In our ZB shorts article for this week, we briefly explain NFT’s for the curious. If you’re reading this now, you should probably catch up, non fungible tokens have taken the crypto currency world by storm, but it’s better late than never.
A Non-Fungible Token (NFT) is a digital asset that is stored on a
blockchain which is used for trading. NFT could be anything that is digital,
it could be gif, videos, pictures, artwork, meme, tweets, movies etc. NFTs
are designed in a way that it is unique, and they cannot be interchanged
with another NFT since each NFT has an exclusive ownership right. This is
what makes NFTs different from cryptocurrencies and fiat currency which
are fungible and are equal in value.
Most NFTs are linked to the Ethereum blockchain. Ethereum is the most
popular and preferred among the NFT artists and creators. Ethereum
blockchain is different from Bitcoin blockchain because it can enable non-
fungible token i.e., it can store additional information about the token.
How to create an NFT?
First, we choose the digital asset that you wanted to change to an NFT.
This asset should have your own intellectual property rights and if you
don’t it could get you in trouble. The next step would be to determine the
blockchain where the asset would be minted. Minting is the process when
the asset is added into the blockchain. Few famous blockchains after
Ethereum are Cosmos, Polkadot, Eosio etc. Third step is to create a digital
wallet which is helpful to keep cryptocurrency for the initial funding.
Fourth step, we need to select a NFT marketplace to sell the NFT.
OpenSea is the biggest NFT marketplace as it has comparatively low fees
and user-friendly interface. It has a total of up to 2 million transactions in
August 2021 alone, valued to 3.4 billion dollars. After the selection of the
preferred marketplace connect the digital wallet to it for future
transactions. Now, we can mint the NFT by following the step-by-step
guide to upload the NFT in the marketplace.
From 2021, NFTs are growing rapidly in popularity attracting creators and
artist all over the world. There were 39,000 unique buyers on March 2021
which shows more than 450% increase when compared to Quarter 2 of
2020.
Some buyers were ready to pay insane amount of cash for NFTs. Beeple’s
artwork known as ‘Everydays- The First 5000 Days’ was the most
expensive NFT that was sold at a record breaking $69.3 million to a single
owner. This NFT consisted of collage of 5000 pieces of his artwork since
2007. Another work by Pak was the next most expensive NFT called ‘The
Merge’, price climbing up to $91.8 million having 28,983 collectors
pitching in.
One drawback with NFTs and blockchain based assets is the
environmental impact that rise with it. NFTs alone don’t create
environmental impact but how they are produced have environmental consequences. A single NFT trade on the Ethereum platform generates
CO2 that is equal to 300,000 Visa transaction or even 24,800 hours of
watching Youtube.
To mint, buy or sell NFTs requires a transaction fee known as the gas fee.
The gas fee is paid so that the NFT is minted and stored in the blockchain.
Gas fee reflects to the computational power that’s needed to record a
transaction on the ETH blockchain. Ethereum has proof of work system
which acts as a security system since there is no middleman involved in
the process. Proof of work system uses up a lot of electricity by
compelling people to solve complex problems using machine that takes
up enormous amounts of energy. Ethereum consumes the same amount
of electricity as the entire country of Liberia.
Now that you have a broad idea about NFT’s, did it get your attention?
