What are NFTs? Let’s start by saying that until a few years ago it would have been unthinkable to collect an artwork or object in digital form. Now it is possible thanks to the emergence of Non-Fungible Tokens, which, in addition to their immense success, has been able to beat the most prestigious auctions by several tens of thousands of euros.
What are NFTs and how do they work?
In the digital world, there are a variety of different types of tokens. Some are fungible, meaning that each is essentially identical to every other. For example, a U.S. dollar is fungible; each is worth the same as any other. Bitcoin is also fungible, as each bitcoin is essentially the same as any other.
Other tokens are not fungible. For example, a share of stock in a company is not fungible; each is unique and has different rights and privileges. Similarly, a diamond is not fungible; each diamond is unique and has its own value.
NFTs (non-fungible tokens) are unique digital assets that can be stored, managed, and traded on a variety of blockchain platforms. They are similar to cryptocurrencies, but with one key difference: they are not used as a medium of exchange, but rather as a store of value or utility token. NFTs can represent anything from virtual resources and gaming objects to real-world resources such as property.
If I take a screenshot of an NFT?
The utility of NFTs comes down to the fact that a particular record on the blockchain is less likely to be tampered with, lost or stolen because of the way it is stored on the blockchain. If you take a screenshot of that digital asset on your phone and then delete it, the screenshot will disappear forever. The same goes for any other method you might use to store data/use digital media to establish ownership of a particular object.
The physical behavior of transactions in a centralized database represent a single point of failure, and there are relatively few options available if that single point of failure is compromised. However, the decentralized nature of the blockchain means that as long as the blockchain is maintained, you have the potential to have unlimited backups to check in case something goes wrong.
NFTs are not replaceable, which allows you to buy and sell ownership of unique digital objects and track who owns them using the blockchain.
So can I take a picture of an NFT?
Well, yes – but it’s like taking a picture of a Van Gogh painting.
Sure, you can have a thousand copies of the original – but you won’t have the actual original precisely because “blockchain” where the NFT is registered will definitely prove it.
Quite simply, whoever owns that digital piece will be registered in the blockchain as the sole and exclusive owner of this photo!
I, as a normal person, did not pay a penny for this photo, does this mean that I owned it once I took a screenshot of it? Of course not . Rather, the real owner is the one who owns this picture on the Blockchain with its accurate and unique data.
NFTs have value only on the Blockchain outside of it, they are just drawings on a simple screen.
What are the benefits of investing in NFTs?
Investors have many reasons for wanting to buy tokenized assets in NFTs.
Some of the advantages of investing in NFTs include:
Anyone can invest inNFT: Anyone can invest in tokenized assets. Ownership of tokenized assets in NFTs can be transferred more easily and efficiently between people anywhere in the world.
Authenticity and ownership of NFTs is authenticated by blockchain: using blockchain technology to digitally represent ownership makes it safer for investors to own the asset. Blockchain technology can also make asset ownership more transparent.
Owningsomething unique: These digital collectibles are not fungible, which essentially means they are irreplaceable. It gives a good feeling to know that you own a unique piece, whether it is a painting, a piece of furniture or a digital image, an audio clip or other digital asset.
Incorporation with video games: NFT games combine traditional game design with nontraditional game mechanics, giving users more control over game resources such as skins, characters, weapons, and virtual lands.
This can be achieved by publishing games on the blockchain and hooking them into an economy powered by digital resources. These digital resources are generally NFT, so they are distinguishable and tamper-proof. Adopting the NFT token standard also allows developers to preserve the rarity and uniqueness of some of these game objects. This is why some blockchain game assets are considered more expensive than others.
What are the disadvantages of investing in NFTs?
Misinformation: NFTs are commonly thought of as an asset class rather than in a technological way to denote ownership. The general misinformation and hype surrounding NFTs can damage the values of tokenized assets, Essentially, when you buy these NFTs, all you really own is a record stating that you own the token behind the original asset.
Environmental Harm: Each record entered into the Ethereum blockchain requires significant processing, which requires the use of significant amounts of energy.
Thus, widespread trading of NFT and other blockchain-based assets is not necessarily an environmentally friendly process.
In fact, a recent study by the University of Cambridgesuggests that almost everything to do with blockchain is highly environmentally unsustainable because of the amount of energy used.
And did you know that two Coinbase employees got married by exchanging rings in NFT with their wedding vows.