Non-fungible Tokens (NFTs)

What are NFTs? Non-fungible tokens are unique in nature unlike Bitcoin, Ether, Binance, Solano, etc. Fungibility means it could be replicated, but every NFT is rare and scarce. Non-fungible token could be used for creating digital version of collectibles, art work, and games. NFTs could be compared to train tickets, where all tickets look identical, prima-facie, but the seat numbers are different and even destinations could differ.

NFTs were long considered as niche segment of the cryptocurrency industry, but their popularity exploded in 2021. What was noticeable - several sporting organisations launched NFTs of best sportspersons, athletes; film personalities came out with their own NFTs; and fashion houses as well as film directors have also followed the suit. Today, Indian conglomerate, Mahindra Group, is launching its first NFT for Thar SUV. NFTs are generally issued on Ethereum blockchain technology, in the form of ERC-721 tokens.

How does NFT token function? Issuance of NFTs led to pressure on the Ethereum blockchain, resulting in creation of NFTs/digital assets on the rival platforms. Unlike major cryptocurrencies, NFTs can't be divided into smaller quantities and it has to be in single unit or in multiples of one unit. NFTs would carry value when supply is limited or scarce, which has to be ensured by the developers. Uniqueness of NFTs make it possible to split tokens into varying degree of rarity.

Some crypto games NFTs are sold in packs, which leaves a chance for every player to get one of the coveted NFTs. It's equally important that NFT blockchain platform verify the authenticity of digital asset and provide ownership history of successive owners, if any. Though NFTs have proliferated in the recent past, yet some believe that it would bring in much needed relief into certain sectors, like music with release of albums in tokenised form, which were badly affected during ongoing pandemic.

NFT Market and Price volatility: The NFT market exploded in the first half of 2021 when US$ 2.5 billion worth of NFTs were sold as compared to US$ 13.7million worth of NFTs getting sold in the corresponding period of 2020. The popular examples of NFT tokens are CryptoKitties, Kings of Leon album, Football trading cards, Basketball trading cards, and anonymous art work. NFTically, a Global B2B SaaS platform, enables you to release your own white-label NFT store or NFT Marketplace without knowledge of technology.

Some critics believe that a hype is getting built around NFTs on account of demand exceeding supply of tokens. It is predicted that supply of tokens will eventually outpace the demand when prices would crash. Some crazy investors have spent six figure sums in owning rare tokens, with the expectation of making profits. However, NFT price crash would prove to be a problematic for them. There are millions of NFTs available on various marketplaces. Axie Infinity platform has more than 6 million tokens on its website. This price volatility phenomenon could be compared with the popularity of Initial Coin Offerings (ICOs) in 2017, when a lot of investors lost money owing to scams, and some of the projects never materialised.

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