Headlines about NFTs are flying all around us. But what exactly are NFTs? Is it a fad? And what exactly can you do with it? Radar talked about this with science and technology journalist Krijn Soeteman.
Soeteman is also currently working on a crypto encyclopedia and is the author of the book ‘Cryptocurrency for Dummies’.
What is an NFT?
NFT stands for Non-Fungible Token, which means something that cannot be replaced and is technically unique. Link ownership to a unique digital item through a smart contract. ‘The smart contract sounds very legal, but it is not, it is not a contract. It is actually a small and very simple computer program.
It was born from the search to create something unique on the Internet, something that you cannot copy. “There has been a lot of research on this since the 1980s. The first system that could do this very well is Bitcoin. If I give you a Bitcoin, you can be 100% sure that I don’t have it anymore. So you can use this to bring unique transactions from A to B’, explains Soeteman.
Nothing is unique in the digital domain. You can copy everything very easily. To make sure you can’t spend something twice, like money, we use banks and other third parties to verify that for us. “But if they go bankrupt or someone doesn’t like that party, it becomes difficult in terms of how to deal with that property.”
He goes on to say that it can also be very difficult with, for example, works of art. ‘If you buy a work of art now, you will receive a paper contract with it. This paper also indicates to whom the work previously belonged. It is easy to play with him. If you buy or sell digital art, this becomes even more difficult and the question is whether the company that regulates those rights will still be around thirty years from now, when you might want to sell it.’
Therefore, an NFT is a collectible that is sold digitally through blockchain technology. Some examples of these objects are the images you may have seen, of Crypto Punks and Bored Ape Yacht Club, among others. In jargon, these types of images are called ‘collectibles’.
Of course, it is very unusual for people to pay large amounts for this. But Soeteman explains that there are several sides to the story. “You have the people who have become extremely wealthy with cryptocurrencies in the past. They just find it interesting, funny or just want to act a little tough and it doesn’t bother them otherwise.’
In addition, it is very easy to sell yourself something from one side to another. ‘To the outside world, it looks like something is really being sold. They have an image and they sell it to themselves, say for one Ether, then they buy it back for six, and so on. Before you know it, that image is worth a lot and you can make money selling it to other interested parties.
There are also celebrities who buy these collectibles. “Then, of course, you quickly go into a kind of madness, which makes you wonder what it’s really about.”
What else can an NFT be used for?
Soeteman himself believes that this exaggeration of the images will be transformed into something more useful. “In this way, you can link multiple properties to one smart contract.”
You can think of concert tickets being sold in the form of NFTs. Concert tickets are often already collectible, but then you have a digital form that you can link fans to. ‘Imagine everyone who bought a ticket before a certain time gets early access to the album or gets extra coins for the bar.’
So you can link all sorts of things to it which is now easier to customize, because it’s linked to your personal wallet. So the tech journalist is curious how this will play out socially, especially on the internet. However, he finds it a pity that many things have been hijacked by big companies.
What should you pay attention to when buying an NFT?
And what are the ‘red flags’? Soeteman: ‘What happens very often is that fraudsters work in an increasingly sophisticated way. So pay close attention to exactly what it says if you have to give your approval for something and check the link, so your wallet doesn’t suddenly empty. It’s also wise to use Google Image Search, so you can find out if the image already belongs to someone else and is now being casually sold by someone else.’
Finally, he says that ultimately everything about NFTs is about real money. ‘You can experiment with it, but don’t let that fool you!’
Source: Krijn Soeteman