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NFTs: Why you should pay attention

Football superstar Lionel Messi recently launched his own collection of NFTs, or non-fungible tokens, that were created using his image by an Australia-based digital designer and are expected to make billions of dollars.

In India too, Bollywood superstar Amitabh Bachchan has launched his own NFTs, which are themed around his life. Before him, Sunny Leone became the first Bollywood actress to launch her own NFT collection of unique, hand-animated art.

Messi, Big B and Leone are not alone in this business. The popularity of NFT, a type of digital asset, has exploded beyond anyone’s imagination in recent years. NFT artworks have been selling for millions and attracting the attention of big brands, celebrities and icons.

What are NFTs?

In simple terms, NFTs are digital assets that exist on a public blockchain that serves as a record of ownership. While anyone can view the items, only the buyer of an NFT has the ‘official’ status of being its owner.

Unlike digital items that can be endlessly modified and reproduced, each NFT has its own digital footprint, which makes it one of a kind. All kinds of digital objects such as images, text, videos, music and even tweets can be converted into NFTs and that process is called “minting” (Yes, like in the cryptocurrency world).

Growing Popularity

The fact that NFTs can give buyers a sense of “unique ownership” and “Digital Immortality” has unlocked exciting opportunities for digital commerce and engagement.

Despite being in existence since 2017, the popularity of NFTs surged only in 2021. According to DappRadar, a Lithuania-based data tracking company, trading volumes of top NFT collections such as Axie Infinity, CryptoPunks and ArtBlocks increased 300% and generated more than $1.5 billion in sales.

Another report published in Forbes pegged NFT sales at over $1.2 billion – almost half of the $2.5 billion cumulative sales volume in the first two quarters of 2021 – while the dapp (decentralised applications) industry as a whole registered more than 1.4 million daily unique users, a 23.72% increase from the previous month.

Future Possibilities

In the crypto world, the idea of integrating NFTs and e-commerce platforms has been making headlines for a while now. Experts believe due to its digital nature and long shelf life, NFTs can play a significant role in the world of e-commerce and market with high-end goods.

“As mixed reality technologies mature, regular people are going to spend more and more of their time — and therefore money — in virtual environments,” a research associate affiliated with a French international banking group told a Business channel.

Since NFTs are digital in nature, they do not involve the hassles or cost of shipping products (even though there is a certain minting and hosting fee that needs to be paid to the marketplace showcasing the NFTs as collections).

Big opportunities await luxury brands that can potentially offer exclusive and limited NFTs without having to worry about counterfeits since the metadata on the token cannot be changed by users.

Need for Precaution

However, all good things come with certain challenges. And in the case of NFTs, the issue of copyright is one. As the market for NFT grows, cases of digital art being copied on the NFT platforms have surfaced, calling for a strict recourse on digital theft and modification.

Though some platforms such as OpenSea and Nifty Gateway provide users with the option to report or appeal copyright infringement in their terms of service, the absence of any official trademark makes it harder for the creators to lay a claim in the world of the internet.

The issue of cyber-security also looms, as several users have reported about accounts being hacked and NFTs worth thousands of dollars getting stolen.

(The author, Samrat Kishor, is Tech Strategy Consultant & Entrepreneur, Golden Next Ventures. The views are his own.)

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