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What is an NFT? How non-fungible tokens work – Evening Standard | Omd Cialis

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Depending on who you ask, non-fungible tokens — usually abbreviated as NFTs — are a version of digital snake oil, a potentially crucial part of the metaverse, or a crypto-inspired innovation central to the future of transportation.

Whatever your opinion, it’s fair to say that NFTs have enjoyed more than a fleeting moment in the sun. Additionally, in recent years they have transcended the realms of tech evangelism and moved into the mainstream, accompanied by celebrity endorsements and high-profile sales.

Despite this push, a cursory online search related to NFTs tends to generate results on a topic that remains awash in jargon and hype.

To bust the myths, here’s a simple look at what NFTs are, how they work, and what the future might hold for them.

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What is an NFT?

If you are familiar with the world of cryptocurrenciesthen you have probably come across the concept of NFTs.

Essentially, an NFT is a way to prove you own something digital.

If you have bought an expensive piece of art, you can touch it or hold it and perhaps display it in your home.

Any attempt to copy or reproduce it, no matter how good a facsimile, would never be the genuine item. It’s like owning a print of the Mona Lisa compared to owning the actual Leonardo Da Vinci masterpiece.

The potential problem with digital art, and any other digital file, is that humans can create identical digital copies. Copying is as simple as right-clicking an image and saving it to your device.

So why would anyone pay for a digital asset that an infinite number of others could also own by storing it on their devices?

The answer is that NFTs provide a method of authenticating the original, true version of the file and its rightful owner.

NFTs can be linked to any type of digital file, but one of the most popular in recent years has been social media profile pictures. In particular, the Bored Ape Yacht Club collection of one-of-a-kind, programmatically generated profile pictures – cartoons of monkeys, which have sold for as much as £2.9million.

But NFTs aren’t just for digital art. For example, someone paid £2.2million for an NFT of the first tweet ever posted on Twitter. It has even been suggested that digital copies of title deeds could use NFT technology to more efficiently and securely authenticate property.

How do NFTs work?

NFTs use the same technology that cryptocurrencies use to prove who owns bitcoins, Ethereum tokens, and other crypto assets.

Blockchain Technology provides a record of transactions that is decentralized — that is, held by many ordinary people at once — and cannot be altered. It is this immutable record of transactions that makes NFTs useful in proving who owns a digital asset.

Once an NFT is purchased, the sale is recorded on the blockchain. The record of the transaction cannot be easily changed, meaning the NFT owner can refer to the record of their purchase on the blockchain to prove their ownership.

In the end, a bitcoin is just as much a digital file as a digital cartoon – both are just lines of computer code. However, there is a fundamental difference between cryptocurrencies and NFTs, and that is in the way each asset is valued.

Each bitcoin has the same value as any other bitcoin at any given point in time. However, each NFT is unique, meaning that no two have the same value just because they are both non-fungible tokens.

Think of it this way: a £5 note in your wallet is worth the same as £5 in someone else’s wallet. However, two TVs can be worth wildly different amounts of money – they don’t have the same value as both are TVs. In this example, £5 notes are to cryptocurrency what TVs are to NFTs.

What’s next for NFTs?

If you look at the numbers, it’s possible that NFTs are already obsolete.

View NFT sales statistics. These peaked at just over 200,000 in August 2021, according to data from nonfungible.com. For the same month this year there were around 40,000 sales.

The average value of NFT sales is also trending down. Average sales peaked at £5,500 in May this year but fell to around £300 at the end of August.

The slump could reflect either the so-called “crypto winter,” which saw crypto asset prices fall across the board, or a general waning of interest in NFTs.

Under former UK Chancellor of the Exchequer Rishi Sunak, the Royal Mint was asked to “produce an NFT for the UK” as part of its ambitions to make the UK a global hub for crypto-asset technology.

Sunak has since been (briefly) replaced by Nadhim Zahawi and now Kwasi Kwarteng as part of Liz Truss’ new government.

Kculteng was formerly Secretary of State for Economic Affairs, Energy and Industrial Strategy. His former department has previously spoken positively about crypto and NFT technology. But the new Chancellor hasn’t said anything specific about the Royal Mint project or NFTs in general.

The other big change in this space is the Ethereum blockchain undergo a fundamental change this will drastically reduce energy consumption. This is a sustainability boon for any platform built on Ethereum blockchain technology, which could have a knock-on effect helping the NFT market.

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CFDs are complex instruments and come with a high risk of losing money quickly due to leverage. 68% of retail investor accounts lose money when trading CFDs with eToro. Cryptoasset investments are unregulated in most EU countries and the UK. No consumer protection. Your capital is at risk.

Updated: September 17, 2022 — 1:32 am

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