Non-fungible token

Demystifying NFTs: A Look at the Digital Ownership Craze

Introduction

A non-fungible token (NFT) is a unique digital identifier that is recorded on a blockchain and is used to certify ownership and authenticity. It cannot be copied, substituted, or subdivided.[1] The ownership of an NFT is recorded in the blockchain and can be transferred by the owner, allowing NFTs to be sold and traded. NFTs can be created by anybody and require few or no coding skills to create. NFTs typically contain references to digital files such as artworks, photos, videos, and audio. Because NFTs are uniquely identifiable, they differ from cryptocurrencies, which are fungible.
Proponents claim that NFTs provide a public certificate of authenticity or proof of ownership, but the legal rights conveyed by an NFT can be uncertain. The ownership of an NFT as defined by the blockchain has no inherent legal meaning and does not necessarily grant copyright, intellectual property rights, or other legal rights over its associated digital file. An NFT does not restrict the sharing or copying of its associated digital file and does not prevent the creation of NFTs that reference identical files.
NFT trading increased from US$82 million in 2020 to US$17 billion in 2021.[2] NFTs have been used as speculative investments and they have drawn criticism for the energy cost and carbon footprint associated with some types of blockchain, as well as their use in art scams.[3] The NFT market has also been compared to an economic bubble or a Ponzi scheme.[4] During their peak, the three biggest NFT platforms were Ethereum, Solana, and Cardano.[5] In 2022, the NFT market collapsed; a May 2022 estimate was that the number of sales was down over 90% compared to 2021.[6] By September 2023, one report claimed that over 95% of NFT collections had zero monetary value.[7][8]
Non-fungible tokens, or NFTs, have exploded in popularity in recent years, grabbing headlines and fetching astronomical sums. But what exactly are NFTs, and why is everyone talking about them?
At their core, NFTs are digital certificates of ownership for virtual items. They leverage blockchain technology, the same system that powers cryptocurrencies, to create a secure and transparent record of who owns a particular digital asset. This could be anything from a piece of digital art to a collectible trading card or even a virtual plot of land in a metaverse game.
The key characteristic of NFTs is their non-fungibility. Unlike fungible assets like money or Bitcoin, where one unit is interchangeable with another, each NFT is unique and irreplaceable. This imbues them with scarcity and potential value, similar to physical collectibles.
Here's a breakdown of the NFT landscape:

• What can be an NFT? Almost anything digital can be tokenized as an NFT, including artwork, music, videos, in-game items, and even tweets!
• How are NFTs bought and sold? NFT transactions typically happen on online marketplaces using cryptocurrency. Popular platforms include OpenSea, Rarible, and Foundation.

• Benefits of NFTs: For creators, NFTs offer a new way to monetize their work and connect directly with fans. For collectors, NFTs provide a verifiable way to own and trade unique digital items.

However, the NFT world isn't without its critics. Concerns include environmental impact due to the energy consumption of blockchain technology, the volatility of the NFT market, and potential scams.

Whether NFTs are a revolutionary innovation or a passing fad remains to be seen. But one thing is certain: they represent a significant shift in how we value and own digital assets, and their impact on the creative and technological landscape is undeniable.

References

1. ^ "Definition of NFT". July 20, 2023.
2. ^ "NFTs Hit $17B In Trading in 2021, Up 21,000%". pymnts.com. March 10, 2022. Retrieved May 5, 2022.
3. ^ Genç, Ekin (October 5, 2021). "Investors Spent Millions on 'Evolved Apes' NFTs. Then They Got Scammed". Vice Media. Retrieved November 9, 2021.
4. ^ Hawkins, John (January 13, 2022). "NFTs, an overblown speculative bubble inflated by pop culture and crypto mania". The Conversation. Retrieved May 7, 2022.
5. ^ Linares, Maria Gracia Santillana. "Cardano NFTs Becomes Third-Largest NFT Protocol By Trading Volume". Forbes. Retrieved April 25, 2023.
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7. a b Vigna, Paul (May 3, 2022). "NFT Sales Are Flatlining". The Wall Street Journal. Retrieved May 5, 2022.
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9. a b Yang, Maya (September 22, 2023). "The vast majority of NFTs are now worthless, new report shows". The Guardian. Retrieved September 26, 2023.
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11. a b Vigliarolo, Brandon (September 21, 2023). "95% of NFTs now totally worthless, say researchers". theregister.com. Retrieved September 26, 2023.