Should you get an NFT?

Tuesday, July 6th, 2021 00:00 |

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The newest blockchain application that allows users to represent items such as videos and art digitally is taking the internet by storm. Experts weigh in on what it is and why it is causing murmurs online

Adalla Allan @Adalla_Allan

Even before the dust has settled on the blast of cryptocurrency, a new digital asset has emerged which seems to have exploded and hit the market with a storm.

This is the Non-Fungible Tokens (NFTs), the new way to sell art, achievements, music, games, and videos online. 

When Eliud Kipchoge, famously regarded as the greatest marathoner of the modern era, announced the launch of his first NFT, most Kenyans were curious about it.

His NFT collection includes a digital representation of his career milestone. His NFT is backed up by Momentable, an NFT platform that curates legendary moments for athletes and musicians.

In 2019, Kipchoge became the first person in history to run 42 kilometres under two hours [1:59:40] in the Ineos 1:59 Challenge held in Vienna, Austria.

To make these legendary moments more special, Eliud made the highlights available as NFTs. 

According to the CoinDesk report in March, an estimated $174 million (Sh19billion) has been spent on NFTs since November 2017.

Just recently, Twitter co-founder and CEO Jack Dorsey auctioned off his first-ever tweet as an NFT for $2.9 million (Sh313m) for charity.

Osinachi, a Nigerian artist who creates pieces using Microsoft Word recently sold a portrait of Kobe Bryant for $28,077 (Sh3m). 

“In economics, we define fungibility as the ability of an asset to be exchanged with a similar good or asset.

The whole essence of fungibility is to enable trade and exchange of assets by making it possible to equate one asset to another or we can say that there is a mutual substitution of assets.

For instance, money is a fungible asset because, if for instance, you had a Sh1,000 note, you can swap it for two Sh500 notes, five Sh200 notes, 10 Sh100 notes, 50 Sh20 coins and so on and still retain the same value of money you had,” Chris Waruinge Kahuria, a digital marketing experts starts. 

Unique properties

“On the other hand, a non-fungible asset comes with some unique properties that limit its ability to be exchanged for something else even though it may appear similar.

They include things such as furniture and computers, which people own and cannot be exclusively exchanged for a similar item.

For instance, a painting can be sold at a conservative value, but its photo and print can never match the value of the original paint,” Chris explains. 

People are willing to spend more millions of dollars on something they can view online or even screenshot or download. Why would one pay so much for something that is so easy to access?

The answer is simple: NFTs come with a digital certificate enabling a buyer of the digital asset to become the owner.

It comes with built-in authentication, which provides proof of ownership. Through a smart contract and a digital certificate, one can acquire a digital asset and this comes with bragging rights. 

“This is the source of the whole hype. You can purchase exclusive ownership to the best drawing in the world and have the rights to resell and redistribute.

You can purchase a song by a popular artist and become the new authentic owner with the sole right to sell and to earn royalties.

The digital bragging rights have become more valuable than the asset itself,” Chris says.

NFTs have now created a unique opportunity for artists and content creators to monetise their wares.

For instance, instead of relying on hard sales, functions and auctions to sell their art and wares, artists can now sell their art directly to the consumer as an NFT, which also lets them keep more of the profits.

“There is also a possibility to structure a royalties’ programme in such a manner that they’ll receive a percentage of sales whenever their art is sold to a new owner.

This feature makes NFTs very attractive since, in the past, an artist would no longer receive future royalties after selling their art for the first time,” Chris explains. 

Irreversible action

The creator of the World Wide Web (WWW), Sir Tim Berners-Lee, is also selling off the original code used to create the modern internet as an NFT. Sir Tim invented the world wide web - the main modern way we use the internet - in 1989. 

Just Like any other new technology, Bitange Ndemo, an entrepreneurship expert warns that NFTs also have some drawbacks, especially when combined with artificial intelligence (AI). 

“The big challenge ahead, therefore, is the authenticity and integrity of creators, tokenisers and buyers of the rights.

As we say ‘garbage in garbage out’, the likelihood of recording counterfeited works is likely to increase,” he says. Then there’s the matter of NFTs themselves getting stolen.

 “There’s nothing in NFTs or blockchain that protects against theft,” says Eric Cole in recent post. Eric is a former CIA professional hacker and cybersecurity official under President Obama. 

“People hear blockchain, they hear these words, and they think it’s some magical level of security, but ultimately to store money you’re going to have a bank account, to store NFTs you’re going to have an NFT account, and if you don’t protect that password... then all bets are off. Whoever has the account and has the NFT, it’s irreversible,” Cole said. 

“If somebody breaks into your NFT account and transfers that NFT to them, and they’re the owner... there’s nothing you can do about it. There’s no bank you can call, there’s no central authority,” he says.

To start an NFT collection, first you will need to acquire a digital wallet where you can store your NFTs and cryptocurrency.

Next, you will be required to purchase some cryptocurrency, depending on the choice of your NFT provider. 

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