Puppy gifs, memes, Elon Musk videos, paintings, tweets, audio recordings, and even Reddit posts. What do they have in common?
The answer is NFT. These objects can be tied to an online token that proves your ownership of that particular sound, image, website, or even an actual physical object. Or not?
Let's talk about NFT today. How it works, and find out what methods of earning are possible with this new thing.
What is NFT in simple words?
An NFT (Non-Fungible Token) is a cryptographic asset that creates a digital impression of any unique item. Among them can be videos, paintings, photographs, music, gifs, texts - any unique content. Different collectors, art lovers, gamers, and curios entrepreneurs buy and sell it through auctions.
But this is a dry definition. However, what is hidden behind it? It would help if you spelled out the NFT abbreviation to understand how it works. The word "Fungible" is used as a specific economic term for products indistinguishable from each other, which means that they or their elements can be painlessly replaced.
For example, when you want to buy a laptop, you find it on an online store's website or at a shop. You can choose a brand, color, and specific model, but you don't care which particular box with a laptop out of hundreds of the same ones will be taken from the warehouse to give it to you later. A brand new laptop from the store is absolutely fungible.
However, after a month of active use, the same gadget will change its status. Your memories are connected with it, your photos and videos are stored here, and your chats, bank details, and business correspondence are also there. You can customize it by replacing individual parts and adding new ones. Stick your favorite stickers on it. And it will become unique, only yours and no one else's. It will become Non-fungible.
From this follows the concept of the uniqueness of a product. And if the product has no analogs, it costs much more.
And what does the last word "Token" mean? This word becomes clearer after a detailed consideration of what a blockchain is. In common life, in order to carry out this or that transaction, you entrust it to banks. Banking systems and employees check your account details and decide whether your current balance allows you to make a particular purchase or not.
Blockchain technology excludes banks from the process. Analytics and calculations are carried out by thousands of computing systems included in a single network but located in different places around the world. Each computer registers transactions and publishes transaction data in the public domain. That's why each internet user can trace a buyer's entire history of transactions from the moment he started.
It doesn't sound terrific, but it gives you the right to wholly and openly evidence that you are the owner of a particular cat meme, and it's very easy to check this. Such transparency and publication of all transactions without exception ensure the increased value of NFT.
As a result of each successful deal, you receive a particular token, which contains data about the transaction, the seller, the buyer, and the amount that was spent.
When did it all start, you ask?
The first transaction was completed in 2014 when Kevin McCoy sold to Anil Dash a video created by McCoy's wife. Entrepreneurs referred to the technology as "monetized graphics."
The term "NFT" was first proposed in 2017 via Ethereum's GitHub, following the launch of different related projects.
But the topic gained real popularity and high interest in 2021 after a series of extraordinary events. For instance, when Elon Musk, founder of Tesla, listed for sale his tweet about NTF for $1 million. It was never sold but received much attention from the media.
Or when comedian Idrak Mirzalizade, who was deported from Russia for a bad joke, put up his canceled residence permit for auction, noting that he would return and the price would increase.
How does NFT work, and what do you need to create your token?
The whole concept is quite handy for all parties in the transaction. Various enthusiasts and artists can not sell their artworks online without middlemen. It means blockchain platforms earn money from transactions, and users earn money by reselling products at a profit.
To create and subsequently sell your token, you need at least three things:
- "Object of the transaction," that is, what you want to sell;
- Digital wallet in the required cryptocurrency (Ethereum is the most popular);
- Intermediary service.
Here is a list of several very popular marketplaces:
Each marketplace has its instructions for creating and auctioning an NFT-token.
- Already you can create NFTs from your paintings, music, photos, and videos, and various intermediaries will help you sell these artworks;
- You can even rent them out and earn passive income;
- Also, by setting up special conditions for the sale of an object, you will be able to receive royalties every time it is resold.
At this point, it is worth touching on the topic of copyright. One of the main reasons NFTs are criticized is the rather confusing relationship between tokens and copyrights. People who buy it often wonder, "Do I now own the rights to something?"
And the answer is NO. The fact is that NFT does not give any rights to own an object outside the boundaries of the blockchain platform. Someone who creates an NFT using someone else's work should ensure they have permission from the copyright owner.
At the moment, legislative regulation of this issue is only being formed. And there may be differences for each country. Therefore, each episode of online theft of intellectual property can end differently.
A small summary:
NFT is, firstly and foremostly, an innovation that exposed a whole bunch of problems: the open issue of plagiarism and copyright infringement and the incompetence of the media, problems with clear regulation of possible disputes, and so on. That hinders the development of technology.
However, different platforms announce various innovations and attract investors, artists and musicians are starting to show more and more interest in a new niche.
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