NFT

Lets talk NFTs!

There has been a lot of talk around NFTs and a craze about their rising value. A video clip of LeBron James dunking recently sold for more than $200,000 on NBA Top shot as an NFT and many people were left wondering why would someone buy a digital representation of that clip while they could watch it on say youtube.

WHAT ARE NFTS?

NFTs, Non Fungible Tokens, simply put are digital tokens that represent real world objects like art, music, GIFS, games, videos etc that are bought and sold online with cryptocurrency and are encoded with the same underlying software as many crptos.

Think of it as a crypto “token” that is one of a kind and cant be replaced.

HOW DO THEY WORK?

NFTs are one of a kind assets that can be bought and sold like any other piece of property but have no tangible form of their own. Each NFT has a unique code that identifies it. Say an artist would want to sell his piece of art, he would have it encoded and sell it at an auction and the highest bidder would then be the owner of that particular piece of art digitally. Digital tokens would be awarded to the bidder and he can choose to keep it as a long term collectible or as a speculative investment hoping to sell it at a higher price in future. Digital Tokens can be thought of as certificates of ownership. One would ask, what is the point of buying a video where one can still find it online for free. Well, nothing will stop people from copying say the art but the buyer of the NFT owns a “token” that shows they are the “original” owner. A record of who owns what is stored on a ledger known as a blockchain. Some people buy NFTs as speculative investments while others look at them as long term collectibles of things they value. NFTs can contain a smart contract that may give the artist a cut from any future sale.

Some NFTs have sold for millions. Twitter CEO, Jack Dorsey, promoted an NFT of the first ever tweet with the bid hitting $2.5m. Recently, A digital-only artwork by Beeple has sold at Christie’s auction house for an eye-watering $69m, but the highest bidder did not receive the art but a digital token that is NFT. Musician Grimes also sold her piece for almost $6m.

THE FUTURE?

One end of skeptics claim its just a bubble that might pop any time because the idea of buying something that is not tangibly there might not make sense to many. On the other end, researchers claim people are beginning to adapt to this new form of technology.

There has been a lot of concerns about the environment impact of maintaining the block chain since technically the codes are being run by many special computers that are emitting a lot of energy at a go. That said, like any other investment you need to do due diligence before purchasing an NFT.

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Tasha Musyoki
Tasha Musyoki
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