What is an NFT?

NFT stands for non-fungible token. It’s one of its kind, unique and can’t be replaced by something similar. Unlike Bitcoin, which can be replaced by another bitcoin - NFTs don’t have multiple replicas of the same unit. So, the owner of an NFT can be rest assured of him/her being the sole owner of that particular NFT.

 

What can be an NFT?

The answer to this is anything that can be converted into a digital asset can be an NFT. Art, sneaker, hell even tweets can be an NFT (Twitter’s founder Jack Dorsey sold his first tweet for a whopping $3 million as an NFT).

 

Why does anybody need an NFT?

This is an interesting question and the answer isn’t very simple. On surface it does seem that converting an Art into a digital form will make it everlasting and easy to share but it doesn’t stop at that. Fashion houses have started experimenting with clothing and sneakers as NFT and HNIs are showing interest in this asset class. We are certain that they can’t really wear these NFTs but their gaming AVATAR can. While we are increasingly gravitating towards a virtual world, corporations are trying to fulfill that particular need through NFTs.

 

Why are people investing in NFTs?

That’s a really straight forward question with a straight answer. NFT is an asset class. Every asset class finds investors depending upon their risk/return ratio. Investors investing in NFTs think there is upside to this asset class and they want to take advantage of the opportunity before the market saturates.

 

Are NFTs beneficial for common people?

Yes and No depending upon what that common man/woman does with it. Suppose an artist who can’t afford showcasing his/her art to arts enthusiasts in a gallery may easily upload his/her art online in the form of an NFT and can reach millions of art enthusiasts and might even be able to sell it online. While a street vendor selling portraits might lose out if people started buying NFTs instead of physical portrait. The only certainty being, the ones digitally savvy would be better off than the ones having no access to this digital infrastructure.

Are NFTs sustainable and eco-friendly?

NFTs are a new technology and thus we have limited data around it. But looking at trends it has the same issue we have faced with Bitcoin. The mining of Bitcoin is unsustainable due to the massive carbon footprint of the mining process. Same issue remains with NFTs. The carbon footprint of minting an average NFT is around 211 Kg of Carbon dioxide equivalent. Which equals to around a month’s electricity consumption of an average EU resident. Thus, making NFTs unsustainable. The biggest challenge Bitcoin and NFTs face is around sustainability and they must bring the carbon footprint down to acceptable levels for these asset classes to remain popular.

What will be the future of NFT?

NFT is in its initial stages, much like internet used to be in 1990s. The blockchain technology that NFT uses has revolutionized the concept of people-to-people transaction and individuals have realized for the first time that there is a possibility to transact without the banks as middleman or the lengthy paperwork. Indeed, there is much hype and curiosity around this novel idea as was the case with internet but overtime after a few bubbles have burst, the technology will certainly find its level and hopefully would be used to make our lives better without harming the planet.