Look at this image. What do you think about it.

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Usually when you look at it seems like a caricature of a small kid. However, you will be surprised that it is sold for a whopping $300k. Similar to this is another artwork.

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This is the first ever tweet by Jack Dorsey which was sold for $2.5 million. The fun fact is that you can download this free of cost.

This mania is not just restricted to the two examples I have given but there are many more of this recent hype around what is called NFT or non-fungible token.

So lets understand what is actually an NFT. If instead of Rs 10 coin, I give you two Rs 5 coins, then we can have an exchange and there will be no issue because you are receiving entire value. Similarly, in the crypto world we wouldn’t care which exact Bitcoin we receive, until we are getting its value.

NFTs are exact opposite of this. Think of an auction of a painting. Now here in this case one item cannot be replaced by another for its value.   NFTs are certificate of authenticity which cannot be replicated. They are stored in a blockchain and represent ownership of unique items. The secure nature of the blockchain technology ensures that ownership is available.

Birth of NFT can be associated with the fact that digital artworks can be copied easily and hence, it is important that artwork is uniquely identified and valued. What this means is that now digitally anything can be given an NFT tag.

The transition from physical to digital does seem to have certain advantages. Firstly, each NFT has an owner and is known publicly. Secondly, artists can retain ownership over their creation and claim royalties. Further, there is also a future of using NFT as a collateral for seeking loans.

But for all this to happen what is important is that this does not seem to be a bubble ready to burst in the near future. As more creators will try encashing through this craze, supply will exceed the demand and all of this could cause a market crash. Another issue associated with them is that if someone else puts a tag instead of the creator then there’s no way of identifying who the real creator was. In addition, if Bitcoins are energy intensive then NFTs are being deemed worse.

Looking at the holistic and the insanity around it the craze looks a fad for now but only after any technology comes down the hype curve that we start to witness the real value of it.



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