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  • Sanskriti Sinha

NFTS- THE NEWEST FORM OF CRYPTOCURRENCY

"I’m selling this song about NFTs as an NFT"

― Elon Musk


The time we live in is that of digitizing absolutely anything and everything. Almost every action one might have to do has an electronic version of it available somewhere. Ranging from entertainment to education to health and now even financial procedures. In the past few years, several types of cryptocurrency, such as Bitcoin, Ethereum and Stellar, have popped up on the internet and gained tremendous value. Recently, a new form of internet trade has developed called Non-Fungible Tokens and it is quite a big deal.


NFTs are fundamentally a trade of unique digital art. In real life, people collect and sell valuable artworks and similarly, in the digital world, people collect irreplaceable digital art called "Tokens". In economics, fungibility refers to the replaceability or interchangeability of an asset. For instance, a 10 rupee note can be replaced with five 2 rupee coins, meaning that this form of money is fungible. However, NFTs are non-fungible. Furthermore, since the cost of an NFT is not predetermined but instead auction-based, the value of an NFT depends on how interesting it is to others and how much they are willing to pay for it. To illustrate this, one could consider the "Nyan Cat" GIF, a 2011 meme of a flying pop-tart cat, which sold for over 500,000 dollars on February 19th this year.


A fascinating aspect of this concept is that although these artworks can and are copied and shared all over the internet, the original piece of art still holds immense value. Besides this expected and implied respect for a token, owners can also implement copyright laws to further assert an NFT's value. A metaphor to understand this could be an iconic prop used in a movie. While replicas of this prop would sell to its fans at relatively cheap rates, the original item would be much more expensive since it is the actual prop and not a copy.


As for any digital currency, all financial transactions related to NFTs get stored on a blockchain. A blockchain is essentially a bank that is regulated by thousands of computers worldwide on the internet. In other words, financial transactions involving digital currency are noted, verified, stored as a block in a database and then completed by numerous computers through complicated algorithms. The principal difference between a blockchain and a bank is that all transactions get added to a public record. This public record is one of the chief pillars of NFTs as social acknowledgement acts as evidence for ownership of an NFT.


An art piece named "Everydays: The First 5000 Days" by Mike "Beeple" Winkelmann was sold as an NFT for 69.3 million dollars. Another token, "Crossroad", sold for 6.66 million dollars. Even Twitter posts such as Twitter co-founder and CEO Jack Dorsey's first tweet sold for 2.9 million dollars.


Unfortunately, this flabbergasting phenomenon has a downside too which is that NFTs require a lot of electricity and power to run as they are all based on several databases run by multiple computers, also known as "miners". A study has shown that an average transaction on the Ethereum blockchain, the one NFTs are based on, uses 35kWh, which is equal to the electricity used by a refrigerator for a whole month. As we know, electricity is commonly generated by the burning of fossil fuels which cause greenhouse gas emissions, ultimately resulting in global warming and climate change.




Although we cannot participate in this new trend, it is always beneficial to be aware of it as it is a landmark of the digital era. Being aware of this complex phenomenon helps us prepare ourselves for the future and keeps us informed of current events. In addition to that, it teaches us about how the world works as NFTs are proof of the exceptional importance of social acknowledgement in our society.


Bibliography:

  1. BitIRA. "Types of Cryptocurrencies | Bitcoin, Ethereum & More | BitIRA®."

  2. Jake Frankenfield. "Fungibility: When Interchangeability Matters." Investopedia.

  3. BBC News. "What are NFTs and why are some worth millions?."

  4. Decrypt / Daniel Phillips. "The 10 Most Expensive NFTs Ever Sold - Decrypt."

  5. Vikram Barhat. "Are NFTs Hurting the Environment?.”

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2 Comments


Ranjita Sinha
Ranjita Sinha
Jun 24, 2021

Amazing piece of info!!

Like

shailesh sinha
shailesh sinha
Jun 23, 2021

Superb!!

Like
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