If you’ve been browsing the internet trends in 2021 you might have noticed the term NFTs being tossed around left and right. A lot of people seem to be going crazy about it, and it also looks pretty expensive.
So, you might wonder what exactly are NFTs and if you are already missing out on giant monetary potential. No worries, here we will give an explanation on NFTs and why some of them are worth so much. We’ll talk about the pros and cons, and provide you with enough information to decide if you should be buying these digital goodies.
What are NFTs?
NTF stands for a non-fungible token, and what it basically means is that the token is not interchangeable. In economics, we have currency like $1, $5, or $10 and these are all interchangeable, you can change 5 one-dollar bills for one five-dollar bill. NFT means it has a unique value on its own, like a painting of the Mona Lisa. Meaning if you can produce a near-perfect replica it still wouldn’t have the same value.
These NFTs are used for digital goods and allow people to own the assets like the first tweet ever made, a video of James LeBron dunking, or the original Grumpy Cat meme. This does not necessarily prevent people from copying or altering the original, but you can still hold the rights for the first and the original version of the content made. It might look strange to older generations but for digital natives, this seems to be a growing trend and there is a lot of money going around for buying and selling NFTs.
NFTs and Cryptocurrencies
You might have also seen that NFTs are being compared to cryptocurrencies, and there is truth to that. They basically both works on blockchain technology, and the whole NFT trend started as a blockchain collectible game. Here you could breed cats and each cat was unique in its own way, much like digital art. By using blockchain an owner of a particular NFT has a confirmation that he is indeed the owner, as it’s confirmed on multiple ledgers, much like the ownership of cryptocurrencies.
However, cryptocurrencies have their own system of value and they are interchangeable. Some of them even have higher utility as businesses accept them as a payment method. Nowadays they are often used in online casinos as you can fund a real money account via bitcoin. British players who play at fast withdrawal casino in UK can both make a deposit and withdraw money fast using cryptos. So, these instant payout platforms are what increase utility and value by extension of digital currencies.
Problems with NFTs
So far this looks like it’s another hobby for the rich. It’s basically an act of randomly assigning monetary value to things on the internet. As a result, you don’t know whether you’ll get your money’s worth by investing. People who buy it do so because they want to own that thing not necessarily re-sell it. Given how it’s mostly a thing of prestige you would have to gauge whether you’ll have a big customer base for a specific NFT before you purchase it if you wish to resell it.
Another problem is power consumption. Mainly that so long as we continue to fuel this trend we are likely saying that we are okay with all the power it takes to maintain it. Right now blockchain requires massive computing power and that creates issues. To put this into perspective bitcoin uses 240 kilowatt-hours of electricity per transaction, which means the whole network is using as much power as the whole nation of Serbia. Given all the eco-friendly initiatives this might grow into a bigger problem unless they make necessary adjustments on the supply side.
Finally, this is just another trend so it’s hard to say how things will play out. It’s likely that it’s just another bubble that will burst in a few years like dot-com. On the other hand, the fear of missing out is real, and for all, you know you are losing money by ignoring the trend.
Hopefully, this was all insightful enough for you to decide whether to start buying NFTs or not. If you decide to do so, stick to the things you know and that you strongly believe will have value in a certain community. This way you might not mind if you only end up owning something you genuinely love.
Ebony Smithson Alexander is a professional writer who works as a content strategist. She covers topics related to the iGaming industry, gaming, and tech. Leslie loves to explore new gambling platforms, play League of Legends and organize poker nights with her close friends and co-workers.