Stored on a virtual blockchain ledger, Non-Fungible Tokens (NFTs) are unique strings of code that act as ownership rights of digital artwork. To make it easier, NFTs are digital commodities used to buy different types of digital media and they have a unique code that identifies the real owner. Cryptocurrencies, virtual reality, AI, Cloud Computing, and IoT are inventions that have completely changed the dynamics of the world. Now a multibillion industry, NFTs continue to boom and attract huge audiences; Statista reports that the number of people interested in trading NFTs has significantly grown in 2021. It further highlights that the industry has expanded about tenfold between 2018 and 2020.
These highlights reflect the scope and worth of the NFT industry so far:
NFTs have also given rise to sub-segments: online courses, trading portals, auction websites – a thriving market fueled by millions of minds from around the world.
However, like other emerging technologies, NFTs have been subject to backlash as well. One of the most highlighted concerns is their carbon footprint – also the source for cryptocurrencies, bitcoin and altcoins. According to Forbes, “transactions with bitcoin use up a lot of energy, with the average transaction using over 1,700 kWh of electricity, which is almost twice the monthly amount used by the average U.S. home.” Furthermore, an article published on Nature Communications highlights that cryptomining could negatively affect China’s environmental goals in the near future. Following this, noticeable actions were observed as many cryptomining setups were closed down. Regarding the governing laws and regulations, things are quite different in various regions.
Nevertheless, if cryptocurrencies have given a new meaning to the world of commodity, at the other end of the spectrum, NFTs have redefined the dynamics of digital art. There are several types of creative work, such as paintings, photographs, albums, collections, music, video clips that can be owned with the help of NFTs and traded through any digital currency. In a unique context, NFT-based digital artwork could conceivably be reproduced for unlimited time and without the permission of the owner. This unique game of owning creative art pieces seems to flourish further in the future. It has emerged as a new and attractive opportunity for creative thinkers to monetise their work. From OpenSea and Rarible to Foundation and other platforms, there is a huge density of interested people willing to spend millions of dollars every day on this new addiction. Some platforms have strict user verification requirements whereas some offer flexible and easy procedures.
Other than the technical and economical indicators, a NFT’s worth depends upon their highly unpredictable demand. Therefore, governments of different countries are thinking about applying taxation on NFTs.