In February 2021, the Nyan Cat meme sold for $600,000. Twitter's founder Jack Dorsey auctioned off his first Tweet for $2.5m.

What do these things have in common? Well, they don't exist in the physical world and have become extremely valuable due to NFT's. Nyan Cat GIF

What Are NFTs?

A NFT (non-fungible token) is data added to a file that creates a unique signature. It can be an image file, a song, a tweet, a text posted on a website, a physical item, and various other digital formats.

This basically means that someone can own a digital file (and that it's marked with code to differentiate it from any digital replicas).

What Are NFTs, and How Are They Transforming Digital Art? 3

Luiz Octávio, CEO and founder of Dux Cripto, worked on the development of NFTs and explains that the technology "is a form of decentralized certification."

NFTs Are Objects... But Online?

NFTs give us a way to have clear ownership over digital items. Consider how they're the same and different from a physical object, like collectible cards (Pokemon, NBA, etc.)

Collectible cards

  • Collectible physical items

  • Value changes based on what other people are willing to pay

  • Security feature: holographic stickers, special paper, and other hidden elements

  • You can buy, sell, trade, or give cards to anyone quickly

NFTs

  • Collectible digital items

  • Value changes based on what other people are willing to pay

  • Security feature: unique data added to a digital work

  • You can buy, sell, trade, or give NFTs to anyone online, but a network of computers must verify the trade and the unique data

Investing In NFTs

Like real estate, fine art, and other crypto currencies, the biggest risk for NFT investors is whether the items will keep their value.

Token holders may get stuck with NFTs if their popularity declines and people stop wanting to buy them.

computer and phone with unreadable graphs and charts. Photo by MayoFi on Unsplash

Environmental Impact Of NFTs

NFTs, (like all cryptocurrencies) have a large impact on the environment. NFT transactions must be verified through Blockchain to guarantee the encryption is valid, which consumes enormous amounts of energy.

The creation of an average NFT has a carbon footprint of over 200 kg - about the same as driving 500 miles in a typical American gasoline-powered car.

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This Byte has been authored by

KD

Kassie Dwarika

Director of Content Programs | Debate Coach