What is NFT and How does it work

A trend is going on the internet knowing as NFT. Just a few days ago, a jpeg picture was sold for 69 million USD. It’s not the only JPEG, there are other digital assets too that are sold out for huge freaking millions. Jack Dorsey first tweet was sold for $2.9 million. Now the question is what makes NFT so unique that let buyers to spend a huge amount on a single image, post or music. According to experts, it’s a bubble that is going to be pop soon like the dot-com craze but others are also saying that NFT is here to stay and it will soon change the method to sell and buy. What is NFT? Is it a hype or a bubble and are NFT’s worth buying?

What is NFT?

NFT stands for Non-fungible token. In simple terms, non-fungible means non-replaceable. This Non-replaceable term makes NFT unique. NFT are digital assets which represent art, music, video, game or post which belongs to real-world objects. These digital items are bought and sold online with the help of Cryptocurrency. 

NFT gives someone ownership of that digital asset which he/she purchased. But nowadays, the digital assets which are selling have already existed in some form on different social media handles from that catty gif which was purchased for $600,000 or that collage of jpeg picture which was sold for $69 million. These things are already available elsewhere and users are using them and sharing them for free. So, what’s the need to buy NFT by spending a huge amount?

People are buying NFT because NFT gives you the ownership of that digital asset. NFT also consist of built-in authentication or code which gives proof of ownership of that buyer.

How does NFT work?

NFT are usually stored in Blockchains. Blockchain is a concept which helps in carrying transaction between two people instead of doing it in their bank accounts the records are recorded publicly, means on the internet. Blockchain relies on the public ledger of transactions. 

Most NFT’s are stored in the Ethereum blockchain, although they can be stored on other blockchains too. 

NFT’s are created from the real-world object and these object scan be tangible and non-tangible. It can be any art, design, Music, Social media post, Game, Videos, GIFs and sports moments. 

NFT’s gives you that art in a digital format rather than in physical format. It means you can’t touch it physically it would be stored on your computer in a digital format. NFT only gives you the ownership rights of that digital asset with the digital signature of the creator. This information can be stored by the creator and buyer. NFTs can have only one owner at a time and this ownership can be easily verified by the real-time authentication or code encoded on NFT. 

How NFTs are helping creators?

As we know, the artists have to rely on auction and galleries to sell their paintings or any art. But NFT has helped in removing the dependency of the artist on galleries and auctions. They can now monetize their art with the help of NFT. NFT is not only giving them high profits but it also helps them in earning a percentage of sales whenever their art is sold to a new owner. This unique feature makes NFT unique because generally, artists are not getting this feature in auctions and galleries.

Recently, a disaster girl turned her meme into NFT and sold it for $500,000. Similarly, the catty gif was sold for $600,000 in February. Now, NBA is also setting up little moments of basketball games for thousands of dollars and the NBA top shot moment was purchased for $500 million in late March. So, NFT’s are giving artist’s profits and buyers their ownership.

Effect of NFT

NFT’s has a positive effect on the buyer and seller side but it harms the Climate. NFT is stored in blockchain and blockchain relies on a public ledger. This ledger requires many little calculations for transactions. These calculations are performed on micro-computers all day and all night. By doing these calculations micro-computers consume energy in a large amount. As we know the energy are generated by burning fossil fuels in power plants and if the energy demand goes high then it will have a major bad effect on climate leads to carbon footprint issues. 

As mostly NFT’s are stored in Ethereum and a study shows that Ethereum consume a large amount of energy and sometimes this energy demand equals energy consumed by a country.

We know that the NFT and all this process are going online but the effects caused by it is real.