The latest trend in the world of digital currencies is definitely NFT. You must have heard or read this abbreviation somewhere, but it was not clear to you what it was about. Many online influencers call NFT a real revolution in the digital world, and here’s what it’s all about.
These digital images are called NFT (Non-Fungible Tokens). In this post, we will explain, in the simplest way possible and with as few technical terms as possible, what are NFTs, and we will give our opinion on this whole phenomenon.
What Are Cryptocurrencies?
To understand what NFT is and how it works, it is necessary to understand the concept of cryptocurrencies, and you can read about this in our text in which we explain in detail what are cryptocurrencies. We will only give a brief reminder here.
Cryptocurrencies are digital currencies that can be used as any kind of money to pay for goods and services. Data on who has how many cryptocurrencies is stored in the blockchain. Blockchain is an online database that has been copied to tens of thousands of computers.
When a legitimate cryptocurrency transaction is performed, all computers are updated. If someone changes the data from the blockchain on their computer, when that computer is connected to the Internet and when the data from that computer is compared with all other computers that have a copy of the blockchain, an error will be immediately noticed, so no one can cheat the system. For this reason, people believe in the security and value of cryptocurrencies.
What does Non-Fungible Mean?
Non-Fungible means interchangeable. In a world of investment, fungible or interchangeable means that two seemingly different things are no different. So, for example, if we take all the $ 100 banknotes that exist, they differ in the sense that each banknote is an entity in itself, but in terms of payment, it doesn’t matter which banknote you use. For this reason, these banknotes are considered interchangeable.
An example of the Non-Fungible or not interchangeable is the image of the Mona Lisa. We can make a copy of this image, even a perfect reproduction, but a copy is not worth nearly as much as the original, because the original and the copy are not the same. Such things are considered Non-Fungible.
What Is NFT and How Does It Work?
Finally, we come to what is NFT? We already know that blockchain can ensure that if you store something in it, no one will be able to change that information. If you have read our text about what cryptocurrencies are, you know that we can write literally anything in the blockchain. NFT relies on blockchain technology, but instead of writing down how much money there is, we write down who owns the digital image.
Because no one can cheat the system, people believe that this is how they become the owners of digital images and that in this way they can make money by selling the image for more money than they bought it for. The sale of NFTs is done in the same way as the sale of any cryptocurrency, and the miners are in charge of processing the transaction.
NFT can become any digital image, even if you draw it in a few minutes in Paint or simply paint your screen. In the picture above this paragraph, you can see a screenshot of the first tweet that Jack Dorsey, the CEO of Twitter, ever wrote. This tweet was made into NFT and sold for 2.5 million dollars. If you now think that we have won the lottery and decided to invest in NFT, you are mistaken. This is, of course, a copy.
If anyone can make a copy of any digital image, then why do they have value and how are the owners of the original digital image different from those who have a copy? The answers are surprisingly simple. NFTs have value because people believe they have value and because it says somewhere who owns the original and no one can change that information, people recognize him as the owner.
NFT, like ordinary cryptocurrencies, is kept in special wallets. These are programs that contain identifiers that are used to know who owns NFT and they are stored online. Saving NFT in online wallets is charged, and the commission depends on the online wallet you use. It is also possible to use a physical wallet, and it works as a USB drive that is specially designed to store NFTs or cryptocurrencies.
Why Is the World Crazy About NFTs and Why Are So Many People Opposed?
If you consider all this nonsense, you are not alone. Unlike cryptocurrencies, which are designed as a form of payment, the only reason for the existence of NFT is earnings and value creation where it has not been before. Do you believe that a simple image of a tweet is worth millions? Of course not, like most. Unfortunately, you are clearly wrong. The fact is that the image of that tweet has sold for millions and thousands of pictures are sold every day for huge sums of money. For this reason, we have more and more people who are investing in NFTs.
The main problem is the mining and pollution that is produced in the process. Mining requires a computer to complete the transaction, and electricity is required for the computer to run. These computers consume a huge amount of electricity, and this has an extremely negative effect on global warming.
Since the majority considers NFT a completely unnecessary idea, which was created only to create value from nothing for both speculators and those who have enough money to influence the “free market”, the price we all pay by destroying the environment is not worth it.