What The Hell Are NFTs (Non-Fungible Tokens)? Are People Seriously Buying .jpg Files?
We must constantly upgrade our knowledge to stay up with the world’s exponential growth in digitalization. NFTs, or Non-Fungible Tokens, have sparked so much interest that celebrities such as Amitabh Bachchan, Snoop Dogg, Steve Aoki, Eminem, and Shawn Mendes have jumped on board.
Kevin McCoy sold his non-fungible token “Quantum” for 1.4 million dollars in 2014, making it the first-ever NFT to be sold.
Despite the fact that NFTs have been on the market for a long time, many of us are still unfamiliar with the notion.
Weirdly, this was my NFT perception a few months ago, which I tweeted like;
But then I started looking into it to get to the bottom of it, and it appeared like NFTs were here to stay. And it’s critical to educate ourselves about them before boarding the train.
Non-Fungible Tokens are all the rage these days. For 10,000 NFTs, sellers on sites like Fiverr and Upwork charge anything from 50,000 to ten lakh rupees. As a result, you have a terrific opportunity to learn this new skill and seize the opportunity. This looks like the same paradigm as the dot-com boom of 2000.
What Exactly Are NFTs, And Why Are They So Trendy?
Non-fungible Tokens are cryptocurrency assets that represent a variety of distinct physical and virtual commodities, such as real estate or visual art.
NFTs are one-of-a-kind, just like actual artwork, and they leverage blockchain technology to verify their authenticity, allowing you to know the difference between an original and a clone.
Request: Follow this article of mine to know more about blockchain…
They are simply blockchain record that allows collectors to build a digital collection with each item being able to verify its original issuer.
Approach it this way:
Leonardo Da Vinci created only one painting of the Mona Lisa. Individuals can easily replicate copies or paint their own versions, but only one original will exist. With NFT, it’s the same concept.
The most popular NFTs are CryptoPunks and CryptoKitties.
Famous personalities showing their interest in this technology has boosted everyone’s enthusiasm about it.
Recently, The Economic Times released an E-Paper mentioning Amitabh Bachchan’s NFT.
Moreover, various American artists are already owning a few NFTs.
How do NFTs Work?
NFTs provide a certificate of ownership of a digital object for the buyer, which also protects its value for future transactions. A report by Coindesk states artists can sell their art digitally to a global audience that not only allows them to get a greater cut of the profit but program royalties as well. Gamers can also become owners of in-game items and even earn money from them.
It adds that a majority of NFT tokens were built using two Ethereum token standards — ERC-721 and ERC-1155. We’ll get into it, let’s first look at;
Some Key Characteristics of NFTs
CryptoPunks cannot be utilized as characters in the CryptoKitties game, and vice versa. The same is true with collectibles like trading cards. The basketball card game does not allow for the use of baseball cards.
NFTs are indivisible, unlike bitcoin satoshis, and cannot be broken into smaller amounts. They only exist as a complete unit.
Each token cannot be destroyed, withdrawn, or reproduced because all NFT data is saved on the blockchain via smart contracts. The ownership of these tokens is also unchangeable, which means that players and collectors, not the firms that manufacture them, own them.
Another advantage of maintaining historical ownership data on the blockchain is that objects like digital artwork can be traced back to the original creator, eliminating the need for third-party authentication.
It goes on to say that the majority of NFT coins were created under some standards. Those are ERC-721 and ERC-1155 Ethereum token specifications.
What Is The Relevance Of The Erc Standards Used In The Development Of NFTs?
As previously stated, ERC standards are the set rules by which NFTs on the Ethereum blockchain are formed.
The NFTs that are created on top of different blockchains may have different standards. ERC-721 and ERC-1155 are the Etherem standards used by the majority of them.
Let’s look at the ERC-20 standard to get a better understanding of the above-mentioned standards.
Users can create Fungible(replaceable) Tokens using the ERC-20 standards.
Let’s pretend you, and I are both in a store. I’d want to purchase a 100 DogeCoin item. But I’m 20 coins short of a hundred. So you lend me 20 dogecoins, which I pay to the store, and I can now purchase that item.
One point to note is that the 20 coins you lend me will be worth the same as my doges, for which store will accept your 20 doges. It means that our doge coins were completely interchangeable and had the same value for each of us as well as the rest of the world. This way dogecoins are created using ERC-20 standards as they are interchangeable.
On similar grounds, ERC-721 is a standard for creating Non-Fungible(distinguishable) Tokens.
Assume you purchase artwork for a few dollars on a digital market. You are also the owner of the original copy. Your purchase is now unique, as there is only one original copy. As a result, it stands distinctive. ERC-721 standards can be used to design contracts that will be required to analyze the difference between the original copy and the others.
The ERC-1155 token standard is an improvement on the ERC-721 token standard.
It allows both Fungible and Non-Fungible tokens to be created. A player can possess both non-fungible goods such as swords, shields, and armors, as well as fungible items such as gold or arrows, in various games such as World of Warcraft.
What Is The Difference Between NFTs And Crypto Coins?
Cryptocoins are interchangeable, Non-fungible tokens, on the other hand, are unique.NFTs are based on the same blockchain technology as cryptocurrencies, however, they are not a form of payment.NFTs are similar to plane tickets — they all appear the same yet have varied seats and destinations.Non-fungible tokens are perfect for preserving artifacts such as paintings and trading cards.On second-hand marketplaces, the tokens can be bought and traded.
The Biggest Problem with NFTs
The amount of computer power required is relatively significant, similar to other blockchain-based technologies. The blockchain codes require a lot of computational power to execute. According to one study, mining one type of cryptocurrency consumed as much energy as the entire country of Ireland.
Furthermore, each time an NFT is purchased or traded, it consumes even more energy.
Purchasing NFTs is designed to be a long-term investment, but there’s no assurance that it will be profitable in the future. According to some experts, NFTs are essentially a massive pyramid scheme that destroys the ecosystem.
Everything is just so fascinating about NFTs. Looks like Web3 and the onboarding of Metaverse are gonna be super crazy. But diving into NFTs from an investment perspective is something experts are not recommending for now. Although an individual must be familiar with the underlying technology and various use cases built upon it.
Stay tuned to this series as I will be releasing more articles based on Web3 and Metaverse soon…
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What The Hell Are NFTs(Non-Fungible Tokens)? Are People Seriously Buying .jpg Files? was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.