Inclusive Growth

NFTs can democratize growth which means more people can have access to these tokens. When the demand for NFTs rises, it can grow more, which could mean more access to rare collectibles. It could also mean more access to hard-to-find NFTs.

NFTs have the potential to democratize growth, which has the potential to create an inclusive growth model. This democratization is not only for big investors, hedge-fund managers, and corporate bigwigs; it’s also vital for the average joe who wants to earn good money.

At the same time, the original content creator can consistently get royalties from their NFT. A portion of all profits still goes to the artist, which provides a near-lifetime way to make money from the same token.

6.    Smart Contracts For Automated Executions

Smart contracts are another advantage NFTs provide. Smart contracts automate processes, so you can set automatic executions, from buying and selling to crowdfunding. Since NFTs are built on blockchain’s smart contract system, you can transfer them globally too.

With NFTs, you can embed code in smart contracts. These smart contracts can transfer NFTs across the globe. This allows you to transfer tokens between people without a third party and very little oversight. This level of movement can help you get more out of every transaction.

You can automate everything if you’re creating an NFT marketplace, from finding sellers to sending tokens. You can automate the back end, which means you can build as many marketplaces as you want.

Final Thoughts

Non-fungible tokens provide a new level of scarcity and authenticity. They have the potential to be a good investment, and they can be smart investments given the right NFT and opportunity. They can create value, provide monetary gains, and democratize profits for everyone. 

NFTs are the future of crypto-collectibles, and they’re the future of digital collectibles. Whether you invest now or tomorrow can mean the difference between loss and profit.

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