What are NFTs? How are people earning millions from NFTs?

POST AUTHOR- PRIYANSHU JAIN

        In the recent few years, NFTs have been one of the hottest topics. Many a times, we came across news like some person sold something as an NFT for X-million dollars. This makes people wonder what NFT is and how people are making millions out of NFTs which are as simple as a plain image. In this article, we shall have an in depth look at what NFTs are, can you make money from NFTs, and should we as humans go ahead with NFTs considering its environmental impacts. Wh-what? Environmental impacts of NFT? How's that possible? Keep reading... 

What are NFTs?

        NFT stands for Non Fungible Token. In the old times, we had the barter system, wherein people used to exchange goods for goods. Anything that can be exchanged with something else is known to be as fungible. NFTs can't be copied, replaced or divided, and hence, they are non fungible. NFTs can be anything that is digital, such as images, music, videos, GIFs, articles, etc. that can be stored in a digital locker. Now, a very usual question that comes up is that if NFTs are digital, anybody could go online and simply download them. Then why do people pay millions to buy NFTs?

Well, here's the catch...

         NFTs are all about ownership. Having an NFT on your system locally is of zero value. Even right now, you can just head over to any NFT marketplace online, choose any image/music or other digital art, right click on it and download it. You can keep it on your system for as long as you want to without paying a single penny. To explain NFTs, I would like to use an example. Let's say, I'm an digital artist and I created an image. I want to sell that image in the NFT marketplace. I register myself and go through all processes and finally list my image on the NFT marketplace. Now people who are interested in buying NFTs will come to the marketplace and see my image along with other NFTs. Let's say you are a buyer and you are interested in buying my NFT image. You, along with other buyers, will bid for the image, and the highest bidder wins the auction. Let's say you were the one who bid the highest and won. You pay me the amount (in dollars or cryptocurrencies) and congratulations, you are now the 'owner' of that image. This transaction will be stored in blockchain and the owner of the image will now be named as your name. NFTs are stored in a digital ledger, called blockchain. These can considered to be as digital wallets, provided they are NFT-compatible. Blockchain keeps a track of all transactions, along with the current owners of an NFT. 

        

        Let's say, in future, the value of that image increases and people are willing to pay more for that image. You list it on the marketplace and let's say, sell it for double the price for which you bought it from me. Since I was the creator of this image, I will earn some percentage of money every single time the NFT changes hands. This is the catch with NFTs. If you are an NFT creator, you get to earn money passively every time your creation passes on from one person to another. 

Can anyone create and sell NFTs?

        The answer is YES. Anyone can create their own digital form of art and sell it online as an NFT. But before you begin, just imagine this one thing: Why would anyone buy your NFTs? If anyone can create and upload NFTs, what's so special in your NFT that people will buy it by spending tons of money? Well, here's a limitation of NFT. If you are not a very famous person, or not a skilled artist, chances are nobody would buy your NFT. NFTs are valuable only when they come from a very famous person, only then people will be proud to buy them and spend millions over it. 

Jack Dorsey, former CEO of Twitter, sells his first tweet as an NFT for over $2.9 million.

        Now think, if it would have been a simple tweet from you or me, why would anyone want to buy it? Jack Dorsey's tweet sold for $2.9 million just because he was the CEO of Twitter, and his first tweet happened to be Twitter's first ever tweet. This is the reason why a lot of celebrities are making a move into the NFT market, as whatever they upload will be worth buying for their fans. So, anyone can create and upload their digital art on the NFT marketplace, but people will buy them only if that NFT holds some value with respect to fame or benchmark.   

Environmental Impacts of NFTs:

        Making money with NFTs is cool, but who thought that making money would cost us our environment?  In order to understand why this technology consumes so much energy, it is important for us to know how blockchain works. The blockchain acts as a distributed ledger which contains all the information about data and transaction details which can be seen by everyone. The process of verifying and storing data about each and every transaction is very energy-intensive. 

A single NFT transaction consumes as much energy as a normal household would consume in 1.5 days.   

        Imagine if millions of people start buying and selling NFTs online, what kind of environmental impact would it cause just over a period of few months. NFTs are no doubt one of the best and legal ways to make money, but I doubt upon it at the cost of our environment. Some people may even use NFTs to turn their black money into white. They upload an NFT from one account, and buy the same NFT from another account and transfer that money to their bank account legally. Well, this may get you in serious trouble, so it is recommended not to do so. 

        So this was my take on NFTs. Do let me know what are your views in the comments below! Also, I would like to leave all of you with a thought - Should humans really focus on earning money at the cost of losing our nature?