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PYMNTS NFT Series: What Are NFTs

PYMNTS NFT Series: What Are NFTs
Written by publishing team

Welcome to the first installment of the PYMNTS series on Non-Foldable Tokens (NFTs), the latest craze in cryptocurrency.

Over the next 12 days, we’ll be looking at every bit of the NFT craze sweeping the worlds of art, video games, social media, fashion and sports.

Upon completion, you will have a solid understanding of the basics of NFTs – what they are, how they work, what they will be used for, what their disadvantages are, what you should be aware of – and wary of – who, and why people pay so much money for them.

So, what is an NFT?

The shortest and most literal answer is that it is a non-fungible code. Fungible is an economic term and means an asset that can be exchanged for any other asset of the same type, such as bitcoin, a share of stock or money, since one $10 bill always equals two $5 bills.

An indestructible token is a digital asset similar to Bitcoin or any other blockchain-based token, but with one big difference: it’s as unique as a board or a house.

NFT is a unique digital asset on which any type of data can be stored – photos, video, music or text. And because it is built on the blockchain, this data cannot be altered, falsified, or destroyed. As long as the blockchain exists, it is.

And since all transactions are public on the Ethereum blockchain – on which the vast majority of NFTs are hosted – anyone can trace the source and verify its provenance.

This means that it can be sold and resold in the marketplaces and held in digital wallets like any other cryptocurrency. It can also be hacked and stolen, although NFT known to be stolen is difficult to sell if you want to take advantage of it in the real world.

See also: Samsung adds the NFT platform to the list of smart TVs

If you’re new to coding, you’ve likely come across three types of NFTs: art, videos, and avatars.

NFT’s possession of a digital poster by artist Mike Winkelman, aka Beeple, which fetched at auction last year for more than $69 million, made it the third highest price ever paid for a living artist’s work. This number ensures plenty of mainstream coverage, although it’s not the only multi-million NFT for Beeple.

Read more: NFT Artist Beeple Sculpture Collection Worth $15 Million at Christie’s Auction

Others have entered the trend, from ’90s bad boy artist Damien Hirst (of floating shark in formaldehyde fame) to musician and ex-girlfriend of Elon Musk Grimes, who sold $6 million in NFT artwork last year.

See also: Kraken Crypto targets the NFT Art Lending Market

For video, think of the NBA’s NFTs Top Shots, which featured clips highlighting the slams and pushing the NBA hard over the past season, leading to the first real spike in NFT sales outside of the crypto world.

You will also see more NFTs in Music. Musicians and production companies are interested in NFTs as a way to distribute music, with the Kings of Leon releasing their March 2020 album “When You See Yourself” as an NFT – and all regular channels, of course – with added features ranging from art to very expensive limited room that comes with free concert seating. forever.

The coming of the gods

On one level, avatars are those weird little pictures of CryptoPunks and Bored Apes that celebrities have been paying so much for lately. Rapper Eminem spent $452,000 for one of the latter two, the Bored Ape Yacht Club NFT featuring a monkey wearing his signature gold chain and khaki hat.

Like most people who own these cool avatars, Marshall Mathers instantly made it their verified profile picture. Eminem Twitter the account. Like a growing number of celebrities, the sale got so much press that the digital agency that facilitated the sale called itEminApe. “

And this is where a good portion of the big money is being funneled at the moment, as many of these avatars have been minted in limited cycles, so when one captures the public imagination, the price can skyrocket.

Probably the largest market will be video games built on blockchain platforms, which can use NFTs to represent both characters and objects. One the NFT is your warrior, the other is a magic sword, and the third is a special hard-to-obtain outfit. There is a lot of potential here. Play-to-earn games like Axie Infinity – the top-selling NFT platform – allow players to create useful items to sell to other players, while items built from standard NFT tokens can be used across platforms, such as an outfit that travels with the player and not a game character.

Read also: What is the Metaverse, and why does one have a fashion show?

And NFTs are a big part of the blockchain-based version of the next big thing: metaverses, interactive virtual worlds that rose to public attention when Mark Zuckerberg renamed the Facebook Meta and announced that he thought it would eventually be a metaverse. Nike, Gucci, Dolce & Gabanna have all sold virtual products on NFTs in metaverses such as Decentraland.

Legal uses

There are a lot of uses for NFTs, which can contain verifiable and non-falsifiable data. Lots of companies file title documents on the NFT, where stocks and real estate titles are commonly cited but rarely used, as the law has to catch up.

The law does, because these non-financial ETFs — and others — could be securities, according to the US Securities and Exchange Commission, which plans to examine the issue this year.

NFTs can also be used to mark up property so that it can be sold in parts, opening up the general public for investments out of reach of non-wealthy buyers — a share of a hotel or a board, for example.

See also: Charities turn to NFTs for fundraising

They can also make smart contracts that add an ownership feature so the artist can get a fraction of any future resale of their work.

Read also: 42% of cross-border companies use blockchain-based smart contracts that lead to payment

Then there are identity documents. Portable identification documents containing personal data controlled by the owner – known as Sovereign Self-ID – is a blockchain use being explored by groups ranging from Big Tech data opponents who dump data to UN refugee agencies.

Finally, there is the wild NFT card. By giving something the source of being original, you can sell almost anything. Former Twitter CEO Jack Dorsey – a Bitcoin supporter who leads payments company Block (formerly Square) – sold his first tweet NFT for $2.9 million last March. And while the tweet is still “live on Twitter” where anyone can see and copy it, the buyer has an NFT signed and verified by Dorsey.

After selling his $69 million pool, Winkelman explained that any NFT buyer needs to know exactly what they’re buying. The person who bought “Everydays: The First 5000 Days” did not buy the copyright, only the NFT and the right to view it. Like everything in crypto, Emptor Warning – let the buyer be warned.

Next up: What is an avatar and why do people pay so much for it?

Avatars are the number one way to use NFTs in practice – as a digital representation of the owner and their personality. Why would Eminem buy a $450,000 photo of a monkey wearing his chain and hat? Prestige, being in an exclusive club, an expression of individuality, publicity, investment – there are many reasons.

Then there’s the important question: When will Kardashian buy the NFT?

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New PYMNTS data: Documenting Identities in the Digital Economy – December 2021

on:More than half of American consumers believe biometric authentication methods are faster, more convenient, and trustworthy than passwords or PINs – so why do less than 10% use them? PYMNTS, in collaboration with Mitek, surveyed more than 2,200 consumers to better define this perception versus the usage gap and identify ways companies can boost usage.

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