-By Kshitij Sighroha
Jack Dorsey’s first 15-year-old tweet -
- "just setting up my twttr" -- which became a tweet that is now being sold at auction with bidding reaching $2.5 million. In February, a 10-second video clip known as “Crossroads” by the digital artist Beeple sold at auction for $6.6 million. A video of a LeBron James dunk sold for a mere $200,000. What do all these have in common? All of these are examples of NFT or Non-Fungible Tokens. In an era where everything is digital and socially friendly, people are making maximum use of these technologies. We share so many jokes, memes, infographics, etc. with many people for entertainment or informative purposes, but have you ever thought about how these digital properties are created or from where do they
originate? The answer to all such questions is a single term – Non-Fungible Tokens or NFT.
Now the question arises what does Non Fungible Tokens actually mean? Let us first define the term Fungible. In economics, fungibility is the property of a good or a commodity whose individual units are essentially interchangeable, and each of its parts is indistinguishable from another part. For example, if I lent somebody $10 by giving her a ten-dollar bill, I do not mind whether she pays me back with the same bill, another $10 bill, or two five-dollar bills. Now
talking about does the time of purchase matter in fungible goods? If I bought ten Microsoft
shares in 2006, another ten in 2007, and another ten in 2008, I bought them at different times. They are all fungible, regardless of when I bought them.
Non-fungible tokens or NFTs are a blockchain entry or cryptographic assets that have a unique identity where each item can be traced to its original developers . Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. This differs from fungible tokens like cryptocurrencies, which are interchangeable and do not have a unique identity, therefore, can
be used as a medium for commercial transactions. NFTs shift the crypto paradigm by making each token irreplaceable and having its own unique identity of the original developer at square one, thereby making it impossible for one non-fungible token to be equal to another.
How about we dig deeper and educate ourselves with the History of NFTs, that will help us complete our first level in the world of NFT. The first one-off NFT was created on May 3, 2014,
by Kevin McCoy and Anil Dash. In October 2015, the first fully-fledged NFT project, Etheria, was launched and demonstrated live at DEVCON 1. In 2017, the Ethereum blockchain started to
gain prominence over bitcoin based token platforms, due to Ethereum having a system for token creation and storage built right into its blockchain thus eliminating the need for third-party platforms like Counterparty, and was the company to coin the term non-fungible token.
Whatever the hazards, NFTs have a bright future ahead of them, since the overall market reached $100 million by the end of July 2020. Experts in the crypto business even predict that NFTs will be the entrance point for 40% of new crypto users.
Talking about the NFT buying “Frenzy”, according to the data In 2021 interest in NFT continued to spike, and a number of high-profile sales were made just in the first few months. The speculative market for NFTs has led more investors to trade at greater volumes and rates. The buying frenzy of NFTs was called an economic bubble by experts, who also compared it to the Dot-com bubble. NFTs offer digital artists a way to better monetize their works at an even higher and more profitable rate. Some versions of NFTs even extend the artist’s ownership beyond the original sale and to resales, which allows artists to continue to make a profit, regardless of if and how many times the NFT is resold. The advantages of NFTs can be encapsulated in 6 simple terms: indivisible, limited, unique, easily transferable, trustworthy and maintains ownership rights.
How are NFTs created?
The process of the creation of non-fungible tokens is called minting. It refers to the creation of a physical coin. NFTs are developed in an NFT marketplace, where a creator uploads a digital file and determines if it is a one-of-a-kind item. It comes in a large number of copies or is part of a series. NFTs are interesting, there’s no doubt about it. But there are some serious drawbacks to sinking your money into them. The environmental price of NFTs is in question. Minting of NFTs requires a high level of computing power and energy, similar to cryptocurrencies such as Bitcoin and Ethereum. For example, the energy utilized to mine bitcoin has hit the equivalent of Argentina’s annual carbon footprint. So, widespread trading in NFTs and other blockchain-based assets isn’t necessarily an environmentally friendly process. Even for experts, NFTs are confusing assets. When you purchase one of these non-fungibles, you’re not necessarily purchasing the copyright to the art. People are still able to find copies on the Internet of the art for which you own the token, and there’s nothing stopping them from copying and pasting these files on social media, essentially showing off and sharing what you may have paid millions of dollars for. When you buy these assets, all you really own is a record saying you own the token behind the original asset. You don’t know the real value of the assets that you hold. A question that is yet to be answered is, Will this Transformation of Art Collection Last? Although there’s a real possibility these digital tokens will maintain their value, there’s also a real possibility that investors are going to have a “slam on the brakes” moment, sending the values of these tokens to the bottom. Just as everything has its pros and cons, NFTs also have the same. NFTs are fun. They offer you a way to own something on the blockchain that’s not a cryptocurrency. But as an investment, they should be looked at as highly speculative, extremely risky assets. If you want to take part in the blockchain and see these tokens as your opportunity to do so, by all means, go for it. But do so responsibly. Buy low-cost NFTs with a mindset that you’re enjoying it and not with a mindset to get richer because the floor might fall off anytime.
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