Non-Fungible Tokens: Currency of a Virtual World

NFT

NFTs have become popular overnight. As always, social media has done its work in setting up a new trend. The first thing you notice on a social media profile is the owner’s display picture. You can see most of them now, displaying weird-looking bright-colored animals or abstract. Yeah, those are their Non-Fungible Tokens, the currency of Metaverse.

NFTs are the real thing as famous brands like Nike and Adidas have entered the space as well. By introducing their own NFT collection, Adidas raised a whopping $23 Million which allows people to access their “VIP Lounge.” Nike has acquired a studio in the Metaverse which will be used to design NFTs.

What are Non-Fungible Tokens?

You simply got up one morning to discover people’s display photos filled with strange characters. Well, NFTs, short for Non-Fungible Tokens are cryptocurrency tokens that are unique for each person and display a set of metadata that cannot be exchanged for cash or altered and is stored on the blockchain. 

You can use it for buying or selling but the money acquired cannot be used in the real world. The exchanges can only be made in the Metaverse or in the form of NFTs. 

One widespread misunderstanding concerning NFTs is that the JPEG or picture that is displayed to symbolize the NFT is kept on the blockchain. While that is true for a select few projects, the majority of applications store the image on an external storage system and the blockchain metadata carries the link to that image. Due to the size of an image’s file, storing it on the blockchain comes at a very high cost, making it uneconomical for projects to be entirely on-chain.

Are NFTs the Same as Cryptocurrency?

The short answer is no they are not. Cryptocurrency can be called Fungible Tokens, meaning they can be exchanged to obtain real-life currency. For example, the current rate of Bitcoin is $19,750. You can buy it using the amount in dollars, save the coin in your crypto wallet, and once its price rises a bit, sell it to obtain cash or transfer the funds into your account.

This doesn’t happen with NFTs. If you buy an NFT for $5000, the information and the ownership will be shifted to you and saved in the blockchain ledger. No one can use it except you. That’s how the trade of NFTs works.

What Makes NFTs Popular?

NFTs are popular, though they do not amount to real-world currency, because they can be anything. From art to games and tweets to videos, you can sell anything in the form of an NFT. The condition is that the item you’re selling can be utilized or displayed in the Metaverse. 

Grimes made $390,000 off of a 50-second video, whereas Beeple made $6,000,000 off of one of theirs. The $3 million tweet that Twitter’s creator sold. In the world of NFT, trades are valued in the hundreds and millions.

But why are people buying all of this? Well, just like you buy games for your PlayStation or Pokemon cards, these are the same for people who have tons of money lying around. Will it be ever used in the real world? No one knows but this doesn’t stop them from making trades in it. It has become more valuable than the nft profit in a very short amount of time because of these influencers and people from rich communities.

Verdict

Should you indulge yourself in this mess? Sure, if you have some extra stash of cash hanging around. But if not, then steer clear from investing in it because no one knows its future. It is a fashion accessory for the rich. You can always learn about it or even provide services for it so you can earn real money. But, don’t spend your savings thinking that one day it will become the new common currency.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.