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BLOG NO.122*

FINANCIAL LITERACY *NFT*

Cryptocurrencies can be used to buy things, but they’re purely digital– there’s no coins or cash. The most popular cryptocurrency is called Bitcoin, but there are a number of others. *Some believe that this is the future of money* *so it’s a chance to talk to your kids about it*.

*An NFT is a technology that proves who the owner of a digital object is*. This digital object could be a song, a picture, a video, a tweet – or even a piece of digital land in an online game or virtual world*. Recently, pieces of digital land in a forthcoming virtual world called Otherside sold for nearly US$6,000 (£4,791) each. What’s more, people were so keen to buy them that they also paid thousands of dollars in transaction fees.

*NFT stands for non-fungible token*. If something is non-fungible, this means that it cannot be replaced or exchanged for something of identical value. An example of something fungible is a current coin, such as a one pound coin, because this can be exchanged for another pound coin. It doesn’t matter which of the coins you have – you still have £1.

Something like a painting, though, is non-fungible. That particular painting only exists once. *If you bought a painting, you could take that painting and hang it up in your bedroom. It would be yours – no one else would own that exact painting*.

*NFT is the latest passion in investment, especially amongst the young*.

*You are not cool, if you have not created a NFT, or invested in it*.

 *NFT means non-fungible tokens*.

*We know what cryptocurrency is. It is digital money not backed by any sovereign authority, but which can be bought or sold on cryptocurrency exchanges like shares in the stock market, to make money. Cryptocurrency is fungible. One bitcoin can be exchanged for another*

*NFTs are virtual digital assets from the same virtual world , but being non-fungible implies that each piece is unique with intellectual property rights and cannot be replicated*.

HOW ARE NFTS SIMILAR TO OTHER CRYPTO ASSETS?

• NFTs can be bought and sold on cryptocurrency exchanges.
• You can own a fraction of NFT. Yes, it is possible to own a small part of a digital Picasso painting, and earn profits whenever it is traded.
• *You can receive NFT drops similar to crypto airdrops in your account. Airdrops means free crypto assets given as part of a promotional scheme or when you open a new account on an exchange*.

 *superstar Amitabh Bachchan* created a non-fungible token with a recital of his father’s poem. And the masses got curious about the concept of NFTs*.

*Have you heard of memorabilia from celebrities being auctioned for high prices*? It could be Madhuri Dixit’s outfit donned for the picturisation of Dhak-dhak song, a monogrammed suit owned by the Prime Minister or a cricket bat used by a top player for the first match played by him.

*Why do people shell out astronomical amounts of money to pay for things which they’ll never use*?

*Exclusivity attracts a premium. One takes pride in owning and displaying something no one else has*. One can also make a profit by selling the item at a higher price.

*NFTs are digital versions of exclusive assets*

*One of the earliest successful NFT projects is Cool Cats*. It is a series of cat images, each distinctly different from the other, scanned over half-a-million possible combinations.

Christie’s arthouse sold a digital collage by artist Mike Winkelmann (popularly known as Beeple) for $69.3 million. It is the most expensive piece of digital art ever sold.

HOW DOES ONE START INVESTING IN NFTs?

*Have a crypto-wallet with some cryptocurrency in it. Most of the NFTs trade on Ethereum blockchain*.

In short, you need to be a crypto-investor first with an account on a cryptocurrency exchange.

Buy and sell in NFT marketplaces such as Openspace, Rarible or Mintable, based on NFT market place recommendations. However, do your own research on the subject.

HOW CAN YOU CREATE A NFT?

*Anybody can create and own NFTs, if the piece is rare, unique and you have the intellectual property rights for it*.

*Music, videos, collectibles, moments in cinema or sports, domain names, memes, virtual fashion items, game items nor digital art can all become NFTs*

*NFT minting is the process of uploading your digital file in a market place. Most of the market places do not charge a fee for minting, but will charge a service fee when you list it for sale.*