What are NFTs? Here’s All that You Need to Know

News about NFTs is trending and even Bollywood has jumped on the bandwagon. But what exactly are NFTs? Are they revolutionary and worth the hype? A possible investment avenue?

Let’s find out!

What are NFTs

Before getting into NFTs, it is important to understand what fungible and non-fungible assets are.

A fungible asset or token is a unit that is easily interchangeable with another of the same value. For eg. a Rs. 200 note has the same value as two Rs. 100 notes and can be exchanged, making them fungible assets.

A non-fungible asset cannot be interchanged easily due to its unique nature. For eg. a car cannot be exchanged for a house as they are not the same unit and may not have the same value.

NFTs or Non-Fungible Tokens are essentially digital assets that represent real-world objects such as paintings, music, games, etc. These are unique digital items that can be bought and sold in the online market similar to how people purchase and sell paintings, properties, etc. in the real world.

However these are not tangible or physical and ownership in this case is only for the virtual asset in question.

How Do NFTs Work?

Traditional paintings especially those by artists such as M.F.Hussain, and Amrita Sher-Gil are priceless due to their uniqueness and value placed on them. Despite the number of copies that are made of their paintings, the originals hold the highest value. But digital work can be easily duplicated.

This is where NFTs are said to be revolutionary. Artists can now tokenize their digital artwork and create a certificate of ownership, similar to how it is for a physical painting. These details are stored in an online ‘ledger’ known as the blockchain. This ensures that the tokenized artworks have a unique certificate of ownership which cannot be stolen or copied.

While this does not prevent digital artworks from being copied, ownership for the original can be decided.

Please note that digital artwork does not necessarily have to be restricted to paintings. It can also involve memes, collectibles, videos, texts, and even real estate. 

An example of this would be, in September of 2021, Bollywood superstar Amitabh Bachchan launched his own NFTs including autographed posters of his movies.

Popularity and Future of NFTs

Similar to how one would purchase/collect paintings, sculptures or other forms of art, there are a number of takers for NFTs as well. For. eg., an NFT by a digital artist by the name of Beeple was sold for $69 million.

Many believe that the lockdown of 2020 and 2021 has contributed to the popularity of digital artwork and collectibles as there was an increase in the time spent on the internet.

Some also believe that this could contribute to the growth of artists as they have more avenues to be noticed instead of having to just rely on galleries and exhibitions. Collectors and investors can also take pride in owning something that is unique.

However, whether this is a revolution of sorts or just a temporary trend will have to be seen.

Are NFTs Legal in India?

On 1 June, 2021, a company called WazirX announced India’s first NFT marketplace leading to multiple applications from creators and collectors. Since then a number of companies have launched NFT services, therefore it is possible to purchase NFTS in India.

However, since NFTs are only traded in cryptocurrency and there is no clarity on their legality, investing or trading in NFTs is quite risky. There is no separate legal framework for NFTs as well and collectors or investors may end up paying extra tax in addition to GST. 

In Conclusion

The world has been going digital for a while and NFTs are the latest addition. Being able to purchase unique digital artwork through cryptocurrencies is what NFTs promise. There is also a rise in the demand for them as well.

However, since they are new and there is no clear framework for the same, purchasing or investing in NFTs will have to be done with caution. 

What do you think is the future of NFTs in India? Is this something you will be interested in?

Let us know in the comments below.