Picturize this – A person selling a bunch of pixels on a screen for millions of dollars!
A chance to own a digital space of yourself – that’s all just yours!
Just the way one can purchase and own land, a house or any other tangible property.
A small drop to call our own, of the vast ocean that we call Internet!
Welcome to the world of NFTs – the talk of the town!
To dive deep into the details further,
NFTs, or Non-Fungible Tokens are tokens in a blockchain that offer a virtual certificate of ownership. The term Non-Fungible simply means that these cannot be copied or multiplied, simply because they are one of a kind.
Our Indian Rupees for example, are fungible. We give a rupee back; we take a rupee back – the value remains the same. But if we accept a painting of the original Mona-Lisa and accept back a copy of it; the value wouldn’t be the same.
With this in mind, an NFT is simply a form of digital ownership locked in a token in an ethereum blockchain – which could be in any virtual format ranging from music, photos or videos. An owner of such NFTs can legally sell it for money, which works in the same way with how royalty works.
Selling virtual spaces in the internet has not been new – people have been purchasing skins and characters in their favorite video games ever since. But this gets a whole revamp with blockchain getting involved now. It all initially began with the sale of pixel cats named Cryptokitties – for lakhs of dollars on the Ethereum platform in an online crypto game.
Today, in the internet age, everything can be copied and forwarded over many times by anyone. Ever saw the same meme on Instagram a few weeks later posted online by some different page?
This is now changed with NFTs – a digital ownership certificate now gives digital rights to sell, resale or license it as per the owner’s discretion, and that too without any third party’s permission.
Because they store data – they can be associated with stores of unique information, which means that it cannot be falsified or modified without the original owner’s permission.
You may ask – “Why would one buy an NFT instead of getting a free copy online?”
The same reason why one dreams for the original Monalisa to be hung on their wall instead of a copy of the same.
With NFTs now popping all over the place – people have been rushing to buy them in a hurry and to make sound investments in a totally new form of assets. The most notable one of them is Mike Winkelmann – commonly known as Beeple who has transacted in NFTs worth millions of dollars over the internet. Digital playing cards of NBA players are now being circulated in the US – the same way we used to trade trump cards of our favorite cricketers in our childhood days.
NFTs essentially lead to decentralization of all the artwork that’s available on the internet. No single person can dominate or rule over the internet – which was the very purpose that Internet was founded way back in the 90s. To make information available to everyone without any bias.
In India, one can begin purchasing NFTs by first purchasing and storing Ethereum via any of the crypto wallets – CoinDCX, Coinswitch Kuber, WazirX, etc. Then there are online market places for purchasing NFTs – OpenSea and Rarible are a few of them.
But the user also requires to be cautious as the purchase and sale of such digital assets might attract the eyes of the taxmen, since the scope of taxability of such transactions haven’t fully been defined in the Income Tax Act yet. But, the Ministry of Finance has made a primary mention of Virtual Digital Assets in the Budget 2022 that was presented recently. So, it remains to be seen as through which lenses the government sees such new-age investments.
Selling digital art and making money out of NFTs – is that alone the future of NFTs? A big, resounding no! One best potential use of the NFT technology that can be used is in the ticketing industry. When NFTs are issued as tickets for sport events or movies, they can be harder to counterfeit or steal – hence making the original owner the legitimate one. Tickets purchased by the authentic buyer can be made non-transferrable, hence making it impossible to transfer it.
Documentation is another use of NFTs, where virtual important documents can be verified with a click of a button – without even having to worry about its authenticity and veracity of the details provided. Imagine buying and taking the virtual skins, mods and add-ons in the gaming industry and carrying them wherever you go, and not just in that one game.
But there are a few problems to solve beforehand as well. The primary one is the cost of creation, since NFTs are mainly hosted on the virtual Ethereum platform. These are also not sustainable in the long run, since they require huge amounts of energy during the mining process. This can be mitigated to a certain extent by moving NFTs to other crypto platforms as well. Difficulty to create and use is another short-term issue that can be solved as the NFT industry evolves further with time. NFTs sometimes prove to be more of a status symbol than an actual utility, since it can be easily downloaded and used by someone else that costs nothing. This needs to be fixed if NFTs are to be taken seriously. Lastly, if there are technical errors in retrieving the ownership data of NFTs, then the digital asset is proven worthless.
The future is here, and with NFTs – we gear up to a whole new experience of investing and monetizing the digital space!