NFT tokens are often based on the Ethereum blockchain – but levels of congestion seen on this network have meant digital assets have started to be created on rival platforms.

To create scarcity that gives NFT tokens their value, developers can ensure that the supply of tokens is strictly limited. It’s also common for tokens to be split into varying degrees of rarity, meaning that only a small number of the most desirable tokens will ever exist. NFTs for some crypto games are sold in packs, meaning that every player has a chance of getting their hands on one of the most coveted NFTs.

And another thing that sets NFTs apart from major cryptocurrencies such as Bitcoin and Ether is the fact that they cannot be divided into smaller chunks. Whereas it’s easy to send 0.05 BTC to a friend, it’s impossible to send 5 per cent of an NFT in a similar fashion.

One of the most common advantages of non-fungible tokens lies in how blockchain platforms can help verify the authenticity of an asset – and provide a comprehensive history of ownership.

Some believe that the growth of NFTs could breathe fresh life into the embattled music sector, which has been hit hard by the coronavirus pandemic. Kings of Leon were recently pioneers when they launched their eighth studio album in tokenised form – enabling fans to place a bid. The rarest token available offered some insane perks, including front-row seats to the band’s concerts for life, piles of merchandise, and a chauffeur.

The major factors by which the NFTs are valued are:

• Scarcity: NFTs aren’t mass produced and cannot be replicated. In fact, many NFTs are one-of-a-kind.
• Indivisible: While not technically impossible, NFTs typically cannot be broken into smaller parts. This functionality makes fractional ownership of the asset impossible.
• Unique: An NFT is authenticated by a “permanent information tab,” which confirms that it is a unique asset.

At its core, an NFT’s value is driven by supply and demand. Due to vastly limited supplies and their one-of-kind nature, a sudden increase in public interest can spike prices. Subsequently, the cryptocurrency boom of late-2020 and early-2021 took many NFT products to staggering heights.

One of the essential things about NFTs is that anyone can make, buy, and sell an NFT without asking for anyone’s prior consent. Also, these digital assets are kept in an encrypted peer-to-peer system, which makes it hard for cybercrooks to hack or tamper.

Currently for buying or selling NFT, you have to install Metamask–Ethereum’s digital wallet, the second most popular cryptocurrency after Bitcoin. After installing Metamask, you can buy Ethereum. You can visit any website like market site such as OpenSea, SuperRare, Foundation, or VIV3 which sells NFTs, you can use the bought etherium to buy an NFT. Also, you can trade NFTs from crypto exchange Uniswap by connecting your Metamask account.

The Covid pandemic has further devastated the poorly-paid lives of innumerable artists, musicians and creators. The digital world offers a creative outlet, but in it, any creation can be easily duplicated. This is where NFTs come in. With NFTs, any creation can be tokenised to create a digital certificate of ownership, helping creators get a life-changing price for their art.

Theoretically, artists with NFTs for their creations can access a global market, retain ownership rights over their work and claim benefits like resale royalties directly. But in the real world, new-fangled innovations seldom work the way it is claimed. Some even think that NFTs will fix the shattered economics of streaming music and restore the power-balance between art creators and art mediators. But all this is mere conjecture at this point. The NFT eco-system after all, is connected to the largely unregulated world of cryptocurrencies.

Over the past 10 years or so, the crypto sector has regularly been gripped by crazes. A notable example comes in the form of initial coin offerings, which exploded in popularity in 2017. Here’s the problem: many investors lost substantial amounts of money owing to scams and projects that never came to fruition.

Few critics, such as Litecoin founder Charlie Lee, believe that the sudden spike in NFT trading activity is extremely problematic. He predicted that the supply of NFTs will eventually overtake demand, causing prices to crash. This will create big problems for those who spent six-figure sums to get their hands on rare tokens, all with a hope of selling it for a profit in the future.

For all the excitement, there are also concerns that NFTs are not eco-friendly because they are built on the same blockchain technology used by some energy-hungry cryptocurrencies. For example, each NFT transaction on the Ethereum network consumes the equivalent of daily energy used by two American households.

Security for most of today’s blockchain networks is based on special computers called “miners” competing to solve complex math puzzles. This is the proof-of-work principle, which keeps people from gaming the system and provides the incentive for building and maintaining it. The miner who solves the math problem first gets awarded with a prize paid in virtual coins. The mining requires a lot of computational power, which drives electricity consumption.

Ethereum blockchain technology is evolving and moving toward a less computationally intensive design. There are also emerging blockchain technologies like Cardano, which was designed from the outset to have a small carbon footprint and has recently launched its own fast-growing NFT platform called Cardano Kidz.

The speed of transformation of blockchain technology into a newer, more eco-friendly variant might well decide the future of the NFT market in the short term. Some artists who feel strongly about global warming trends are opposed to NFTs because of perceived ecological impact.