NFT stands for non-fungible token, which literally means a sign or representation of something that can’t be replaced. It doesn’t make it any clearer, right?
When thinking about NFT people might imagine a picture, or a song, or any other kind of digital file. While digital pictures or songs are sold as NFTs, the files themselves aren’t actually NFTs.
How does NFT work?
What NFT really is, it is a record on the blockchain, that contains information about a digital file, a person, who linked it to the blockchain, and a list of its previous owners. All this information is decentralized, simultaneously stored and checked on many different computers, which makes it almost impossible to cheat or hack something. That also helps NFTs to remain unique.
The use of blockchain for its functioning makes NFT similar to cryptocurrencies, but unlike cryptocurrency, NFT is not fungible (which is in its name). When you exchange one bitcoin for a different – you have the same, but that’s not true about NFTs.
Most NFTs are on the base of Ethereum blockchain.
What makes NFT precious?
Generally, it’s the thirteen-billion-dollar marketplace that makes NFT precious. It is kind of a trend or fashion that makes people buy NFTs. Or a sort of gambling: they might be thinking: what if I buy this NFT today and be able to sell it for much more money in a couple of months? And that’s true, that this has worked for many.
What is awkward about NFTs?
You can still download a digital file and make dozens of copies of it, but those who own NFT are its real owner. It’s like buying a postcard with a Van Gogh painting doesn’t make you the owner of the original. But the digital file is not the painting, and the copy is usually as good as the original…
The owners of NFTs make communities, based on their NFT-belongings, which makes it even more like art collecting.
What made NFT so popular?
Maybe it was pandemic of 2020, that made NFT so popular. People stuck at home and not being able to spend their money on more usual things, they did for entertainment (like travelling, dance clubs, visiting art galleries, other social activities), were looking for something new. And here comes NFT – something really new and trendy. And many have thought, “Why not?”, helping this market to grow.
What’s the idea?
The point of NFT depends on whether you are an artist or a buyer of NFT. If you are an artist and make your digital product the NFT, you’ll benefit every time it is sold. So, most of it you’ll get, if your work becomes popular.
If you are a buyer of NFT, you can consider it a kind of asset (with the idea of selling it when its price grows), you can support the artist with your purchase, and you get some usage benefits as the owner of NFT.
What was the beginning of NFT?
The idea became possible with the launch of Ethereum platform, when the support for them was added as a new standard. Everything began with the game CryptoKitties, where the users bought and sold virtual kittens which were actually NFTs. And this shows us the use of NFTs in the world of computer games, which itself includes the huge market.
What are the platforms for buying and selling NFTs?
There are many different platforms for the purchase and sale of NFTs, but OpenSea is the most popular. It became that popular for being free and non-regulated, which helped it to grow huge. But it also leaves a lot of space for different schemes which can’t be considered illegal, but still… and maybe some people are just observing – what else can be invented there?
You can buy NFTs with cryptocurrency, but not only. The seller can ask for any currency they want.
What is the connection between NFT and the real world?
Some corporations and celebrities launch their own NFTs, which helps the idea leave the community of crypto-enthusiasts and enter the society of more traditional art-collectors. But they still haven’t become mainstream the way smartphones or Star Wars have.
There were attempts to link NFTs to physical objects to add value. The Nike company did this with their sneakers, so you can verify the authenticity of them through the NFT.
There is also a TV-show that uses NFTs as a ticket system. And one more is in the production process already.
One more connecting point is the environmental impact. As the other blockchain-based technologies, all of which are energy-consuming, NFTs add to the greenhouse-effect. Some transactions even didn’t take place and were terminated after the participants have known about the effect on climate change. It would be fair to add that many specialists are working on this issue.
Where can I store my NFTs?
NFTs are stored in digital wallets like cryptocurrencies. What’s interesting, you don’t need any specific kind of wallet to store your NFTs. But actually, that’s not true – as nothing, neither cryptocurrency, nor NFTs is stored in a digital wallet – for it is simply the way you can access them. All these items are just a part of blockchain.
So, what’s the matter?
NFTs may be thought of as one more way for manipulating money for profit or the playground for the rich, but even if that’s fully true, this still allows them the right to exist.
As the whole idea looks generally stupid, childish or at least a waste of money, there still are digital artists, whose works are amazing. And the existence of NFTs gives the simple and effective way to support their art and make a clear distinction between an original and just a copy. At last, it can be the only way to apply for digital art to avoid counterfeiting. Or at least the first one, which is efficient enough. You may think of it as a certificate of ownership, a way to waste or earn money, an item to collect and store. The idea is that someone invented it and many others liked the idea. Maybe, it is just a side effect of the world pandemic, and it will vanish into thin air in a couple of years, leaving the crowd without their money, but with a useless stack of blockchain “ownership certificates”. But maybe it will transform into something of real use and value and that way prove its existence in the future – who knows?