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Is this JPG an NFT?

Let me get the headline answer sorted first of all. No! It most certainly is not!

In 2021, a new term called NFT, an acronym for non-fungible token, took the world by storm. People began buying NFTs, which are unique digital tokens stored on a blockchain, for millions of dollars in cryptocurrency. There are those who believe that NFTs could revolutionize everything from concert tickets to medical records and land deeds, while others think that NFTs are a scam, a new type of multi-level marketing scheme or a Ponzi scheme. But regardless of where you stand on this debate, one thing is certain: NFTs are a new trend in the crypto world, and they are important because people are investing significant money in NFTs and their development.

So, what exactly is an NFT? To put it simply, an NFT is a token that represents an asset on the blockchain, just like a coin or any other token. However, unlike other tokens, the NFT is unique and non-fungible, meaning it cannot be copied, substituted or subdivided. An NFT is unique and that's what makes it valuable.

An example can help explain this. Let's say a food truck festival wants to give their most eager supporters special VIP treatment, like cooking classes or special drinks or access to the VIP area.

They issue food truck NFTs, specifying what perks the holder of that NFT has. A supporter who buys an NFT can then use it as proof they have access to the services the NFT offers, and if the supporter no longer wants access to those services, they can trade or sell the NFT to someone else, and that person gains access to the services.

This example only scratches the surface of what people believe NFTs can eventually be used for. It's also a good example of how NFTs are being used today, but how does it work? NFTs are unique tokens, meaning there's only one of them. The blockchain knows this and will always treat it as a unique entity. NFTs can contain whatever the creator wants, usually they contain either hyperlinks to assets stored elsewhere on the web, like cartoon avatars, or simple smart contracts that perform some form of automated transaction anytime the NFT is activated or traded. Because the cost of storing data on the blockchain is extremely high, this is the most common usage of NFTs, instead of storing the actual image, it just stores the link to the image.

Holding an NFT of an art piece does not mean you own the art. It means you own the NFT, the token on the blockchain, nothing more, nothing less. The value of an NFT is not in the art itself, but the uniqueness of the token and what it represents.

Proponents of NFTs believe that this technology will revolutionize many areas, such as concert tickets, where ticket fraud becomes all but impossible when the ticket is a unique token on the blockchain. For artists, NFTs can be minted with smart contracts that give them a portion of sale every time that piece is traded. As the NFT is traded for higher and higher values, the artist earns more and more money. They could also be set up to grant the NFT holder special privileges that change over time, like access to special events or promotions or services or so-called airdrops, where an NFT holder gets a token or other entity dropped into their crypto wallet.

Despite the skepticism and debate around NFTs, it is clear that the technology behind it is here to stay, and it will have a significant impact on the way we interact with digital assets in the future.


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