Everything you need to know about NFTs
We take a look at what NFTs are and why they are being talked about by everyone from digital designers through to celebrities like Paris Hilton!
If you’ve followed the rise of Bitcoin and Ethereum, or you’re interested in how digital art will be valued and traded in future, or you just want to know what the buzz around NFTs is about, read on to find out how NFTs are set to reshape the world as we know it.
What are NFTs?
NFT stands for non-fungible token. ‘Non-fungible’ means that they cannot be exchanged or substituted for something else without its value being affected.
Perhaps the simplest way to think of NFTs is as a way of proving who is the original owner of a digital asset.
As we all know, digital files can be copied and redistributed easily and quickly, so proving who owns the original version of any digital asset can be difficult. And this is where NFTs come in.
Examples of non-fungible items might include an original painting, or a vintage guitar. These things are unique and if you own them then there is nothing else quite like them that you could exchange them for.
So how is it that a picture of a cat, which can be copied and shared across the internet in a matter of seconds, could come to be worth a small fortune? The answer is through authentication.
If you wanted to prove that a piece of physical art was an original, you might need a certificate of authenticity, and this would add value to the art itself. NFTs operate in a similar way, but digitally. They are publicly verifiable assets, authenticated on something called the blockchain.
The blockchain is a secure database where NFTs are stored, along with key identifying information relating to each and every one. The NFT represents ownership of a unique digital file.
How to create an NFT
Imagine you have created a piece of digital art, and you want to make sure you get the credit for creating it. One way to do that is to create, or mint, an NFT.
When you create an NFT of your art, information will be stored within it such as a unique fingerprint of the file, the name of your token, and a symbol representing it. That token is then stored on the blockchain, which records that you are the owner of the token.
Having been through this process, you have the option to sell that token through a transaction that takes place on the blockchain. The blockchain is secure, and it keeps a record of who owns each NFT and who has previously bought or sold them.
The digital artwork you have created is not stored on the blockchain. But the attributes stored there, such as the fingerprint, token name, and symbol, ensure that your ownership of the asset can be proven.
Buying an NFT
When it comes to buying NFTs, things become a little more difficult to explain and understand.
The first thing to know about buying NFTs is that buying one does not get you a copy of the digital artwork or asset that the NFT relates to.
What the NFT entitles you to is ownership of the original digital asset, but people can still download and save copies of the file your NFT relates to.
What’s more, the artist who created the artwork that your NFT relates to still owns the copyright and can still sell reproductions of it. You, as the owner of the NFT, simply own the original version.
In short, NFTs are all about ownership, and you can expect to see all sorts of unique items being traded as NFTs, such as artwork, tickets to events, in-game items, and even houses!
Why have NFTs become so popular now?
NFTs, which are sometimes referred to as ‘nifties‘, have been around since 2017, when the blockchain game CryptoKitties took off and saw virtual cats being bred, collected and traded for thousands of dollars.
The coronavirus pandemic then prompted a boom in the value of NFT transactions, as lockdowns meant people spent more time on the internet and had more spare cash to spend. The total value of NFT transactions quadrupled to $250million in 2020.
Since then, Facebook’s announcement about its preparations for the metaverse has boosted people’s confidence in NFTs having an important role to play in the future of digital asset creation and trading.
What makes NFTs different to other cryptocurrencies?
The blockchain underlying NFTs is more complex and holds more potential than the code that underpins other cryptocurrencies.
This means you can do things like having royalty payments to the original creator of an NFT built into each resale of it, or minting an NFT that actively creates other original NFTs.
NFT proponents say they will help to address the problem of creators not being properly credited and paid for their work – something that online sharing of digital content has made difficult.
However, to anyone considering venturing into the world of NFTs, it is worth remembering that they are only worth what anyone is willing to pay for them. So while your NFT of the original rainbow cat meme might be worth huge amounts now, if the popularity of the meme fades into obscurity you could be left with an NFT that nobody values, and as such it will be worth very little.
Who is using NFTs?
The profile of NFTs has been boosted by some high profile figures getting involved in the burgeoning market for them recently.
For example, the rock band Kings of Leon offered NFTs relating to their latest album, giving fans the chance to take ownership of exclusive editions of the album for extra money.
Twitter CEO Jack Dorsey decided to sell the first tweet he ever posted as an NFT, and remarkably it sold for over $2.9million.
NFTs have allowed digital art to break through into the world of top-level art collecting, and digital artist called Mike Winkelmann, better known as Beeple, sold a piece called ‘Everydays’ as an NFT for $69million through major auction house Christie’s. Prior to that, he had never sold a print for more than $100!
Could NFTs be important in bingo?
Given that Paris Hilton owns more than 150 NFTs and has made NFTs that sold for over $1million, there is reason to believe that this trend could really be open to more than just tech nerds and art connoisseurs.
Predictions are being made about the future of online gaming and online bingo being headed towards the metaverse, where in-game purchases and digital assets will be all the more important. Could it be that one day bingo players will happily receive NFTs as payment for big wins? The bingo software developers and maybe even slot developers will have to keep a close eye on how things progress so they don’t get left behind.
Skeptics say that as NFTs grow in popularity they will become more difficult to manage. Bogus claims to creatorship and ownership could muddy the waters and affect the value of NFTs.
Other concerns include the huge amounts of computing power required to make NFTs, which makes them environmentally unfriendly, and the requirement to have bank accounts stuffed with cryptocurrencies in order to start making, buying or selling NFTs, which some believe makes the market inaccessible and elitist.
One thing is for certain: NFTs are not going away anytime soon, and it is worth knowing a thing or two about them in case their popularity continues to escalate long into the future.
Mark Angus is a professional writer and editor currently based in Adelaide and London. Mark writes on a variety of sports betting and gaming topics, most notably football and cricket (he has been a season ticket holder at Fulham for far too many years), as well as horse racing, in particular jumps racing. In addition, Mark produces website content, blogs and articles for a variety of publications, organisations and businesses, and has extensive experience in writing for all forms of online, print and broadcast media.