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When I saw the engagement challenge for Crypto Academy I had no idea what NFT’s were.

This morning I sat with my stepson to show him a bit of Steemit and his eyes fell on the term “NFT’s”.

“NFT’s are so dumb” was his first words to me. “You can take your phone, make a screenshot and sell it for hundreds of dollars”.

Ah okay, now I knew NFT’s are those little funny characters which are selling like “hot cake”.

Let’s see if he was right.

What are NFT’s?

We earn money which we use to buy goods. This is concept of an economy. The world is however changing. We now purchase goods online which we don’t have in real life.

For an example, I like playing Pokémon. Every time I buy balls to play the game I am purchasing digital goods.

NFT’s stands for “non-fungible token” and can be items like digital art.

Non-fungible means it has a special value to you which cannot be replaced by something else. Digital art work means that the art can only be seen on a computer or on other electronic devices.

People developed a platform for electronic artists whereby they can sell their art digitally. The NFT is a way to proof that the work of the artist is the original and the only copy in the world. It cannot be copied and it cannot be reproduced without the owner knowing and approving thereof.

In other words an NFT is the unique digital token that proves certified ownership to an item like digital art which cannot be copied.

NFT’s use blockchain technology which works like a digital record of all the transactions connected to the NFT on a network of computers.

The difference between fungible and non-fungible tokens

In the real world tokens can hold value and are the visible representation of something for example an identity card proofs that the person is a citizen of a specific country. Tokens are not restricted, it can fulfil various functions.
Tokens can be used to conclude internal and external transactions including digital assets and therefore plays a vital role in the differentiation between fungible and non-fungible.

The most used fungible entity is money. Money can be changed between people of the same amount of money. My R 100 note (South African Rand) has the same value of another person who also has an R 100 note.

The most used non-fungible entity is NFT’s. A non-fungible token emanate the value or asset of the goods.

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What are the differences between an NFT and other currencies?

To answer this question we need to compare the three available online currencies;

• Digital currencies
• Crypto currencies
• NFT’s

Where to buy and how to invest in NFT’s

NFT’s are sold on special websites called a marketplace. In order for you to buy or sell NFT’s you need a digital wallet. This digital wallet must be linked to the marketplace.

The largest NFT Markets;
• OpenSea.io
• Foundation
• Rarible

As long as your digital wallet have enough crypto currencies available you will be able to make a transaction. These marketplaces do charge an extra fee when you purchase a NFT as they need to track who is the original owner.

Of importance is that all NFT’s are purchased with crypto currencies.

NFT’s are unique therefore each one has a different value and demand and supply sets the prices.

Is investing in NFT’s good or bad?

NTF’s are very unusual and also relatively new which is what many investors are looking for. They buy NFT’s at a fairly low price to keep them for a very long time in the hope that the price will increase. This is exactly as we have seen with collecting of baseball cards, Pokémon cards etc.

Then you also get those who like to speculate with NFT’s. They buy them and directly sell them at a higher price. The term used for this is “flipping .

What makes NFT’s very popular is that more and more companies are coming on board.

Investing in NFT’s for me is risky as you do not have a history on which you can base your decision. A recommendation will be to start investing with small amounts.

How to create a new NFT

It is so easy that anyone can create an NFT even me.

➤ To enable you to create an NFT you first have to choose the specific blockchain technology that you want to use.
➤ Once created you can then upload your art, JPEG image or items to the blockchain.
➤ You have to set up a digital wallet
➤ You then select the NFT marketplace you want to list your NFT on as it is the only place NFT’s can be bought and sold.
➤ You upload your file
➤ You can add a royalty to your item which means that every time there is change in ownership you get paid a commission or royalty.
➤ You start the sales process

Is it possible to have NFT’s stolen?

The answer is yes BUT is should not be easy as hacking of blockchains are nearly impossible and NFT’s Marketplace make use of blockchain.

OpenSea who is one of the largest NFT platforms was in trouble in December 2021 when it was reported that assets were stolen.

There are also some marketplace who are centralized like Nifty. This means that hackers can steal private keys.

Hacking - Unfortunately there will always be hackers and fraudsters who will come up with solution on how to “steal” from others. The more popular NFT’s become the bigger the hype.

Copycat - I have read about a case where Ryde Ripps where selling duplicates of another company, Bored Ape Yacht Club NFT’s. Copycat of NFT’s are a serious problem.

Fake works – People are being scammed into purchasing work of popular artists which are indeed fake.

Phishing – Users click on messages or emails which take them to a site where they connect their wallet or purchase fake items. In the end they land up losing all their money. This happened with Ozzy Osbourne’s CryptoBatz. Scammers tricked buyers believing they are actually buying the collection.

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Will the use of a distributed file system like IPFS prevent stolen NFT’s?

• IPFS stands for InterPlanetary File System - “Faster, Safer, and More Open”
• IPFS is a decentralized data network
• IPFS uses content-based addressing which means that content can be verified. A unique cryptographic hash is created for every object
• IPFS’s content addressing is more efficient compare to HTTP’s location-based addressing

Based on the above features I am of the opinion that it will be a great safe guard to be uses to prevent stolen NFT’s.

How are NFTs used in art, video games and collectible card games?

ART

We already know how NFT’s are used for digital art so let’s take a closer look from the view of an artist.

NFT’s allow artist to make money by providing them with a way in which they can monetize their assets. Artist can sell direct to the public with the result cutting out fees like exhibition halls and commissions. Artist can build in royalties so they can earn commission every time the art is sold.

NFT’s are no longer just digital art. Many NFT Companies or projects are also part of video games, movies and believe it or not, celebrities.

VIDEO GAMES

The main usage currently is for players to earn while spending hours playing a game. Gamers can make money from tokenized items.

CryptoBlades – A game in which characters fight each other. You can also get item upgrades for the game with NFTs.

My stepson is a keen Fortnite player. If players can have the opportunity to unlock a NFT Fortnite skin or by winning it in a cup competition they will then have the opportunity to sell this token skin to someone else.

Epic Games, the developers of Fortnite, can also benefit as they can earn royalties each time an object is sold.

COLLECTABLE CARD GAMES

Trading card games operating on a blockchain are gaining on the traditional TCG’s. Not only is the quality of the games much better but there is also an opportunity for players to earn while playing.

Splinterlands, also known as Steem Monsters is an example of a collectible card game. The game is compatible with TRX, STEEM, HIVE and ETH.

NFT’s and revolutionizing property titles

NFT’s are proof of ownership therefor it can for sure be use for proof of ownership of a property. By doing this the middleman, the deeds office and lawyers can be taken out of the equation.

Share ownership - Investors can obtain shares in large property group through purchasing of NFT tokens.

How are NFTs regulated?

NFT marketplaces are not required to comply with regulations like;

• Anti-Money Laundering (AML)
• Counter Terrorist and Proliferation Financing (CTF/PF) standards
• Know Your Customer (KYC) procedures

“It’s always hard to predict upcoming regulation — but I do expect some form of regulation to be drafted and proposed within the coming year or two years.” Zach Burks CEO of Mintable NFT marketplace

Solutions to the limits of NFT development

When you think about NFT technology you immediately think about three things;

1. The blockchain side
2. The cryptocurrency side
3. The storage side

These are the three issues NFT developer have to address at all times.

Storage plays a vital role when it comes to NFT’s as the smart card and the digital art must be stored separately. Developers will have to come up with better innovative ideas which at the same time will prevent issues like hacking.

To ensure the democratization of NFT’s developers will have to continue developing on multiple blockchains.

Lastly, a study conducted by Cambridge University highlight the fact that blockchains, from an environmental standpoint, uses a lot of energy. Developers might have to do away with proof-of-work validation.

In conclusion, Divan was right that it is easy to create an art for NFT’s but he was wrong, it is not dumb. There are far more to what the eye can see.

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