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

Crypto image for millions
What the NFT hype is all 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 these proofs of ownership and authenticity, which are 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 perceived 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 as well as purchases and sales are listed. This gives the NFT a unique digital signature, even if the underlying work can be reproduced millions of times. However, NFT is unique and is made tradable through the certification. The NFT blockchain is freely available. This allows the official owners of digital artworks to freely and publicly brag about their ownership. However, legally enforceable claims on the underlying product are not normally associated with this.

What types of NFTs are there?

In principle, any digital object – images, videos, music, texts or tweets – can be made into NFTs. For example, fans can buy and trade 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 such as YouTube. However, NFT enthusiasts see themselves as the owners of the original. Also popular are football star image NFTs, which are issued by the clubs and are intended to have a similar function to classic trading 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 an NFT for $2.9 million in March.

How to buy NFTs?

NFTs are traded on specialized platforms. But classic auction houses such as Christie’s are also jumping 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 for NFTs developing?

NFTs have been around since 2017, but they really took off earlier this year. According to industry service Chainanalysis, nearly $27 billion in NFTs have been traded since the start of 2021. The largest share of 16 billion dollars is accounted for by 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 weeks. In addition, the hype around Bitcoin & Co has produced many cryptocurrency millionaires in recent years who want to spend their new wealth.

What makes NFTs so special?

Advocates 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 accompanying 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.

Increases in value are anything but guaranteed. If the hype wears off, NFTs could lose massively in value. In fact, a majority of NFTs, when resold on the relevant platforms, trade for less than when they were issued. Buyers have recently suffered heavy losses, especially with many NFTs issued by pop musicians and other celebrities. Critics also suspect that some NFTs’ sensational prices are based on targeted manipulation through so-called wash trades. 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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