Traditional works of art, such as paintings, are extremely valuable for many reasons, but mostly because every painting is unique and one of a kind.
That is not the case when it comes to digital files, however, since they can easily be duplicated and shared, despite copyright laws and such. This is where NFTs, or non-fungible tokens, come in.
So what are NFT’s and what do they have to do with cryptocurrency?
NFTs are essentially unique tokens that serve as proof of ownership of an asset. NFTs use blockchain technology and cannot be replicated, which is why some creators have embraced them.
Read more below.
Most NFTs are part of the Ethereum blockchain — Ethereum is a cryptocurrency that supports NFTs, according to The Economist.
"To mint an NFT, the creator establishes a unique record of the artwork, generally on a website. Then the creator places the record on a blockchain," the paper explained, noting that "possession of a private encryption key associated with the transaction proves ownership."
"This gives an artist or collector something to sell. An NFT may link to a version of the work, but rarely includes the rights to reproduce or distribute it. That differentiates it from a commercial licensing arrangement, too."
NFT: Pros And Cons
Some experts believe that NFTs are a great solution for both creators and collectors, because they solve what has long been a major issue when it comes to digital art: ownership.
Conversely, critics claim that NFTs are problematic because they rely on cryptocurrency, which is very volatile compared to other currencies and investment tools.
The high electricity usage of blockchains is another major issue, critics say, especially today with the world struggling to fight global warming, transition to green energy and halt climate change.
NFTs In Entertainment
According to The Hollywood Reporter, ViacomCBS announced this week that it would be partnering with NFT company Recur to "develop and sell digital collectibles based on its vast library of films and TV shows."
ViacomCBS and Recur will launch a platform for users to buy, collect, and trade NFTs in early 2022, the company said.
ViacomCBS consumer products president Pam Kaufman said in a statement that "voracious collectors and first-time NFT buyers alike will find unique opportunities to own a piece of their favorite franchises" thanks to this partnership.
Are NFTs A Good Investment?
So, are NFTs a good investment?
As reported by Forbes, experts believe investors should be cautious because some NFTs appear to be scams.
"This does not mean that almost all NFT’s are scam. It’s just good to remember that, when so much hype delivers this amount of money, there are many incentives to convince innocent people to risk too much money, " said Scott Morgan, founder of Crypto Integrity Tao.
Pierre Bourque of Blockchain Radio echoed Morgan, saying that investors should explore their options and do research before investing in NFTs.