NFTs: into the world of crypto assets
Shivani Jayant
SWE Intern @ Fannie Mae | CS Learning Assistant | Open Source Software Developer | WEP Lead
Ok, sleeves rolled up, browser open and a small dose of weirdness and we are ready to get into NFTs! After Bitcoin, NFTs are the big new cryptocurrency craze. According to BBC, "Where Bitcoin was hailed as the digital answer to currency, NFTs are now being touted as the digital answer to collectibles." Imagine this. Someone pays 69 million dollars for artwork. Not a sculpture or painting, but a unique digital token called an NFT. This actually happened. It was a digital-only Beeple's 'Everydays: The First 5000 Days' NFT sold at a Christie's auction.
So, what exactly is an NFT? (Before I became qualified to answer this question, I did a lot of research. I spent hours on websites and blogs to find an understandable and simple explanation and my conclusion is it doesn't exist. So here is my version - a collection of phrases from a bunch of sites all mashed into one.) An NFT stands for a non-fungible token. In economics, a fungible asset is something with units that can be readily interchanged. A non-fungible asset cannot be easily interchanged. Basically, non-fungible means that it is unique and nothing else can replace its value. For example, a bitcoin is fungible - you can trade one bitcoin for another and you'll have the same thing. On the other hand, a one-of-a-kind trading card is non-fungible. If you trade it for another card, you'll have a completely different trading card. An NFT can be thought of as digital certificates of ownership for virtual or physical assets.
When it comes to NFTs there are a few questions that I will try to answer (with the help of my trusty browser service).
How does this even work?
Original works of art like paintings are valuable because only one exists. Digital files, on the other hand, are easily duplicated. With NFTs, artwork can be 'tokenized' to create a digital certificate of ownership that can be bought and sold. A record of this is kept on a ledger called the blockchain.
Blockchain was initially devised to support fungible assets like Bitcoin and other cryptocurrencies but has evolved to enable users to create non-fungible crypto assets. The ethereum blockchain is the basis for most of the currently offered NFTs because it enables NFT creators to save information to their digital artifacts as tokens on the blockchain. The token shifts to your ownership once you have paid for the NFT.
Can't people just copy the digital artwork?
An important thing to remember is that just as masterpiece paintings can be copied and distributed as inexpensive posters, anyone can have a digital copy of your NFT. Your private crypto key is proof of ownership of the original. The content creator’s public crypto key serves as a certificate of authenticity for that particular digital artifact. This pair of the creator’s public key and the owner’s private key is primarily what determines the value of any NFT token.
Are NFTs expensive?
Personally, I think the answer is yes because no matter how much money you spend, you don't really gain anything tangible out of it. Here a copy is as good as the original except for the bragging rights. But that is my opinion so... on to answering the actual question.
Yes and no. You can get expensive NFTs but less expensive ones do exist. Although, is it really worth it to get a random NFT for a less expensive price?
In conclusion, it's still very hard for people to understand NFTs and I think a basic rule of investing applies here and that is not to invest in something you don't know. (Let's collectively ignore the fact that I have never invested before.) If you are into the idea of collecting NFTs then I think you can have fun with it but I am going to spend a few more hours in this rabbit hole or world of crypto assets before I make any decision.
References :
https://www.bbc.com/news/technology-56371912
https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq