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15th April 2022 (6 Topics)

Non-fungible tokens (NFT) Bubble


People are increasingly investing in NFTs in hope to get rich quickly without assessing risks and taking any due consideration.


About NFT

  • Unlike, a fungible asset that can be readily interchanged - like money, a non-fungible token or NFT is unique digital asset that cannot be interchanged.
  • NFTs can really be anything digital like drawings, music etc. but a lot of the current excitement is around using the tech to sell digital art.
  • NFTs, can help artwork in getting "tokenized" thus creating a digital certificate of ownership that can be bought and sold.
  • NFTs may also contain smart contracts that can give the artist, for example, a cut of any future sale of the token.
  • It is backed by Blockchain technology.
    • For the uninitiated, Blockchain is a distributed ledger where all transactions are recorded. It is like your bank passbook, except all your transactions are transparent and can be seen by anyone and cannot be changed or modified once recorded.
  • However NFT’s does not prevent people from copying the digital art.
  • Most NFTs are part of the Ethereum blockchain. However, other blockchains can have their own versions of NFTs.

Fungible items, on the other hand, can be exchanged because their value defines them rather than their unique properties. 

How is an NFT different from cryptocurrency?

  • NFTs and cryptocurrencies are very different from each other. While both are built on Blockchain, that is where the similarity ends.
  • Cryptocurrency is a currency and is fungible, meaning that it is interchangeable.
    • For instance, if you hold one crypto token, say one Ethereum, the next Ethereum that you hold will also be of the same value.
  • But NFTs are non-fungible, that means the value of one NFT is not equal to another. Every art is different from other, making it non fungible, and unique.

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