What is NFT in simple terms

NFT – what is it and why is it valuable?

Let’s start with a definition – NFTs (non-fungible tokens) are blockchain-based non-exchange tokens. With them, we can purchase virtual items such as graphics, virtual real estate or even skins in games. NFT technology makes it impossible to counterfeit the purchased asset, so when we become the owner of an NFT-based item, we are sure that we are its sole owner. This makes each such work unique … in an unusual way. Nothing prevents each of you from downloading any picture of a monkey to your computer or phone and doing whatever you want with it .. Put them on your screensaver, turn them into another work or send them to friends. The thing is, then you won’t have the token itself, and you won’t be able to authenticate the item. Sounds complicated, so let’s try it simpler.

NFT – what is it

I want to make it easier for you to understand the whole idea of NFT, so I will use an easy-to-analyze example. Take Leonardo da Vinci’s iconic Mona Lisa. Everyone knows that there is only one original and there are probably different ways to check it. Any painter in the world can create his own reproduction of this picture, and with appropriate efforts, it can practically not differ from the original. So we have a situation where the original was created with a certain value given by the market. On the other hand, we have counterfeits that someone may try to sell for the original, and the less knowledgeable buyer may be deceived. NFT is similar with one exception. Let’s say you’ve uploaded an image of a monkey and you’re trying to sell it to a friend (that is, as if you’ve created a fake Mona Lisa).

This time, anyone without even proper knowledge of painting can be convinced (because everything is based on blockchain technology) that your proposal is a scam and that you are not the real owner of the work. In NFT technology, it is very easy to imagine who actually owns a given thing. Now questions may arise – “why do I need this painted bear, a picture of Mona Lisa, at least you can hang it … and even if I wanted to set it as wallpaper on my phone, I would download it and that’s it!”. You are partly right, but partly the idea is slightly different, so let’s move on.

NFT – what is it for?

It is true that you can somehow copy any work related to the NFT token. Picture – screenshot, video – recording, text – copy. The problem is that there is more behind the tokens. A very simple verification of the owner allows you to provide him with additional, this time real, benefits from the creator. I already started the topic of monkeys, so let’s move on in this direction. In the case of digital monkeys, people are motivated to buy them by the fact that they will join the “NFT Bored Monkey Yacht Club.”

For the sake of curiosity, I want to add that the prices for virtual pets reach several million dollars. So what is the motivation to join, especially since the amounts for a few pixels are simply absurd? The monkeys themselves, besides, of course, the collection and investment value, also have the basis of the desire to create an elite group. Club members organize meetings around the world, create joint events, as well as more or less complex projects.

So you can say that for a few hundred thousand UAH (the cheapest monkey costs more or less, prices vary) you can buy your way into the world of stars and rich people. Among the members of this club, among others, Eminem, Snoop Dogg or Jimmy Fallon. In the case of Bored Ape Yacht Club NFT, the tokens were supposed to gather a community – the elite and rich cream, and they succeeded. Of course, theoretically, this idea can be replaced, for example, with tickets to these events. Except that the NFT is just an accessory that makes it easy to show that we belong to a certain group – something like Rolex owners. When we see them, we immediately know that someone is rich.

Of course, there are other projects, often more interesting and rational. An example would be clothing companies that, by creating a community based on tokens, can give their owners access to better deals or limited collections. So, ultimately, what is NFT – as the examples show, it is a way to create new communities, which even the developers themselves talk about.

So it turns out that this is a kind of entertainment, and three types of people join projects: those who advertise the project, those who want to join this environment, and people who want to earn on these tokens. Buy low and sell more as your community grows. However, remember that the value of NFT tokens is speculative and created by people. Often the prices for some works jump by hundreds of thousands of UAH in one day. The next day, their value may be 0.

NFT – how to buy?

Let’s assume that after reading the first part, you are thinking about owning an NFT token. For various reasons, be it investment or just wanting to join the band. So, where to buy NFT? This process can be a little tricky for people who haven’t dealt with, for example, the world of cryptocurrencies. Currently, the most popular NFT token exchange is the Opensea platform. There you can join hundreds of projects in search of the perfect digital item for you, with all its potential bonuses.

The buying process does not take long. You create an account on a crypto exchange, connect it to your own cryptocurrency wallet and use Ethereum to buy any token from the site with just a few clicks. You can also sell purchased NFTs in the same way.

NFT – show off your new acquisition

In addition to belonging to a particular group and the benefits that flow from this, you can of course boast of tokens, as well as Rolexes on your wrist – we do not buy them to be in a chest of drawers. Popular websites try to follow trends. For example, now on Twitter you can link your account to your own wallet, after which the system will verify your NFT tokens (in the form of images) and you can set them as your own avatar. The website then gives a special hexagonal profile photo shape to authenticate the NFT picture. There are more and more ways to list your own tokens, as it increases the profitability of the entire enterprise – this is always an additional advantage that speaks in favor of the purchase.

You also need to give an example of NFT in games. Many companies are already planning to add unique items that can be displayed on the servers of this title. Not like before – in the form, for example, of a skin that anyone can get. Using NFT, each item will be unique and inimitable. After all, it’s hard to predict what the future holds for the NFT world. It is currently a young project. However, you can see a lot of interest from even the biggest brands, who are likely to come up with more and more crazy token ideas.

How does NFT harm the environment and what are the threats from it?

I know it’s unclear which direction NFT technology will take. Nowadays, it’s just an opportunity to make digital items unique. Their usefulness can be discussed and simply called a whim. The matter is complicated by the fact that NFTs also pose certain dangers and threats. Let me start with something very obvious, which is a scam.

NFT technology now makes it very easy to manipulate this project. For promotion, you can use popular people, as in the case of the monkey club, where the cost of individual tokens is artificially pumped up. This is one example where the image of famous people can be followed by crowds, and the project itself can be a simple jump to the box office. Another form of scam is, of course, NFT promises.

NFT environment

On the net you can find projects that look very promising. Authors can promise great bonuses as long as you buy their token. Limited groceries, travel, or other benefits sounds interesting, but of course, it may never happen. All it takes is a good manipulation that will attract hundreds of people and a quick exit from the author’s own project – he can promise the best, in the end he does nothing. NFTs are speculative projects, so getting into such an unpleasant situation is not difficult.

Suppose, however, that we check all projects well, or we live in an ideal world and there will simply be no scammers. However, there is a slightly more complex problem. NFT tokens are mainly based on Ethereum and this works in the Ethereum Proof of Work system. Therefore, if a new token is created and transactions are associated with it, miners will have to “discover” new blocks. Network traffic is increasing and NFT is becoming harmful to the environment. According to unofficial data, the carbon footprint of the token is about 35-45 kg of CO2, which corresponds to ~6000 hours of YouTube viewing. On the other hand, it can be said that land, air or sea transport leaves much more pollutants behind – so why punish technology development for this?

So this raises the question – is it acceptable to simply create images (or other content) on the web that negatively affect the environment? Especially in times of global climate change? You must answer these questions yourself. The solution to the problem may be a proof-of-stake system, which will slightly change the operation of the Ethereum network – but when this will happen, we do not know. Currently, some networks charge gas fees for transactions. This is meant to offset greenhouse gas emissions, but it’s not a perfect solution.

NFT is the future, but it is not yet known whether it will be bright

NFT is a project that we will probably hear about more than once. Tokens, the value of which is in the millions, attract the attention of even the average user. However, one should not forget that the operation of the NFT is somewhat questionable. So far, this is not something innovative enough to effectively change our world. Creating unique works on the Internet is interesting in some way, but is it necessary? Perhaps, after some time, someone will be able to use this technology a little better than creating a club of bored monkeys, and then we can talk about a real revolution.

So let’s see what happens to NFTs in the future. However, personally, I do not recommend treating tokens as a form of investment – this is a very risky area of ​​the market. So where does the NFT phenomenon come from, if its use is controversial, and it also brings a lot of harm to the environment? It can be assumed that this popularity has arisen due to the big money behind the projects, which is what attracts people the most. But let’s not deny the idea itself – it’s interesting.