The Hype of NFT (Non-fungible token) ? You Can’t resist to Look

The hype of NFT?

Before talking about what is NFT (Non-Fungible Token), we want to have attention to a few things you must know to imagine the hype around the NFTs these days. So, there’s some super strange stuff happening online right now and I need to tell you about it.

First ever Tweet NFT

First look below at this tweet, the first tweet ever tweeted in the history of Twitter. This tweet was by Jack Dorsey, who was one of the co-founders of Twitter. And this tweet was somehow just purchased for $2,915,835.47.

NFT sold jpeg

This doesn’t end here just a few months back a single jpeg image sold for 69 million dollars. The NBA is selling little moments of basketball games for hundreds of thousands of dollars. There is all sorts of digital things that people are purchasing a version of them for lots of money.

There are three simple letters that you need to understand to understand what is going on and those letters are NFT. Now the question arises why people are paying this much money when they can watch it for free.

This story is much bigger than a 6 hundred thousand cat gif or a 3-million-dollar tweet, it’s a story about human psychology and how the way we value things is shifting because of technology. A technology that some people think may revolutionize our society, while at the same time accelerating the climate disaster. It’s all of these things together and we want to explain them to you.

What is NFT?

NFT stands for the non-fungible token, this is not enough explanation for this because people throw around things like blockchain, crypto art, ledger, NFT, etc. and people expect one can easily understand what they are talking about but it is not that easy.

So, we start with fungible, it’s a very specific word those economists use and it has a very precise definition, we want to use a different word in place of fungible for the easy-to-understand purpose we can just use the word replaceable, now non-fungible means non-replaceable. Means you can’t replace it, there is only one of them, it’s unique.

We can understand with a simple example that if you wish to buy a jean pant from an online e-commerce store, you pay $40 dollar and choose a jean blue color with 34 waists. If you purchase one of these jeans for $40, you don’t care what specific jeans they send to you, because they going to make thousands of jeans in your size of the same color. They will send it to stores and people like you, they will send one to you. You don’t care which one it is. Means jean is fungible, its replaceable. As long as you get one that’s similar to the rest, it’s worth the same to you and they are interchangeable.

However, let’s talk about one Peter England jeans which are with you for a quite a long time, you feel very attached to that jeans whenever you wear that, you feel very happy and energetic means it has an emotional value to you and this jean is non-replaceable because the same is unique on the planet because it is only one of them which you fell in love with.

Everything in our economy is one or the other fungible or non-fungible, a sack of rice is fungible, you don’t care which one it is, the Mona Lisa is non-fungible, there is only one. Surprisingly non-fungible things are way more valuable than fungible things.

So that’s the NF in NFT, non-fungible. Now let’s talk about the T, which is token, this is a very internet kind of word and to explain to this we have to explain something we have not explained in the long paragraphs written above.

The Blockchain

Luckily, there is a way to understand this and we are going to make it as easy as possible, let’s say you wish to buy three slices of pizza from a friend Manoj, he charges you $5 for these three slices. You don’t use cash so you pull out your debit card and swipe on his POS machine, as soon as you swipe this card a message is sent to your bank and it says hey dear you wish to spend $5 on pizza and that money needs to go to Manoj bank account, this is how a bank works this the bread and butter for them that you are using their services for paying money to each other in exchange of services or goods. They document every transaction from all their customers, at the end of the day they have a tally of all the money that went out of your account and into your account. They can say basis on all of these transactions, you have a $50 balance in your bank account.

And so, when that request comes in as you swipe your card bank says ok you have $55 in your account, you can send $5 to Manoj bank, approved. And they approve the transaction, one that money comes to Manoj’s bank account, Manoj’s bank is also doing the same thing, they say Manoj has $80 and now he has $85 and they add it to his record. More and more your money is just a number on a screen adding and subtracting from one account to another account. It’s a result of a bunch of transactions. You don’t barter with physical things; you don’t use cash as much so the bank keeping meticulous records of every transaction becomes really important. We trust the bank to do this correctly. Bank and other middle man have been keeping stuff like this running smoothly for centuries.

There have been a few bumps in the road, with the rise of the internet people started to wonder, is there a way that we could do this same thing, coordinate this same transaction and transfer of money between two people without the bank; The result is a very clever concept called the blockchain.

The blockchain fulfills the same thing that banks were doing but instead of doing this privately on your bank account and talking to Manoj’s bank, all of the transactions are actually recorded publicly on the internet.

So, let’s do the same example in the blockchain (crypto) world, Manoj charges you 5 crypto coins for your three slices of pizza, I swipe your crypto card to accept your wish to give 5 crypto coins to Manoj, instead of the bank seeing that request for a transaction and trying to validate it, it goes on to this public record, where a bunch of people’s computers all around the world are keeping track of every single transaction of everyone always. If you don’t indeed have the five coins in your wallet/account, to pay Manoj, all of the people’s computers who are keeping track of every single transaction will notice that there is a discrepancy, they will tell you that you don’t have five coins, we are looking at every transaction ever, and you don’t have 5 coins, your transaction is rejected.

If you do have five coins all of the computers looking at the public records will see that request for a transaction and they will approve it. And now Manoj has 5 coins, they will write this transaction in public records, Now Manoj has those extra 5 coins is now business of everybody and everybody now knows that. The point here is the group verifies the legitimacy of every transaction.

Back to NFT

Now you must be wondering what the blockchain and this public record have anything to do with cat gif, tweet, or jpeg image worth million dollars. So, in our pizza example, we talked about the blockchain as a way to verify currency transactions. But it bends our minds can it apply to something which is not currency or money.

Let’s say one day you are just looking at the ledger and ledgers like you want to give 5 coins to Manoj, and you got 5 coins approved… and then a transaction comes up like a Malaysian businessman wants to give three million dollars worth of coins to Jack Dorsey in exchange for a little token or a digital certificate that says that the tweet is now somehow owned by the Malaysian businessman. The only thing the blockchain cares about is, does the Malaysian businessman has three million dollars worth of coins and so a bunch of computers all around the world look at the whole entire list of transactions and say like yeah, this guy has more than three million dollar’s worth of coins, Approved. They approve the transaction and now it is written in a public record that is unalterable. That says that this Malaysian businessman owns the tweet. The token has been transferred to somebody new, a Non-fungible token (NFT).

If there is anything that gets human psychology to value something it’s if an entire group validates that it’s real and that there is only one of them.  Thereof are tens of thousands of NFTs of all kinds. some music is being given tokens, lots of art is being minted as tokens and being bought and sold, and then of course there is the value turns into psychological hype, the excitement around certain things. We can be doing this forever.

The whole art industry is based on the idea of a bunch of people deciding that this painting, this little bit of canvas and wood and paint is valuable, and thus it is valuable. The only difference about now is we now have a technology to this in a non-physical way using this very sophisticated internet technology that is maturing very quickly. Now you are thinking ok cool, there are a bunch of rich people online buying and trading digital art, and there are millions of dollar’s worth of cards, we thought you said this was going to have the potential to change the world and we are getting there, but first, we need to talk about the

The crazy flip side to the NFT fad

The reality is that the technology that is the backbone for all of this, the blockchain stuff that we have been talking about relies on the public ledger thing, that is the sort of heart and soul conceptually, but mechanically, like physically what it relies on computers doing a bunch of little calculations all day and night forever. These computers are not real computers, they don’t have any memory or screens, or anything. All they do is just make little micro-calculations all day all night.

Most NFTs are stored on a blockchain called Ethereum, and as of now in early 2022 when we are writing this Ethereum blockchain is using 33 (TWH) terawatt-hours of electricity and you must be thinking like what is a terawatt hour of electricity. That’s the same amount of power as the country of Serbia. A reminder that generating electricity usually comes from power plants that are burning fossil fuels, that are putting carbon into the atmosphere which is a big freaking problem, it can cause a manmade disaster on a global scale.

The power consumption on the Ethereum blockchain is exploding, it quadrupled in the like eight months and it is showing no signs of slowing down. It is a lot of energy and to think that much energy is not being used to like, move people around or produce things. It is used to crunch numbers in a weird computer warehouse somewhere so that somebody can buy a fake token of a thing that we can’t understand. It’s such an ironic moment where it’s like this is all digital, it’s all fake, it’s not real, but it’s having deeply real-world effects.

Conclusion on NFT

In the end, we can only conclude that this is definitely hype and that’s the whole point, we mean these speculation markets are all about hype, we see this all the time with new technologies and new things that people get excited about (like Metaverse, Web 3.0 separate topics). They swarm it with their investments and the price goes up and then something happens.

For example, in the 90s the was taking off and people were just realizing that you could make money on the internet like you could make big businesses on the internet the stock market was surging 400% in five years mainly fueled by so much hype and excitement around by these new internet companies. This rise peaked in March of 2000 and then the bubble burst and a lot of these companies either went under or completely lost all of the exciting valuations that they had.

But, did that mean that the internet went away, did that mean that internet businesses didn’t come back? No companies went on to reshape our world. Right now, we think we are probably in that stage of NFTs. It’s hype, its novel, it’s exciting, but what it is doing is pushing our minds to think differently about how we validate and verify things.

If we buy a house there is a whole thick stack of paperwork and a bunch of middlemen to make sure that it is very clear who owns the house and how that money gets transferred from one to another, it is a nightmare of an experience if suddenly technology existed that took away the centralized middle man and made transaction between people. Able to authenticate, verifiable, and much smoother, that could change our world.

We are not here to say if the bubble going to burst or whatever we don’t know, we just know that this is the crazy moment of hype where we are getting our heads around a new technology what it means, and eventually will adapt. This won’t be crazy; this won’t be novel anymore. Prices will go down but the technology that allowed it all to happen will probably stick around.

error: Sorry Boss