Decoding NFTs: A Blessing or a Curse in Disguise?

Nov 15, 2021
5 min read
NFTS: Non-fungible token
Decoding NFTs

Everyone wants to make millions in a night.

What if I told you that it’s achievable? You just have to create a digital form of art, music, video, or even a meme and immortalize it.

The first tweet of Twitter’s CEO Jack Dorsey got sold for more than four million dollars. Unbelievable, right?

Twitter Tweet sold for $4 Million
First Twitter Tweet by Jack Dorsey

Cryptocurrencies, tokens, and digital assets are expanding with the growing blockchain and crypto industry. Since digital ownership is crucial for the progression of a digital realm, it will shape the next massive revolution and a new-found universe for customer experience.

So, what does a Twitter tweet selling for millions has to do with NFTs and public records?

Decrypting Cryptocurrency and Blockchain

Cryptocurrency is a computerized medium of exchange that holds a collection of binary data in a ledger or a digitized database. The secured transaction of cryptocurrency happens through ‘tokens.’

Blockchains are versatile, distributed ledgers that help in the successful implementation of cryptocurrencies. It has uses in various industries since it enables organizations to enable transparency, automation, and security through efficient techniques.

So, what’s an NFT?

Representation of Ethereum, A cryptocurrency
NFTs are a part of the Ethereum Blockchain

NFT or non-fungible token is a unique, indivisible, digital asset formed by the amalgam of cryptocurrency and art stored in smart contracts or ledgers. There are over 10,000 NFTs in the form of digitalized art, music, GIFs, and so on.

Fungible is a term used by economists that is a synonym of replaceable. In short, non-fungible means no two NFTs are similar, like a concert ticket. Although they’re built using parallel programming to cryptocurrency, they are nearly opposites of bitcoins, and currency notes are fungible and look alike.

NFTs are a constituent of the Ethereum blockchain, where users can purchase and sell any digitized item, from pictures and art to memes and music pieces. These tokens get stored in a shared digital ledger, an immutable place where people’s computers track everything, making forgery impossible.

About the Ethereum Blockchain

Ethereum is an open-source, decentralized blockchain that makes use of smart contracts. It has its own cryptocurrency abbreviated as ETH, and it is second in market value after bitcoin. The Ethereum blockchain is built on its programming language called Solidity. It finds innovative uses in sales and advertising, finance, web browsing, gaming, and logistics.

Non-fungible tokens might be the next great thing that will aid artists in their works since it allows them to trade their pieces, monetize them, and preserve the copyright.

How Does it Work?

Let’s understand this through some illustrations.

Suppose you wish to buy a vintage music piece priced at $50 from someone called Ralph. If you’re making an online transaction through traditional banking, a message goes to the bank that you want to spend fifty dollars on a music piece, and that amount needs to get transferred to Ralph.

This is how a traditional bank works, thorough documentation and tallying all your transactions. Now, all the tally shows that you have $200 in your account, which means you can pay for that $50 music piece, and the transaction gets validated. The amount gets added to the tally of Ralph’s account.

Basically, the bank 'middleman' that’s responsible for all online transactions. Now, what if I don’t want a bank to make this transaction? This is where blockchain comes to play.

Now, if I want to buy this music piece from Ralph, who charges 30 tokens, the payment gets stored in an unalterable, non-erasable public record where all transactions from people across the globe get recorded. The computers worldwide see if you have 30 tokens for approval of the payment before it's verified.

Difference? You can now do it in a non-physical way, without a middle organization.

Briefing the First Non-Fungible Token: CryptoKitties

CryptoKitties are the first NFTs part of the Ethereum blockchain and now have their own blockchain. Each Cryptokitty in the blockchain is unique, which means that if you receive a crypto kitty from someone, it will be different from the one you own or the one you sold.

Why are People Crazy about the NFT?

Nyan Cat Meme $500,000 as a non-fungible token
The Nyan Cat

The above picture of a gliding pop-tart cat is a part of a GIF famously known as the Nyan Cat. The meme dates back to 2011. It got sold for more than $500,000 as a non-fungible token.

Although the idea of non-fungible tokens dates back to 2014, it is gaining immense popularity now. People like collecting various items they think hold value, like artworks, sculptures, ancient currency coins, etc. There might be a million copies of the Mona Lisa on coffee mugs, stamps, and postcards, but the original painting is irreplaceable.

The craze of the ownership of items is also turning digital, giving rise to non-fungible tokens. Their uniqueness proves the value and the scarcity of the entity owned. It can be anything like art, game skins, or a virtual wardrobe collection of clothes that you could never wear.

Where can I buy Non-Fungible Tokens?

Beeple created by Mike Winkelmann sold for $69 million
Beeple: The NFT collage ART

In general, non-fungible tokens don’t sell in traditional crypto marketplaces. However, multiple marketplaces have come around NFTs. Some of these include OpenSea, Metamask, Rarible, SuperRare and Grimes’ choice, Nifty Gateway,

Is NFT Paving Way for Our Doom?

Maintaining the Ethereum blockchain that contains the NFTs consumes 133.68TWh of energy each year, even more than the power consumed by Sweden and the Netherlands, which is around 131.80TWh. This substantial energy consumption leads to negative carbon emissions in the environment, causing global warming.

Besides the environmental disadvantage, purchasing NFTs doesn’t let you buy the copyright. The users can still upload and download a copy of it, even if you paid millions to own it. Also, not all NFTs are valuable or may tend to lose their value over time.

The concept of non-fungible tokens might support artists today but might be the downfall of the globe tomorrow. It is a dual-edged sword with thoughtful advantages. So, NFT could either be the next big revolution worldwide or an idea journeying to the doomsday.