NFT – All You Need to Know in a Nutshell
The popularity of the NFT is undeniable (although in light of recent events, things may get complicated soon). But where did it come from? What is it exactly? There are still many unknowns about this topic for some internet users.
NFT – what is it?
Let’s start by explaining the abbreviation itself, which refers to the words “Non-Fungible Token“. Each NFT is unique and has no counterpart anywhere else – this is possible thanks to technology that prevents the creation of two tokens representing the same data string. So when buying an NFT token, we can be sure that we now have a real white crow.
It is worth noting that the tokens have a digital nature, based on the blockchain network. This is the same network that supports cryptocurrencies, with Bitcoin at the forefront. However, all the similarities end there: NFT tokens have no predetermined value and, as already mentioned, are unique. It means, therefore, that we cannot exchange a single NFT token for another – we can resell or buy it, but it will always remain a single item.
What can be an NFT token? Actually, there is no one specific type, as it can be an image file, a video, game item or skins, avatars, GIFs, or even a plain text file. The only condition is to certify that a given file is unique and does not have a copy of it, which is reflected in an appropriate digital record, constituting a specific certificate of uniqueness.
The owners of such tokens often have a specific good that is assigned to these digital assets. Due to this specification, NFT tokens are used, among other things, as assets corresponding to specific works of art, for example songs, photos, music videos, images or trading cards.
The history of non-fungible tokens
For the first time, the topic became loud in 2014. It was in May of thas year that Kevin McCoy and Anil Dash created Quantum. Initially, it was a video made by the wife of the former. Then McCoy registered them in the Namecoin blockchain and sold them to Dash at the Seven on Seven in New York for…$4.
However, in their initial stage of existence, they did not gain much popularity. This was reflected in the Etheria project, the first major project to sell more NFT. It consisted of 457 hexagonal tiles for sale, but most of them did not find their owners in 5 years.
However, interest in the NFT topic arose later. It took place in 2017, thanks to the CryptoKitties game, which is about breeding cats, with virtually no specific purpose. Sounds cliche? Perhaps, however, the business turned out to be a goldmine. Well, every cat in the game is an NFT token – the first virtual pet was sold for almost $ 120,000. It was then that there was a large-scale realization of how much money there is in the NFT.
Increase in popularity
Another boom for non-fungible tokens began in early 2021. It was related to the increase in cash investments in virtual works of art. It is worth noting that among such works we can find the first entry on Twitter by the founder of the platform – Jack Dorsey. This entry sold for nearly $ 3 million. The virtual work by WhIsBe (Not Forgotten, But Gone) was sold for a round one million dollars. These sums must impress.
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The popularity of NFT tokens is primarily influenced by artists, celebrities and sportsmen. Their works are increasingly released with NFT tokens, as are appearances by movie stars and athletes. This procedure is aimed at making buyers obtain a unique work that will have a collector’s value, which over time may turn into quite a real amount or lose any value.
Why are NFTs reaching astronomical amounts?
It is worth noting that NFTs in themselves do not have any value, in the same sense as, for example, precious metal. What drives them is uniqueness. Having an NFT token, we can be sure that we have something that no one else in the world has. Hence, comparisons to original works of art – just as the most famous paintings have copies, they will never reach the same value as the original. The painting itself is not as valuable as, say, a bar of gold, but its value is based on a social contract.
The same is with NFT tokens (which many people find controversial), which, due to their uniqueness, gain great collector’s importance, which raises their price. It’s all about creating a certain good (NFT token) in a very limited amount. The lion’s share of people may not worry about it at all, but if we add someone famous to it (e.g. a token with the image of a famous basketball player), there will always be someone willing to spend a crazy amount to be able to emphasize their elitism.
How to create an NFT?
In principle, anyone can create the digital data units discussed here. What is needed for this? First, we must be a member of the selected cryptocurrency exchange. This is necessary because it will be responsible for converting our digital information into an NFT token. When choosing the form (which can be any) of our information, we still have to pay an additional starting fee in cryptocurrency to initiate the entire process.
This does not mean, however, that you will automatically become the owner of the NFT token worth a staggering amount. This would be true in 2015, but not now. What drives up its price is its elitism – a token that was created in cooperation with a famous athlete will be more expensive than the same token created by an anonymous person.
It is also important to have the intellectual property rights that we want to transform into NFT. Whether it’s an image, GIF, song, movie or anything else – we have to own it. Creating an NFT token from something we do not own can get us into serious legal trouble.
Are tokens a source of stable and reliable income?
Do you have some cryptocurrency and you are considering entering the world of NFT? Think it over carefully, preferably several times. NFT tokens are a contradiction of stable earnings. Their boom is long over, so you cannot build on your interest on novelty of the product.
The NFT itself is subject to trends and how long people will consider it worth investing in. As we mentioned, it’s a social contract that only makes sense if people are willing to pay for it. And as recent events show, this is changing enormously.
Perhaps, however, we are witnessing the final phase of the popularity of the NFT. According to the quarterly report from nonfungible.com, while there is no talk of a collapse yet, the slowing down of the trend is more than visible. Sales volume in the first three months of 2022 decreased by almost 50%. The decline in popularity applies to both sales and active portfolios (a decrease of 76% compared to November 2021), which does not bode well for the future. The development of the situation clearly proves that easy earning on NFT is a thing of the past.
NFT tokens, like any cryptocurrency, are speculative assets. Their purchase often takes place on the basis of “buying now with the hope that the value will increase in the future.” However, such an assumption can be a double-edged sword, because the investment may turn out to be a loss, and you may lose a lot. The situation in the world is also one of the factors – the main influence here is rising interest rates. This is one of the major blows to the NFT and cryptocurrency markets, making them start to lose their attractiveness.
Crypto and NFT markets have certainly not collapsed yet, but the prospects for the future are worrying. The year 2022 may turn out to be a key year in terms of the development of events and will decide whether or not to be for both of these entities.
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Criticism of the NFT – is it justified?
Opponents of non-fungible tokens have quite strong arguments that undermine the meaning of the entire venture, closing it within a temporary and logic-free fashion. The most popular argument is whether we need the NFT and its existence for anything. Its value is based on a contractually agreed framework, and its aesthetic value is debatable. NFT and its comparison to works of art is exaggerated, because the tokens will not provide such visual impressions as, for example, famous paintings.
Crypto is a greater threat impact on the environment. Computing operations for mining cryptocurrencies require the processing power of millions of processors. Electricity is needed to power them, which produces huge amounts of greenhouse gasses. The calculation adds its three cents to the greenhouse effect that affects the entire planet.
Another problem is also plagiarism. Exhibiting other people’s works as NFTs can have serious repercussions. In 2021, a person impersonating Banksy sold the artist’s work for $336,000. Another case is the Qing Han. Following her death in 2020, a scammer took over her identity, selling her works as NFT tokens in the process. Unfortunately, creating a plagiarized NFT is easy, and the anonymity of the creator doesn’t make it easy to prosecute the fraudsters.
It is also worth adding that the structure of the token exchange resembles the so-called Ponzi scheme. It is a type of financial pyramid where initial investors get paid at the expense of those who buy later.
NFT – what is it? We hope that this text has brought you closer to this issue and has dispelled any doubts that may have arisen. Let us know in the comments what you think about the NFTs.