An Introduction to NFTs

The future of NFTs

We really are only scratching the surface of the potential of NFTs. It is only a matter of time before we see them emerging in new areas of our lives.

Right now, it might be in the collectables, digital artwork, and gaming space, but this innovation is set to soar over the next decade with more brands and media powerhouses turning their attention towards digita. assets.

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The digital world's new frontier

From the ‘metaverse’ to web3, Blockchain and crypto, we are racing towards a new frontier of the digital world. One where the lines between our physical and digital lives will be even more blurred than they are already. Right now, everyone’s talking about NFTs, and for good reason too: the space is booming.

After capturing mainstream attention in February 2021 when a piece of video art by an artist known as Beeple sold for a huge £6.6 million, NFTs have been causing quite the buzz amongst forward-thinking consumers and investors alike.

But what exactly are NFTs?

Are they really going to change the future, and most importantly, how do we get in on the action?

What is an NFT?

NFT stands for ‘non-fungible token‘. Everything in our economy is either fungible or non-fungible.
If an asset is fungible, it’s replaceable by another identical item. Physical money and cryptocurrencies are fungible. This means they can be traded or exchanged for one another. They are equal in value – one bitcoin is always equal to another bitcoin; one pound is always equal to another pound.

NFTs are different. Each one has a digital signature that makes it impossible for NFTs to be exchanged for one another. Each NFT is unique or ‘one-of-a-kind’ and cannot be interchanged. You can buy and sell NFTs on digital marketplaces using crypto.

NFTs can be a representation of something (a work of art, a game, a collectible, a piece of music, a photograph or video) or it can be an original creation that exists only in digital form. Almost anything can be made into an NFT. Use cases predominantly are in the digital collectibles, music and art space currently, but there is huge potential for them to expand into other areas in due course and become the bedrock of the digital economy.

An NFT allows the buyer to get exclusive ownership rights. It contains built-in authentication which makes it easy to verify ownership and transfer tokens between owners. NFTs are registered on a Blockchain, which is a distributed public ledger that records transactions. Specifically, NFTs are usually held on the Ethereum Blockchain, although other blockchains support them as well. This gives the NFT a unique digital watermark that certifies the ownership of the NFT – it gives the digital asset the stamp of authenticity.

What is a Blockchain?

In short, a Blockchain is a digital database that records transactions from networks all over the world. It’s a decentralised system, governed by the people who interact with it.

It’s best known for its crucial role in cryptocurrency systems. It maintains a secure and decentralised record of transactions. The innovation with a Blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.

Blockchains are also immutable. This means that data, once entered into the Blockchain, is irreversible. They are permanently recorded and viewable to anyone.

Did you know?

Most NFTs are stored on a Blockchain called Ethereum. This Blockchain is powered by 33TWH of electricity – the same amount required to power the whole of Serbia.

What is Web3?

The internet has evolved a lot over the years. Its applications today are almost unrecognisable from its early days. The evolution of the web is often divided into three stages: Web 1.0, Web 2.0 and Web 3.0.

  • WEB3
    Decentralisation is at the core of Web3. With the rise of technologies such as distributed ledgers and blockchain storage, data is becoming increasingly decentralised. This is helping to create a transparent and secure environment, surpassing Web2s centralisation, surveillance and exploitative advertising.
  • WEB2
    You can think of Web2 as the interactive and social web where you don’t have to be a developer in the creation process. In this stage, everyone can participate – we are all able to create our own content and upload it to a website, not just read information.
  • WEB1
    Web1 was the first version of the web, taking us from approximately 1991 to 2004. Participants were consumers of content while creators were typically developers who built the websites. During this era, content was consumed through static websites.
What does the term ‘decentralised’ mean?

This type of decentralised infrastructure will displace centralized tech giants and allow individuals to rightfully own their data. With web3, users will be able to connect to an internet where they can own and be properly compensated for their data and time, eclipsing an unjust web where the tech giants are the only ones that own and profit from it. NFTs are closely linked to the Web3 vision. They’re both powered by the Blockchain and will be core parts of the new digital world.

Are NFTs worth it? What’s their value?

Many people may wonder how tokens on the internet could be worth any money at all – let alone the enormous $69 million that Beeple’s ‘Everydays: The First 5000 Days’ sold for at Christie’s Auction House in March 2021. Especially given that many of them just represent ownership of a digital artwork that you could, in principle, download a copy of it for no cost at all.