NFT

Updated: 01/18/2023 by Computer Hope
NFT illustration

Short for non-fungible token, NFT is a unique identification from the Ethereum blockchain that's attached to a digital thing. For example, an NFT can be attached to digital art, a playing card, music, character, video clip, etc., to make it unique and something you own if you purchase the NFT. By owning the NFT, you could say the digital thing is a one-of-a-kind (non-fungible) you own. This uniqueness can also give that digital item value, allowing it to be sold to another person.

Example of NFTs

An NFT can be attached to anything, and although it's often attached to a digital item, it can even be associated with something tangible. Below are examples of NFTs.

  • Digital art (crypto art) - A popular type of NFT is digital art that someone has created on a computer. For example, a GIF or JPEG image someone created could be sold as an NFT.
  • Photograph - A photograph taken by a camera can sell as an NFT. For example, William Shatner sold early Star Trek photos he had as NFTs.
  • NBA sports shots - The marketplace Top Shot sells NBA moments (small video clips) as NFTs.
  • Tweets - People on Twitter have sold one or more of their tweets as NFTs. For example, Jack Dorsey sold his first tweet for almost $3 million.

NFT advantages

NFTs have advantages, especially for artists. If you're an artist, selling your art as an NFT could allow you to make more money for the initial sale of the NFT. Also, because the unique identification can be tracked, you can make a percentage of the money earned from every future transaction.

NFTs are considered a speculative asset, where you believe someone else will pay you more than you originally paid. Of course, any NFT you own is only worth what someone else is willing to pay for it in the future. If NFTs become irrelevant in the future, they would be worth nothing.

NFT criticism

Easily copied

Because most NFTs only exist as digital objects, many people argue there's no real value to NFTs because they're easy to copy and duplicate. Although the unique identification created by the blockchain cannot be duplicated, it's easy to duplicate the digital thing attached to that unique identification.

However, others argue that the same is true of most art. For example, you can take a picture of the Mona Lisa, but that doesn't mean you own the Mona Lisa.

Copyright

An NFT is only a method of showing proof of ownership. When you purchase an NFT, it doesn't restrict someone else from using the NFT, and doesn't make you the Copyright owner or give you any intellectual property rights.

Fees

The marketplaces that help artists and other users list, sell, and show proof of ownership have many different fees attached to NFTs. These fees can include one-time fees like registration fees and gas fees, and recurring fees like network and service fees. An artist selling an NFT for less than $100 on many marketplaces may even pay more in fees than they make in sales.

What are gas fees?

The term "gas fees" describes how much it costs to make a transaction on Ethereum. These fees help cover the computing energy costs required to make a transaction.

Plagiarism

Most marketplaces that list and sell NFTs take no steps to verify the art being sold on their marketplace is not plagiarized or stolen. This lack of control allows criminals to copy other artists' work, make little or no modifications to that work, and then sell and make money.

It's up to the NFT owner to report other sellers of plagiarized or stolen NFTs, in hopes of getting those sellers banned and the illegal NFTs taken off the marketplace. Unfortunately, doing so requires a lot of time, and many NFT owners have stopped trying to police their work. Instead, they are urging owners of NFT marketplaces to start tracking and stopping the plagiarism and theft of NFTs.

Link rot

Due to the limited blockchain size, most NFTs are not themselves in the blockchain, only the link to a web page showing the proof of ownership. If the website containing this information changes its links, goes out of business, changes the link structure, or doesn't continue with maintenance, the links are subject to link rot.

Power usage

NFTs use blockchain technology that requires a lot of electricity to keep track of all unique numbers and transactions. Although technologies are being developed to reduce the demand of power, they'll always require power to maintain.

Note

On September 15, 2022, Ethereum changed from proof-of-work to a proof-of-stake. This change reduced Ethereum's energy consumption by ~99.95%. NFTs done through Ethereum no longer consume as much power.

Stored in a digital wallet

The NFTs you own are stored in a digital wallet. If you lose access to this wallet or forget the password, everything stored in the wallet is lost.

Easy to pump

Because of the anonymity of marketplaces, it's easy for some to create multiple accounts and buy NFTs they already own to artificially increase the value of their NFT. This action gives the appearance of an NFT being popular and may entice someone to buy an NFT that really isn't popular. This tactic is more commonly known as a pump and dump scam.

Ponzi scheme

Some compare NFTs to a Ponzi or pyramid scheme because of the hype of early adopters making money to excite new and inexperienced people into buying NFTs. Unfortunately, like most schemes, not everyone becomes rich from selling NFTs.

Not regulated

There's no government organization that helps monitor and protect you from schemes like those mentioned above. If you get scammed, you lose your money with no chance at getting it back.

What was the most expensive NFT?

NFT art titled Everydays, the First 5000 Days

The artist Pak sold his NFT piece titled Merge for $91,806,519. However, this NFT was purchased in pieces called "stakes" that allowed 28,983 different people to work together to create this large of a sale. The next most expensive NFT is a piece titled Everydays: the First 5000 Days (pictured) by Mike Winkelmann (aka Beeple) that sold in Christie's auction for $69,346,250 on March 11, 2021.

Note

Although there are examples of NFTs selling for millions, these are unique examples. Most NFTs sell for little or make nothing after fees.

How can I create an NFT?

To create an NFT, you need to do the following.

  1. Create art or another unique thing.
  2. Create an account with a digital wallet provider capable of trading Ethereum or other blockchains your marketplace supports.
  3. Create an account with an NFT marketplace. OpenSea is an example of such a marketplace.
  4. List the digital work you want to sell and link it to the item contained in your wallet.

Is an NFT a bitcoin or crypto?

No. Although an NFT, bitcoin, and other types of cryptocurrencies all use a form of blockchain, they are not the same. In the case of bitcoin and other cryptocurrencies, the blockchain is helping keep track of currency and its transactions. With NFTs, the blockchain is helping track ownership of a thing and its transactions.

Below are examples of NFTs and NFT collections in alphabetical order that have been in the media. We're mentioning these to help direct people interested in NFTs to this page. We strongly encourage those interested in any NFT to read through the above NFT criticism section.

  • Azuki
  • Bored Ape Yacht Club (BAYC)
  • Claylings
  • CloneX
  • Cryptoon Goonz
  • CryptoPunks
  • CryptoZoo
  • Decentraland
  • Dribblie
  • Flyfish Club (FFC)
  • Kibatsu Mecha
  • Lucky Block NFT
  • Meebits
  • MekaVerse
  • Moonbirds
  • Mutant Ape Yacht Club (MAYC)
  • Nastya for All
  • Nastya Originals
  • NBA Top Shot
  • Nouns
  • Otherdeed for Otherside
  • Rich Cats Nation
  • Silks
  • Trump cards
  • VeeFriends

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