Tuesday, January 18, 2022

What is NFT? | Is it the new future |Should you consider buying it| GossipKnowledge

Nowadays there are these questions among public in general that what are NFTs, What are Tokens, Is it related to blockchain and bitcoin, Should you ride this NFT wave or not. And if you follow investors, news, tech savvy influencer and finance influencers  then I am sure that you must have come around this unique word called NFT. Now you might ask what is this NFT? So here I am to explain all about NFT, whether you should be worried about it or not and what's all this fuss is about.

NFT in simple words is NON-FUNGIBLE TOKEN, you can also say that something unique as the word fungible in simple English means replaceable and NFTs are non-fungible so anything that's non-replaceable can be called NFT.

Let me start with an example, let us consider a diary or a notebook which has been mass produced so every copy of it is one-hundred percent identical. And it's impossible that if you buy it on amazon one day and its MRP is Rs.50 and on some other day you buy that same diary from a local store near your house and it would cost you more or less than Rs. 50, which means this diary or notebook is replaceable. And you can easily fill one diary and get another one with same features hence it makes this diary or notebook a replaceable asset.

Now, let us consider another situation with the same asset that is a diary or a notebook.  Your father bought it for you on your sweet 15th birthday and you wrote your memories and many other details which makes this particular diary or notebook unique. You can buy a similar diary or notebook from anywhere but it would not have the same content as your diary. Now this diary or notebook becomes non-fungible or non-replaceable.

You can imagine this same situation with any other thing a car, bike, guitar, a car manufactured in limited edition, a bottle, an image, or even a movie poster. It could be anything you can think of, anything that is limited or non-replaceable.

Now let me explain you the term 'TOKEN' used in NON-FUNGIBLE TOKEN (NFT). It is basically working on something we know as blockchain. Now let me first try to explain what is Blockchain and thus explaining what is Token. I think I should explain this with an example of chocolate as there's no other way that I master. Let's say you are the owner of a store and I as a customer bought something (a chocolate) from you and you asked me Rs. 100 for that chocolate. So, I grabbed my phone, opened UPI, scanned your QR code and transferred you Rs. 100. 

It sounds simple, but during this transaction or in this time interval many events took place at the backend of this transaction. Things like - my bank checks if I have Rs. 100 in my account or not, if yes then it approves the transaction and if not then disapproves it and records this transaction. And simultaneously your bank received Rs. 100 and records it. But this whole thing is going on at bank level. Now imagine this happening at public level or world level and no one could edit it or erase it.

Same happens in Blockchain, in 2009 someone named Satoshi Nakamoto whom no one knows said that if this transaction's record is not recorded by bank rather it gets recorded by many computers all over the world.
Now you may ask that what is the need for this, don't worry I have the answer. As many people were not happy with this centralized banking system (bank level transaction) as they listed many cons of this system like it is controlled by an individual, institution or organization and whoever controls it has a lot of power and could do anything with this money. So, Satoshi Nakamoto introduced a new system which is known as decentralized banking system (the world level transaction).

Now how this whole concept is connected to NFT? Let me again come to the example of the diary. Now suppose you got your special diary filled with your special memories and details and now you sold it to someone at Rs. 500. Now that someone must have a proof or record that he owns this diary from now on. In this case it is physical object like a book but imagine it could anything like an image, a movie clip, a cricket shot. How would that someone would proof that he owns this unique thing. It is by creating a NFT. That's how NFTs work.

By definition NFTs are a legitimate way of transferring the ownership of any unique item.
Now you may think that it's all rubbish as a GIF, an image all this stuff could be easily downloaded and used. You are not completely wrong but, partially you are wrong my dear friend as this NFT is based on the fundamental of human psychology that if something is limited, scarce, or unique it tends to be highly expensive. If it were not true then why do paintings and arts that are unique are sold at such an expensive rate.
Now, the most important question, should you invest in this NFT wave and should you even consider it as an investment? If you ask about my opinion, you should definitely experience this technology by buying or selling a NFT and see if you develop a taste for it. But it is too early and definitely not safe to invest huge amounts in such a thing which many of the experienced investors are calling a Fuss. But I think NFT will stay and soon BOOM like bitcoin. It is highly expected.

All the views in this blog are discretionary and the investments are at the risk of the user. Please share and comment on this blog and let us know what are your views on NFT and it's future.

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