Crypto images for millions: what the NFT hype is all about

Crypto image for millions
What the NFT hype is about

Non-Fungible Tokens (NFTs) are no longer just stirring up the crypto world. Football stars and other celebrities have long since jumped on the bandwagon. Using this proof of ownership and authenticity, which is based on the blockchain known from cryptocurrencies like Bitcoin, digital works of art or pieces of music are sometimes sold to collectors for millions. But the presumed value can also quickly melt away.

What is an NFT?

An NFT is a form of digital proof of authenticity and ownership. For example, a video clip is recorded on a blockchain. For this purpose, the owners are listed as well as purchases and sales. This gives NFT a unique digital signature, though the underlying work can be rendered millions of times. However, NFT is unique and is made marketable through certification. NFT blockchain is freely available. This gives the official owners of digital artworks the opportunity to freely and publicly boast of their ownership. However, legal claims on the underlying product are not usually associated with this.

What types of NFTs are there?

In principle, any digital object – images, videos, music, texts or tweets – can be created for NFTs. For example, fans can purchase and exchange NBA Top-Shot clips with game scenes from the American Basketball League NBA on the NBA website. These can be viewed for free on platforms like YouTube. However, NFT enthusiasts see themselves as the owners of the original. Also popular are NFTs for pictures of football stars, which are published by the clubs and are intended to have a similar function as classic collectible cards. Using NFTs, users can also secure land or characters in virtual game worlds. Twitter co-founder Jack Dorsey sold the world’s first tweet as NFT for $ 2.9 million in March.

How to buy NFTs?

NFTs are traded on specialized platforms. But classic auction houses like Christie’s also jump on the bandwagon. Payments at the auctions are usually made in Ethereum, the second most important cryptocurrency after Bitcoin, or in US dollars.

How is the market evolving for NFTs?

NFTs have been around since 2017, but they really took off earlier this year. According to industry service Chainanalysis, nearly $ 27 billion has been traded in NFTs since the beginning of 2021. The largest share of 16 billion dollars stands for the trading platform Opensea.

Why now?

Some blame the pandemic for the boom. Since many people have been sitting at home due to the shutdowns, they are spending more time on the internet. NFTs are also a way to display your belongings online. Others see the hope of spectacular speculative profits as the trigger for the boom. Numerous NFTs have multiplied their prices within a few weeks. In addition, the hype surrounding Bitcoin & Co has produced many cryptocurrency millionaires in recent years who want to use their new wealth.

What makes NFTs so special?

Proponents see NFTs as the future of ownership. Every possession, from concert tickets to your own home, will eventually be stored on a blockchain. NFTs allow artists to monetize digital art – through the sale itself and potentially additional commissions if the NFT that accompanies the artwork changes hands. Other business models are also opening up. The band “Kings of Leon” markets their album “When You See Yourself” as NFT. Buyers receive a limited vinyl version of the record or can watch concerts from the front row.

Value increases are anything but guaranteed. If the hype disappears, NFTs could lose massive value. In fact, the majority of NFTs, when resold on the relevant platforms, trade for less than when they were issued. Buyers have recently suffered huge losses, especially with many NFTs released by pop musicians and other celebrities. Critics also suspect that some NFTs’ sensational pricing is based on targeted manipulation through so-called laundering. Buyers and sellers cannot be identified on anonymous, unregulated trading platforms. This makes it easy for publishers to raise the price of their own NFTs with fake transactions. In addition, it is difficult to calculate the cost of registering an object as an NFT, as “fuel prices” fluctuate widely. In technical jargon, this is what the fees for encrypting and processing a transaction in the Ethereum network are called. They depend on the utilization of the computers involved.

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