A non-fungible token (NFT) is an exclusive digital identifier that is inscribed on a blockchain, and is used to verify ownership and authenticity of collectibles. As opposed to fungible tokens such as cryptocurrencies and fiat currencies (bitcoin and similar ones), NFTs cannot be divided or replaced into multiple parts to yield the original product. Non-fungible tokens are therefore individually recognisable.

A Non-fungible Token which is a cryptographic tool, uses blockchain technology to verify and secure a record of the existence and ownership of physical and digital assets.

An NFT's ownership is documented in the blockchain and is transferable by the owner, enabling the selling and trading of NFTs. Anyone can develop NFTs, and it takes little to no coding experience to do so. NFTs frequently include allusions to digital content, including images, audio, video, and artwork.

A Brief History of Non-fungible Tokens (NFTs)

Kevin McCoy and Anil Dash created the first known NFT called Quantum in 2014. The NFT which was a video clip made by Jennifer McCoy (Kevin's wife) was appended on the Namecoin blockchain, and was sold during a live performance for the Seven on Seven conferences at the NewYork Museum.

Ethera, the first NFT project, was launched in October 2015 and demonstrated at Ethereum's first developer conference in London, just 3 months after the launch of ETH blockchain. Exactly 5 years later, NFTs would triple in value to generate a revenue of about $250 million in total.

Common Misconceptions about NFTs

1. NFTs are a 'get rich quick' scheme

The NFTs market was compared to a Ponzi scheme by some after its trade volume surged to $17 billion in 2021 from $82 million the year before.

At the end of the day, NFT’s are like any other investment piece where its worth can change from one day to the next just like company stocks or even property investments.

According to a report from dappGambl published in September 2023, more than 95% of NFT collections were worthless.

Moreso, the anonymity associated with NFTs, the ease with which they can be forged, and their connection with fraudulent schemes within the world of art, created wrong perceptions in the hearts of many regarding NFT projects.

2. NFTs are basically just artworks

NFTs represented only artworks in the minds of people who knew nothing about its concept, and folks who weren't tech savvy. But this idea is absolutely wrong because NFTs are NOT ALL artworks.

Just because a good number of the most famous and high-priced NFTs have been associated particularly with digital artworks,NFTs were not solely created for the authorization and verification of artworks.

NFTs itself is a cluster of encrypted formulas on a blockchain that's intended to be immutably connected/represent these items. These items could come in different formats such as a file, a unit of crypto currency, a podcast, an application or even a video clip.

3. NFTs create a false sense of scarcity in Artwork

Here's the truth- NFTs create actual uniqueness in digital assets in a manner that allows them to be regarded as scarce, therefore making them more desirable than they normally would have been regarded.

Art, irrespective of its quality, is littered everywhere around the world. Some happen to be on free websites, some on paid platforms, exhibition arenas etc. There could be multiple copies of the same artwork, but only one original piece exists.

You might even have a copy of The Mona Lisa saved in your harddrive somewhere in your PC or phone, but there will only be one original version of the painting!

This is exactly how NFTs apply the concept of scarcity; by promoting the uniqueness of your work piece.

4. NFTs offer no real value

A good number of people often said that there's no actual value in NFTs, that it's all a sham. This is totally not true.

NFT miners are often rewarded with native cryptocurrencies of the blockchain they mined on. For example,they are rewarded with Ethereum coins (ETH) if the mining process was done on the Ethereum blockchain.

A Miner or minter, is someone who uses a set of complex mathematical calculations to generate blocks on an already existing blockchain. The process with which this is done is called hashing.

Let's Apply the Proof of Stake (PoS) scheme for instance. Before the miner gets rewarded for creating a hash function, the proof of stake technique enables other validators of the blockchain to analyze & vote for the authenticity of the new block created. If a majority of the validators approve the block, it is then appended to the blockchain.

5. NFTs are harmful to the environment

The Ethereum blockchain has gained the most attention because it is currently the most popular destination for NFT artworks. Mining and trading of NFTs happen on the Ethereum blockchain using the Proof of Work (PoW).

The Proof of Work (PoW) algorithm is a high energy consuming network that equally gives off a high amount of carbon during the NFTs mining processes.

Blockchains such as Tezos & Cardano, that use proof-of-stake to process their transactions use a lot less energy as a whole. Since Ethereum will be completing its transition from the Mainnet with the Beacon Chain, and complete The Merge, it will use ~99.95% less energy.

All in all, the viable activity of more Ethereum usage means more energy consumption. The ownership and validity of collectibles can be confirmed using a non-fungible token (NFT), an exclusive digital identity recorded on a blockchain.

Conclusion

NFTs are comparable to conventional printed art, regardless of the amount of energy it consumes during mining. Since the industry is well aware of the impact it's having on the planet, they are taking some considerable steps to improve this outcome. Moreso, a good number of miners have also moved to countries which have cheaper energy and also there are those that harvest their energy from renewables.

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