What is NFT and How Does NFT Work
NFT means non-fungible tokens (NFTs), which are generally created using the same type of programming used for cryptocurrencies. In simple terms these cryptographic assets are based on blockchain technology.
A non-fungible token (NFT) 🎟️ is a unique digital identifier 🔑 that cannot be copied, substituted, or subdivided, that is recorded in a blockchain 🔗, and that is used to certify authenticity and ownership 📜. The ownership of an NFT is recorded in the blockchain and can be transferred by the owner, allowing NFTs to be sold and traded 💱. NFTs can be created by anybody, and require few or no coding skills to create 💻.
NFTs typically contain references to digital files such as photos 📸, videos 🎥, and audio 🎵. Because NFTs are uniquely identifiable assets, they differ from cryptocurrencies 💰, which are fungible. Proponents of NFTs claim that NFTs provide a public certificate of authenticity or proof of ownership, but the legal rights conveyed by an NFT can be uncertain ⚖️.
The ownership of an NFT as defined by the blockchain has no inherent legal meaning and does not necessarily grant copyright 📑, intellectual property rights, or other legal rights over its associated digital file. An NFT does not restrict the sharing or copying of its associated digital file and does not prevent the creation of NFTs that reference identical files 📄.
The NFT market grew dramatically from 2020 to 2021: the trading of NFTs in 2021 increased to more than $17 billion 💵, up by 21,000% over 2020’s total of $82 million. NFTs have been used as speculative investments 💸 and they have drawn increasing criticism for the energy cost ⚡ and carbon footprint 🌍 associated with validating blockchain transactions as well as their frequent use in art scams 🎨.
The NFT market has also been compared to an economic bubble 🎈 or a Ponzi scheme. In 2022, the NFT market suffered a major collapse, with prices sharply falling; a May 2022 estimate was that the number of sales was down over 90% compared to its 2021 peak 📉.
