What is NFT ?
Posted by admin on July 1, 2021
What is NFT?
NFT stands for non-fungible token. It’s a digital token, a type of cryptocurrency much like Bitcoin or Ethereum. They’re digital representations that take up a block on the blockchain that references a piece of data but has an underlining smart contract underneath it which you can use for fantastic creativity. It can be anything, music, a game or even a tweet. NFTs are unique and can’t be exchanged (like-for-like) they are also a part of the Ethereum (cryptocurrency) blockchain – in theory, any blockchain can support NFTs.
NFTs are exclusively made to give you something that cannot be copied, which is ownership of the work. The artist can still retain the copyright of the original piece just like that of a physical artwork. So what’s stopping someone right-clicking and saving that NFT into their hard drive and calling it a day? If they’re looking to be the next Beeple that just won’t cut it. The downloaded file won’t hold the information that makes it part of the Ethereum blockchain. So the value of that picture would be nil.
In case you missed it, “The First 5000 Days” digital collage done by an artist known as Beeple was sold for an astounding $69.3 million at Christie’s Auction in New York.
Why get one then?
Think of NFTs as financial investment or a sentimental possession. Collectibles if you wish, like pokemon or baseball cards. Sometimes it’s the desire to get associated with a brand. If there is high demand for the NFT, they’re often released as “drops.” Think batches of tickets for a concert or event.
You also get access to exclusive content and experiences as part of the NFT community. Some artists that create NFTs of their digital artwork will give the buyer a one-on-one private chat or behind the scene access to how the artwork was done for example.
How can brands leverage NFTs?
Scarcity and exclusivity. Imagine if every ticket holder of a concert receives an exclusive collectible through a music service provider like Spotify or Apple Music which unlocks the best memorabilia from that concert night, special talk with the artist, or even branded AR filters. Cobranding is another example and while the idea of cross-branding or collaboration is not new, it undoubtedly unlocks an entirely new avenue of opportunity.
If you add branded artwork with exclusive (or limited edition) digital collectibles created by an influencer or a celebrity, this becomes a successful recipe for a long-term brand engagement across multiple owners. GoPro & Red Bull, Diet Coke (Coca-Cola) ft. Taylor Swift, Travis Scott and McDonald, you get the point.
In real life experience is another great example for the use of NFTs. Sony pictures can make a 3D print from one of the characters of a movie that’s about to debut, take the next Spider-Man Into the Spider-Verse.
What’s the glitch?
Because cryptocurrencies and blockchain are running through an algorithm called Proof-of-Work (PoW), the current system for NFT transactions is deemed environmentally unsustainable. There’s a lot of energy consumed for creation, buying, selling, reselling and storing which adds to multiple transactions that require a lot of energy.
“The average NFT has a footprint of around 340 kWh, 211 KgCO2. 1 in 5 (18%) of the artists’ NFTs have a footprint greater than 10 tonnes of CO2. To put that into perspective, that is equivalent to 12 transatlantic flights, or a EU resident’s total electric power consumption for 5 years.” – The Unreasonable Ecological Cost of #CryptoArt, Memo Akten Medium page.
There are two main security risks with NFTs. Copyright. Meaning anyone can steal a piece of art or a picture online and create an NFT with it. Then comes the more significant one. When an NFT is obtained, the content gets stored on a server, not the blockchain, because they’re expensive to keep.
The concept of NFTs may still be challenging to grasp to some people but the good news is they’re here to stay for the long-haul and brands are finding creative and nifty ways to use them. NFTs could play a significant role in the digital landscape of the future, they’re not a hyped up craze. Make no mistake, it’s not a bubble either because the value of each NFT is solely based on the value of the item it represents and you don’t want to miss out on the opportunity to participate in an ecosystem that’s on a rapid growth trajectory.