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Non Fungible Tokens, you most likely have heard about them but do you understand the concept of art selling in the digital space for a tiny fortune. If you understand what NFTs are, the reason why they exploded out of the block and became insanely popular might be harder to come by.
2021 was the year NFTs exploded but like all things crypto, the period they go mainstream is usually distant from when they started gathering momentum. In this piece, we will look at NFT holistically and also try to demystify its insane popularity.
What are NFTs?
NFT is an abbreviation for Non-Fungible tokens. So, what are Non-Fungible tokens, and why is everyone getting crazy about them?
A non-fungible token (NFT) is a type of cryptographic token on a blockchain that represents a class of unique assets. These can either be entirely digital assets or tokenized versions of real-world assets. As NFTs are not interchangeable with each other, they may function as proof of authenticity and ownership within the digital realm.
I'm sure that doesn't really make it clearer but I will break it down a little:
Fungibility implies that an asset's units are interchangeable and essentially indistinguishable from each other. For example, fiat currencies are fungible because each unit is interchangeable with any other equivalent individual unit.
The ability that makes money to be interchangeable and a legal tender are referred to as fungibility. For every time you take out fifty units of your currency and you are given five pieces of ten units of the same currency, you have fungibility to thank for that.
Today, there is increasing attention being paid to Non-fungible tokens and the potential it holds in revolutionizing the arts and systems of ownership. Non-fungible tokens (NFT) have become digital assets that represent a wide range of unique tangible and intangible items, from collectable sports cards, trivia items to virtual real estate and even digital sneakers.
The Underlying workings of Non-Fungible Token
What this then implies is that an item referred to as an NFT is hosted and housed on the blockchain and only one piece of that item can be made. The blockchain makes sure of this. NFTs follow the same protocol as other cryptocurrencies and as such their creation, existence and ownership are proven by the blockchain.
It must be said at this point that if you purchase an NFT, you are not purchasing the digital asset as it were. This is because your NFT can still be downloaded depending on how the NFT is tokenized. Think of it as purchasing an album off Spotify, yes, you can listen to the album, but someone owns it. It is the same way when someone uses a digital copy of an NFT that is owned by someone else.
What you are purchasing then is a digitally-authenticated note that the asset is owned by you and you alone. It is that right that is transferrable and that is what you are really purchasing when you buy an NFT.
NFT addresses the issue of ownership in the digital space. By purchasing an NFT, the blockchain records you as the one who has the token. It does not mean that the artwork cannot be used elsewhere; in fact, you will most likely see the artwork you own on the internet if it is popular enough. What matters is that you own it. That is what NFT is about.
What can be NFT?
Anything can be NFT; literally, anything, from music, Virtual furniture to Times Magazine Covers NFT is an interesting field. Already, we have seen crazy auctions for NFT arts, from Beeple Insane sale of a $69 million NFT art to the Gucci Ghost that was purchased for $3,600
Why are NFTs insanely popular?
NFTs are not new, the first set of NFTs to hit the market was called Colored Coins; they were basically bitcoin tokens that had the functionality that could allow them to represent other tokens and assets on the blockchain. This was in 2012. However, Coloured Coins are not considered true NFTs for everyone.
The first recognized NFTs were released as part of Etheria, a 33-by-33 3D map of 457 purchasable and tradable hexagonal tiles upon which small structures can be built with Lego-like bricks. Version 1.0, with internal trading mechanisms that appear to be non-functional, was deployed to the Ethereum main net on October 21st, 2015. Version 1.1, released on Oct 29th. According to OpenSea most of the NFTs went unsold.
It would take another five years before NFTs would come yet again to the public consciousness. This was via cryptopunks and cryptoKitties, they were so popular that they ended up clogging up the Ethereum Blockchain. That was not the only part though – people made a lot of money flipping cryptokitties.
It was until the global lockdown of 2020 that NFT came again to the mainstream and now, we can be certain that it is not going anywhere again. More than any other thing, the boom of NFTs have shown us that there is an unpredictable adoption culture when it comes to new technologies.
NFTs became insanely popular on the premise of scarcity, like several other components of crypto and other technological business models, NFTs feed off emotions. During the lockdown, the digital shift happened and with it the rise of NFT. During the lockdown, the interest in trading cards boomed and with it NFTs. The digital collectible market of NFTs grew a whopping 26 Times based on Year on Year growth compared to Q1 2020. It did an entire $1.4 Billion in sales.
With the advent of GameFi and other play-to-earn structures within the metaverse, forecasts are clear enough to show that while sales might drop, NFTs are not going anywhere. It will always be a part of our world as we have come to know it at this present time. Even the Forbes Tech Council agrees.
Do you think NFTs are the next best investment? Let us know in the comments on our instagram and facebook pages!
All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!
| Country | Issue | Kryptos Use Case |
|---|---|---|
| India | Cryptocurrency transactions are taxed as capital gains, with evolving legislation creating uncertainty. | Kryptos.io streamlines the process by automatically tracking transactions and computing capital gains, adjusting to new regulations for precise reporting. |
| Brazil | Cryptocurrencies are subject to capital gains tax and must be reported, posing challenges with complex requirements. | Kryptos.io simplifies compliance by offering real-time transaction tracking and detailed tax calculations, making it easier to meet Brazil’s tax obligations. |
| Nigeria | Regulatory framework for cryptocurrencies is evolving, with uncertainty around taxation and restrictions from the Central Bank. | Kryptos.io provides an adaptable solution by maintaining detailed records and generating flexible reports, helping users stay compliant despite regulatory changes. |
| USA | Cryptocurrency transactions are subject to capital gains tax, with detailed IRS reporting requirements. | Kryptos.io enhances compliance by automating the tracking of transactions and generating comprehensive tax reports, facilitating adherence to IRS requirements. |
| UK | Cryptocurrencies are taxed under both capital gains tax and income tax, requiring careful tracking and reporting. | Kryptos.io aids UK users by monitoring both capital gains and income from crypto transactions, ensuring accurate and straightforward tax reporting. |
| Australia | Cryptocurrencies are subject to capital gains tax, and users must report their gains and losses to the ATO. | Kryptos.io assists Australian users by providing seamless transaction tracking and precise capital gains calculations, ensuring efficient compliance with ATO reporting requirements. |
| Germany | Cryptocurrencies are taxed as private assets with gains subject to tax if held for less than a year. | Kryptos.io supports German users by tracking holding periods and computing taxes on cryptocurrency transactions, ensuring adherence to German tax regulations. |
| Japan | Cryptocurrency gains are treated as miscellaneous income and are subject to high tax rates. | Kryptos.io helps Japanese users by offering a detailed tracking system and calculating taxes on miscellaneous income, efficiently managing high tax obligations. |
| Scenario | Description | Kryptos Features that can be of aid |
|---|---|---|
| Multiple Exchanges and Wallets | Consolidating records from various exchanges and wallets to maintain a comprehensive overview of crypto activities. | Seamless integration with numerous exchanges and wallets, automatic import, and consolidation of records. |
| International Transactions | Managing records for cross-border transactions, including currency conversions and compliance with international tax laws. | Support for multiple currencies, efficient management of cross-border activities, accurate currency conversion for reporting. |
| Complex Transactions | Handling trades, swaps, staking, lending, and other sophisticated crypto activities. | Advanced tracking, reporting, and documentation for various transaction types. Kryptos' DeFi and NFT modules offer specialized tools for managing decentralized finance and NFT activities, ensuring precise records and comprehensive oversight. |
As Web3 evolves, managing a diverse portfolio has become complex. Kryptos simplifies this with advanced tools for real-time tracking, NFT management, and DeFi analytics. Discover how Kryptos turns challenges into strategic advantages for modern investors.
Struggling with crypto tax in Australia? Kryptos.io simplifies the process, ensuring accurate and compliant filings with the ATO. Track transactions and value assets effortlessly—make tax season stress-free.
Mastering Crypto Taxation: Navigate the Complex World of Digital Assets with Kryptos, the Ultimate Solution for Accurate, Efficient, and Future-Proof Tax Reporting.
Non Fungible Tokens, you most likely have heard about them but do you understand the concept of art selling in the digital space for a tiny fortune. If you understand what NFTs are, the reason why they exploded out of the block and became insanely popular might be harder to come by.
2021 was the year NFTs exploded but like all things crypto, the period they go mainstream is usually distant from when they started gathering momentum. In this piece, we will look at NFT holistically and also try to demystify its insane popularity.
What are NFTs?
NFT is an abbreviation for Non-Fungible tokens. So, what are Non-Fungible tokens, and why is everyone getting crazy about them?
A non-fungible token (NFT) is a type of cryptographic token on a blockchain that represents a class of unique assets. These can either be entirely digital assets or tokenized versions of real-world assets. As NFTs are not interchangeable with each other, they may function as proof of authenticity and ownership within the digital realm.
I'm sure that doesn't really make it clearer but I will break it down a little:
Fungibility implies that an asset's units are interchangeable and essentially indistinguishable from each other. For example, fiat currencies are fungible because each unit is interchangeable with any other equivalent individual unit.
The ability that makes money to be interchangeable and a legal tender are referred to as fungibility. For every time you take out fifty units of your currency and you are given five pieces of ten units of the same currency, you have fungibility to thank for that.
Today, there is increasing attention being paid to Non-fungible tokens and the potential it holds in revolutionizing the arts and systems of ownership. Non-fungible tokens (NFT) have become digital assets that represent a wide range of unique tangible and intangible items, from collectable sports cards, trivia items to virtual real estate and even digital sneakers.
The Underlying workings of Non-Fungible Token
What this then implies is that an item referred to as an NFT is hosted and housed on the blockchain and only one piece of that item can be made. The blockchain makes sure of this. NFTs follow the same protocol as other cryptocurrencies and as such their creation, existence and ownership are proven by the blockchain.
It must be said at this point that if you purchase an NFT, you are not purchasing the digital asset as it were. This is because your NFT can still be downloaded depending on how the NFT is tokenized. Think of it as purchasing an album off Spotify, yes, you can listen to the album, but someone owns it. It is the same way when someone uses a digital copy of an NFT that is owned by someone else.
What you are purchasing then is a digitally-authenticated note that the asset is owned by you and you alone. It is that right that is transferrable and that is what you are really purchasing when you buy an NFT.
NFT addresses the issue of ownership in the digital space. By purchasing an NFT, the blockchain records you as the one who has the token. It does not mean that the artwork cannot be used elsewhere; in fact, you will most likely see the artwork you own on the internet if it is popular enough. What matters is that you own it. That is what NFT is about.
What can be NFT?
Anything can be NFT; literally, anything, from music, Virtual furniture to Times Magazine Covers NFT is an interesting field. Already, we have seen crazy auctions for NFT arts, from Beeple Insane sale of a $69 million NFT art to the Gucci Ghost that was purchased for $3,600
Why are NFTs insanely popular?
NFTs are not new, the first set of NFTs to hit the market was called Colored Coins; they were basically bitcoin tokens that had the functionality that could allow them to represent other tokens and assets on the blockchain. This was in 2012. However, Coloured Coins are not considered true NFTs for everyone.
The first recognized NFTs were released as part of Etheria, a 33-by-33 3D map of 457 purchasable and tradable hexagonal tiles upon which small structures can be built with Lego-like bricks. Version 1.0, with internal trading mechanisms that appear to be non-functional, was deployed to the Ethereum main net on October 21st, 2015. Version 1.1, released on Oct 29th. According to OpenSea most of the NFTs went unsold.
It would take another five years before NFTs would come yet again to the public consciousness. This was via cryptopunks and cryptoKitties, they were so popular that they ended up clogging up the Ethereum Blockchain. That was not the only part though – people made a lot of money flipping cryptokitties.
It was until the global lockdown of 2020 that NFT came again to the mainstream and now, we can be certain that it is not going anywhere again. More than any other thing, the boom of NFTs have shown us that there is an unpredictable adoption culture when it comes to new technologies.
NFTs became insanely popular on the premise of scarcity, like several other components of crypto and other technological business models, NFTs feed off emotions. During the lockdown, the digital shift happened and with it the rise of NFT. During the lockdown, the interest in trading cards boomed and with it NFTs. The digital collectible market of NFTs grew a whopping 26 Times based on Year on Year growth compared to Q1 2020. It did an entire $1.4 Billion in sales.
With the advent of GameFi and other play-to-earn structures within the metaverse, forecasts are clear enough to show that while sales might drop, NFTs are not going anywhere. It will always be a part of our world as we have come to know it at this present time. Even the Forbes Tech Council agrees.
Do you think NFTs are the next best investment? Let us know in the comments on our instagram and facebook pages!
All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!
As Web3 evolves, managing a diverse portfolio has become complex. Kryptos simplifies this with advanced tools for real-time tracking, NFT management, and DeFi analytics. Discover how Kryptos turns challenges into strategic advantages for modern investors.
Struggling with crypto tax in Australia? Kryptos.io simplifies the process, ensuring accurate and compliant filings with the ATO. Track transactions and value assets effortlessly—make tax season stress-free.
Mastering Crypto Taxation: Navigate the Complex World of Digital Assets with Kryptos, the Ultimate Solution for Accurate, Efficient, and Future-Proof Tax Reporting.
