March 28, 2024

Debunking cryptocurrency myths

For the uninitiated or crypto-curious people, unplayable tokens(NFT)represent one of the mostcolorful sectors of the cryptocurrency industry.How is it that seemingly duplicated, often bizarre pieces of digital art can be so extraordinarily expensive, and why are people so eager to buy these intangible items? This is certainly not an easy topic to think about, but let's try.

What is NFT?First of all, it is important to note that when youwhen you buy an NFT, you're buying a digital token that simply points to a specific computer file that exists somewhere on the Internet. It could be anything – from a music file to a gaming costume or an image of a cartoon animal. Think of it as a digital document for a piece of land. The document represents the ownership of this plot, but in reality the document is not the plot itself. SimilarAn NFT is NOT the digital object itself..

So while it may seem like it's all one, there are actually two separate components.

  • The digital item itself (a picture of a cartoon monkey, a GIF animation of a cat with a torso from pop tart, etc.).
  • A non-disappearing digital token that containsunique identifying data pointing to the aforementioned subject, i.e. file location, item name, unique characteristics, contract address, etc.
  • NFT – it is simply a tradable digital token that stores important metadata (digital information), relating to the associated digital product.This information is so unique that even if you take a screenshot or duplicate of the intended file and create a new NFT to represent it, it will contain different metadata and so it will be easy to determine which one is the original and which – a copy. Just as you cannot “copy” the piece of real estate that the deed describes cannot simply be copied over the digital object that the NFT describes. Sure, you can take a photo of a piece of land or right-click on a funny cat NFT, but the object the NFT refers to will remain the same.

    This ease of authentication is dueimmutable, transparent, free for all to see the nature of blockchain technology, on which all NFT tokens are stored. If you decide to sell the NFT, the blockchain data is updated to reflect the new owner's crypto wallet address. After that, back to what you own.

    What do you actually own when you buy an NFT?NFT ownership isn't as clear-cut as it might beappear. On the one hand, when you buy an NFT, you're essentially buying a token that gives you bragging rights so you can tell everyone: There may be hundreds of copies of this digital photo on the internet, but I own the original, and here's the immutable proof (in the form of a unique digital token) to prove this”. But on the other hand, although you may be the “owner” original digital image, it doesn't necessarily mean you have any rights to the image, say, use it as a company logo or create and sell memorabilia based on it.

    Oftenintellectual property rights remain with the person or people who first created this object, but this often depends on the NFT collection.This doesn't mean there aren't NFTs that provide the right to use open licenses, there are a lot of them. It's just that in most cases, unless the creator specifically states so, buyers shouldn't assume that those rights are automatically transferred upon sale. In short, what you own – it is a digital token that invariably identifies an original digital product, giving you the exclusive right to resell it.

    In addition, the owners of some NFT collections,such as the Bored Apes Yacht Club (BAYC) have found ways to add value by creating their own exclusive communities. These private channels allow like-minded people to exchange ideas, information, and receive perks such as early access to new NFTs.

    The development of DeFi protocols also means thatIn some cases, owners can rent out their NFTs to others. What happens if a digital file is deleted? If you only own an NFT and not the digital file itself, what happens if its creator decides to erase the file or it is accidentally deleted? This is one of the main disadvantages of NFTs currently. In the rush to cash in on the growing NFT trend, many creators are not properly protecting their NFT data. This means that if this data is lost or damaged, the NFT will indicate nothing and will be worthless.

    A recent example of this is the widespreadthe loss of many NFTs minted on the now-defunct FTX exchange. Instead of storing the NFT data using a decentralized blockchain-based storage solution such as Storj or Sia, FTX hosted it on FTX US servers, which are now no longer operational. As a result, the affected NFTs no longer link to their original files, but instead direct users to the FTX webpage, which states that the company is insolvent. This further highlights the importance of decentralized storage of NFT metadata and hopefully sets new standards for collections in the future.

    Learning how NFTs work now will helpyou to navigate the future metaverse and digital domain. Many believe that we will eventually be able to buy and sell digital goods in the same way we sell physical ones. After all, we'll still need cool shoes, t-shirts and jewelry wherever we hang out – in a real or virtual bar.