NFTs Explained

NFTs have repeatedly succeeded in making the headlines over the past couple of years. In 2022 alone, trading in the NFT market spiked by a whopping 21000% and hit $17.6 billion. Many renowned brands like Nike, Adidas, and Disney, have hopped on the NFTs bandwagon, expressed their interest in them, and have made serious moves to invest in this sphere.  It is, therefore, highly likely that you’ve heard of or read about the world of NFTs one way or another, but did you ever actually delve deeper into what NFTs are and how you can gain exposure to them?

What Are NFTs?

NFTs or Non-Fungible Tokens are cryptographic assets that digitize real-world objects. In other words, NFTs take tangible and non-tangible objects that are often encountered in real life, like real estate, music, GIFs, collectibles, avatars, designer sneakers, clothes, art, in-game videos, and even tweets, and turn them into digital assets; the possibilities are endless.

The digital assets are then usually traded online and are often purchased and sold using cryptocurrencies. 

NFTs and Cryptocurrencies 

Generally, while NFTs are supported by blockchain technology like Bitcoin Cash and other cryptocurrencies, they mainly run on the Ethereum blockchain and are often paid for in crypto. However, while NFTs are also decentralized the two don’t have any further similarities. 

While cryptocurrencies are fungible and can be exchanged for one another, NFTs, as their name suggests, are not. This means that while you can replace one Bitcoin with another as it can retain the same value, NFTs cannot be traded for one another nor duplicated. This is because each NFT has a  personalized and special digital signature that makes it hard to replicate. The digital signature is essentially proof of the authenticity of the NFT as each NFT creator can sign their NFT with their own special signature and authorize it. For example, if someone intends to sell a copy of an NFT, it is highly unlikely that it will be sold because the NFT’s original owner did not authorize the copy. Unauthorized copies do not have the creator’s digital signature, and the digital signature is what shows its authenticity. 

Nonetheless, NFT files can be copied and distributed, which might make the prospect of them being “non-fungible” sound like a paradox. However, despite that, they actually still retain their individuality. The reason for this is that, even though they can be copied, they cannot be duplicated which means that they get to obtain their originality - This is the trait that made them popular to begin with.  

Indeed, this might seem a bit confusing, so to better understand what might seem like a contradictory idea, one can look at NFTs like famous art pieces or collectibles. For example, while there are multiple copies of Leonardo Da Vinci’s famous painting “The Mona Lisa”, the original and only painting (as far as we know) is presented exclusively at the Louvre. This element of exclusivity and non-fungibility is translatable to NFTs and is arguably where they derive their value from. Furthermore,  NFTs are also considered extensible which means that you can merge one NFT with the other to create a third breed of NFTs.

 NFT-related Stocks and Indices

There are myriad access points available into the world of NFTs. One way to gain exposure to NFTs is through trading CFDs on the NFT Giants Index on the Plus500 platform.  This index tracks the trajectory of some NFT-related companies like Activision Blizzard, DraftKings, Mattel, WWE, and more.  

Another means of gaining exposure to companies related to NFTs is through trading CFDs on NFT-related stocks. You can trade CFDs on the companies that have adopted this relatively new technology. For example, in 2021 beverage mogul, Coca-Cola released its first-ever NFT collectibles in celebration of Friendship Day. The NFT raised $575,000 to benefit The Special Olympics International organization. Fast-food giant McDonald’s has also set foot in the NFTs and the Metaverse industries by launching its first NFT in celebration of its 40th anniversary in 2021. 

Other companies that have embarked on the NFTs journey are Twitter, Nike, Coinbase, and eBay. Accordingly, one can gain exposure to the NFT world through trading CFDs on these stocks.  

What’s Next?

While NFTs certainly made a buzz in 2021, the NFT marketplace has been experiencing a slight downturn in the past couple of months. Nonetheless, while this niche market might be experiencing a downtrend, some experts believe that the future for NFTs is actually bright and claim that it might grow 20 times bigger in the upcoming 8 years.   What will really happen with this buzz-making marketplace is still unclear and traders and investors alike might have to wait and see for themselves what the future holds for this burgeoning space.