Cryptocurrencies & NFTs #2
This is the second in a series of posts explaining the concept of cryptocurrency, NFTs and the future of money.
What is an NFT? Stands for non-fungible tokens. Physical money and cryptocurrencies are “fungible,” meaning they can be traded or exchanged for one another. They’re also equal in value—one dollar is always worth another dollar; one Bitcoin is always equal to another Bitcoin. Crypto’s fungibility makes it a trusted means of conducting transactions on the blockchain.
NFTs are different. Each has a digital signature that makes it impossible for NFTs to be exchanged for or equal to one another (hence, non-fungible).
An NFT is a digital asset that can come in the form of art, music, in-game items, videos, and more. They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos. Hence, they become embedded on a blockchain.
NFTs have been around since 2014, generally to buy and sell digital artwork. The market was worth a staggering $41 billion in 2021 alone. Since then the market has dropped for different reasons the main one being that crypto prices have fallen significantly since the start of the year. In the crypto world everything rises and falls on Bitcoin which is the number one decentralized (no one owns or controls it) crypto currency in the world.
Many NFT's are placed on the centralized (owned and controlled) Ethereum (ETH) blockchain network, which generally follows the ups and downs of Bitcoin. There is volatility with Bitcoin because it is still tied to US and world financial markets. Within the next decade it will decouple from those influences and become its own value system, which if the predications are correct will far surpass the fiat systems that have been used for hundreds of years.
NFTs are generally one of a kind, or at least one of a very limited run, and have unique identifying codes. Think of it as a limited edition print that is digital, not on paper. However, there are different types- Multi-Edition NFTs, 1/1 NFTs, Generative Collections, Autonomous NFTs, Dynamic NFTs, Music NFTs.