An NFT can be resold in the market for cash or cryptocurrency and constitutes taxable income. (Credit: Divyanshi Soni)
A new year, a new set of aspirations. And a new adventure in the technological universe is to experiment with non-fungible tokens.
What? NFT, being such a small business enterprise, the name has a high-tech ring. Basically, it has to do with blockchain technology, cryptocurrencies, etc. So what are non-fungible tokens?
NFT — They are digital currencies based on the macroeconomic concept of convertibility. Money, we know, whether physical or digital, is a convertible asset, just like oil and gold.
the oxford dictionary defines fungibility as the replacement of another identical item or “mutually interchangeable” assets. Tokens digitally represent anything, including online-only assets such as digital artwork or tangible assets such as real estate. Other examples include in-game items such as avatars, digital and non-digital collectibles, domain names, and tickets to concerts and special events. Add movies, music, or properties to virtual worlds used in avatar portals such as second life.
Because NFTs represent a specific asset, they are not as convertible as other more conventional currencies or data bit currencies. Thus, the notion of non-fungible.
BUSINESS — It turns out that artists, influencers, and the US National Basketball Association are making millions from non-fungible tokens. Enthusiasts see NFTs as the future of ownership. From event tickets to homes, all kinds of property can have NFT ownership status. For artists, NFTs could solve the problem of monetizing digital artworks. The NBA launched Top Shot in 2019, a marketplace for NBA Highlight Reels, which users can collect and trade through blockchain technology.
An NFT can be resold in the market for cash or cryptocurrency and constitutes taxable income.
Data from DappRadar, a company that tracks sales, showed NFT trades hit $22 billion in 2021, up from just $100 million in 2020.
ART — Sometimes cryptocurrency is easily adopted in the art world to generate profits. It is an intersection of binary data and art to empower creatives through innovative web offerings. As one creator describes it, NFTs allow artists to interact directly with fans and make a living from their craft without a centralized intermediary.
For example, sites such as known origin sells graphic arts from international creators based on the Ethereum Blockchain concept. Anyone can collect, buy and sell digital art using NFTs as currency for goods.
Even creative entrepreneurs market their fashion designs through the concept of NFT currency.
WALLETS – All NFT art objects are sold through e-wallets that send, receive and store digital assets. Wallets come in many forms, installed in a browser, an extension, computer-connected hardware, or an app on your phone. This e-commerce site Eth Hub, explains the concept of Ethereum wallets that use a digital currency called Ether. The person opens and funds a crypto wallet on an NFT marketplace for e-commerce or investing.
ETHERUM — It is a public and open-source electronic transaction ledger that allows developers to build blockchain applications with business logic within an NFT network. As such, NFTs open the door to a global financial system where an internet connection is all you need to access apps, products, and services that run on cryptocurrency. Anyone can interact with the Ethereum network and participate in this digital economy without third parties.
RELIABILITY — To sum up this somewhat “ethereal” topic, NFTs are digital tokens that internet users can use to represent ownership of unique objects. They allow investors to “tokenize” things like art, collectibles, even real estate. Objects can only have one official owner at a time, and the Ethereum blockchain secures them. The function of the blockchain is to prevent anyone from altering the ownership record with a copy/paste tactic or non-fungible pseudo token. So everything is well secured.