What Are NFTs?
NFTs stands for non-fungible token(s). It’s a word that appears almost everywhere these days be it on Twitter or even in major publications such as the New York Times. But what exactly are they? To understand what an NFT is, we need to understand the concept of fungibility.
Fungibility refers to the ability to exchange one token for another token of equal value. An excellent example of this is the exchange of currency. For example, one can trade a 100-shilling note for another 100-shilling note. Despite having a different currency from the initial one, it is still of the same value. The opposite is true for non-fungible tokens. Each token has a unique value based on its properties and cannot be exchanged directly for another token of equal value.
NFTs and blockchain technology
Most NFTs are a part of the Ethereum blockchain. Ethereum is a cryptocurrency. Its blockchain can hold additional information that makes it work differently from the Ethereum coin. This space for extra information has allowed for NFTs to exist. Most NFTs sold these days are digital art. Selling digital art in the form of NFTs has led to their drastic rise in popularity. Success stories such as Beeple selling an NFT for 6.6 million dollars have attracted many people to the NFT market.
NFTs market is still very volatile and risky.
The NFT digital art market might seem like a goldmine with lots of untapped potential to an outsider. However, that is not the case. The market is speculative, and something worth thousands of shillings today may be worthless tomorrow.
Another glaring issue that affects NFTs is copyright issues. Most would believe that owning one gives them exclusive rights to the art. That is not the case. In this case, an NFT functions as proof of ownership, like getting a receipt after buying some art. This means that people can easily screenshot digital art and use it for their own purposes. It also doesn’t stop the original artist from producing art copies and selling them to other buyers. NFTs are still in their infancy, and I’m sure lawmakers will create more comprehensive copyright laws to govern their sale and ownership with time.
NFTs have also negatively impacted the environment. Due to their reliance on blockchain technology, their minting and trading consume a lot of power and generate a lot of heat.
Per an estimate by independent researchers, a single NFT piece has a carbon emission footprint of about 211 kilograms, equivalent to flying for two hours or driving about a thousand kilometers in a petrol car, or using a laptop for three years. However, these issues still persist; many NFT and blockchain enthusiasts are working on solutions to mitigate the environmental impact.
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