Lately, NFTs have received great deal of attention from the press. Most news stories focus on how the technology is being used by artists, but there are other use cases too.
Despite the hype, you might be left thinking: What exactly is an NFT?
To help you understand the basics, we spoke to Skrill’s Head of Crypto, Jordan Stoev. Here, Jordan gives an overview of NFTs and explains why the technology is here to stay.
What is an NFT and how does it work?
An NFT is a non-fungible token, meaning that it is unique and scarce in its digital form. For example, a signed artwork.
NFTs are publicly verifiable on a blockchain. They can be a single unique token, like a graphic or a single image. Or, they can be part of a limited series, for example a range of collectibles.
NFTs work like any other cryptocurrency token; they can be sent, exchanged and in some cases even borrowed against as collateral.
How are NFTs and cryptocurrencies connected?
NFTs are cryptocurrency based. They are issued, transferred and exchanged using blockchain technology and cryptocurrency.
NFTs are often spoken about in relation to art. Can you explain why?
Several big artists have started creating NFTs, such as Beeple, who recently sold an NFT for $69 million at auction.
The CryptoPunk collectibles – a range of 10,000 uniquely generated characters – are another example of highly sought-after NFTs.
As NFTs allow artists to directly monetize their work and interact with their supporters, it’s a growing space.
Art is just one area of disruption for NFTs. In my opinion, gaming and digital artifacts are also going to drive NFT adoption as the world becomes even more digitized.
Moments ago in our #London saleroom, an extremely rare “Alien” CryptoPunk #7523 from the collection of @sillytuna sold for $11.8M as part of our #NativelyDigital NFT auction – setting a new world auction record for a single CryptoPunk. pic.twitter.com/PDVUSttI3o— Sotheby's (@Sothebys) June 10, 2021
NFTs have come in for some bad press due to their impact on the environment. Will this get in the way of NFTs taking off?
The impact of NFTs on the environment is insignificant compared to Bitcoin mining.
However, I think that even Bitcoin is wrongly demonized for its energy usage – the function it provides in society and finance can’t be overstated.
In fact, cryptocurrency mining is leading the charge in making innovations in renewable energy.
Will NFTs change the future?
NFTs have already changed the way artists and gamers can monetize their work. They also have the power to democratize ownership, giving normal people access to expensive artworks, game items and property.
There is definitely hot air in the space with some items unlikely to hold their value long term, but I am certain NFTs are here to stay. As a concept, NFTs can unlock a lot of opportunities for people.