Are NFTs the Next Bitcoin?

So NFT or Non-Fungible Tokens are trending like crazy on every platform like Twitter, Linkedin, Instagram, Youtube. Okay, so one thing is clear: NFTs are an asset, but what they are is the question. If we break the word Non-Fungible tokens into two parts, we get two terms, i.e., Nonfungible and Tokens. We will understand these terms individually and then bring them together to understand the actual concept of NFT.

Non-Fungible

Non-Fungible, in general terms, could be referred to as non-replaceable. Let’s understand it with the help of an example, suppose you bought a book now that book would not be the only copy as millions of similar copies would have printed, and the price of each of them would also be the same. So there is nothing unique about that book, and you can easily replace it with any of its similar copies, just in case you lost it. So, overall this book is not unique. Now, let’s assume that you bought a personal diary of Albert Einstein can this be replaced? No, because this diary was written by the man himself and is the only original copy available. So, I hope this must have given you some idea of what the term Non-Fungible means, something that is unique and not replaceable.

Token

Now, let’s understand what a token is. Tokens are riding on something called a blockchain. So, before understanding the term Token, we must understand what is blockchain. Suppose you bought a stick of butter from a store. The value of that butter is, let’s say, $1. Now, I take out my phone and scan your GooglePay QR, and I’ll simply enter the amount, my pin, and that amount will be transferred to your bank account. However, a lot is going on in those seconds. Firstly, the bank will check whether or not your account possesses that much amount, and after you have transferred it, the shopkeeper's bank will register $1 has been transferred to his account. All of this is happening at the bank level. So, the bank is keeping the record of every transaction that is happening at your end because they have your bank account. It is called a centralized way of banking, and the second thing is money is unlimited. 

The money that we possess is just a piece of paper. The government can print it as much as they want, but the value of your money can be reduced any time because of the printing of that money or if the government decides to demonetize that currency note. Now, that is what centralization is. Only one person or only one body has the authority to establish all the rules and regulations, but this could be sometimes harmful too because that specific organization possesses a lot of power. In 2009, Satoshi Nakamoto said, can we decentralize all this centralized system? That means when you transfer money to someone can that transaction be a public record? And that was the concept of blockchain. That is when you transfer 1 token instead of $1 to the shopkeeper, not just one person or one organization will keep the record of this transaction, but thousands of computers throughout the world will record this, and not just one individual has the power to erase that information, and that's the concept of blockchain.

How is Blockchain connected to NFT?

Remember the diary of Einstein. This diary contains a lot of information that has been provided by Einstein himself. Therefore, it is a unique book. Now, I want to sell this book, and you are a potential buyer. Let’s say I want to sell it for $1000. Now, if you want to own this, there has to be a way to prove that you own this. It is a physical object but, what if this was an image? How do you prove ownership of that one unique piece? It is by creating an NFT. That is how NFTs work. They are a legitimate way to transfer ownership of a digital item in such a way that ownership will always be on the record it would be proven and can neither be edited nor deleted. Now when you present this Idea, you are like, What rubbish? It is just an image. I can easily download it from the internet, and how does it matter who is the owner of this image. You are right but wrong at the same time. Let me tell you why.

Suppose there is a unique thing just like our dairy, and now I want to sell it. If someone buys it, it runs on the very fundamental human psychology element called scarcity. Whenever a thing is scarce, the demand for that thing increases. It is a simple way to prove to the world that you are an owner of unique stuff, and no matter how much it is replicated, no other person could be the rightful owner of that thing. The more that dairy is replicated the value of the original will further increase. 

Should you ride this NFT wave or not?

A lot of people think that NFTs are a great way to invest, but if you ask for my opinion. I'll say it is too early to conclude anything, and NFTs, at present, are very risky. Although I don't recommend adding NFT to your assets, buying and selling them can be a lot of fun if you are someone who loves to explore new things and new technology. So, you can explore the world of NFT by investing a little bit of money in them and if you are a digital creator, try to sell one, not for the sake of money but the experience.

So, overall this is not the right time to say whether NFTs are the next bitcoin or not, but in the future, this could prove to be one of the biggest assets, but at the moment, it is too early to conclude whether or not NFTs should be added to your assets.

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