On the 1st day of March 2022, popular songwriter and record producer Grimes sold her NFT digital collection named ‘War Nymph’
at the nifty gateway for a whopping sum of 5.8 million dollars, the internet went gaga.
But that wasn’t the end of it. Ten days later, Beeple sold an NFT: ‘Everyday — The First 5000 Days’ for 69 million dollars at Christie’s auction!
These two events set the pace for NFTmania, which has continued to soar.
This brings us to one of the most asked questions on the internet today:
NFT, which stands for Non-Fungible Token, is a digital asset that represents real-world objects like art, music, in-game items, and videos.
They are bought and sold online with cryptocurrency.
I know some people may wonder if cryptocurrency is the same as NFT; well, the answer is a big No.
Just like cryptocurrency, NFTs are stored in the blockchain, and that is where their similarities end. While cryptos are fungible, NFTs are non-fungible.
Ok, did I hear you ask, What is fungibility?
Fungibility is simply the ability of goods or assets to be readily interchanged for another of its kind. A perfect example of a fungible token is the money in your wallet, dollar bill, bitcoin, and other legal tenders. These can offer payment for goods, services, or debts.
But NFTs are different; they are unique digital assets that cannot be interchanged for any goods or services in order words, you can’t offer NFT in payment for any goods or services.
Unlike money or bitcoin, the value and the price of an NFT are set by the owners based on factors like the uniqueness of the artwork.
You can buy a house in exchange for Bitcoin, ether, or money, but you can’t buy a physical place in exchange for an NFT.
Let’s say you bought Jane Austen’s book: Pride and Prejudice or Kanye West’s album: ‘Donda,’
Automatically you become the owner of that particular copy. If you decide to sell that single copy, all the proceeds will go to you and none to the creator. With NFT, it is entirely different.
And this brings us to our next question:
Who owns a piece of NFT art, the buyer or the creator?
Let me explain.
Blockchain not only stores NFT or cryptocurrency but also authenticates the ownership of an NFT by certifying the digital asset through a unique cryptographic token.
Each NFT minted or created has a unique identifier (public key) directly linked to a blockchain address, and what does the public key prove? It proves that the copy of the digital file is original, and its holder is the original creator of the NFT.
When you buy an NFT, you are given a private key; with this key, you can verify transactions, prove ownership of a blockchain address, and sign transactions.
It is important to note that even though buying an NFT may transfer some copyrights to you, (Some creators eg Crytopunks do not transfer IP, copyrights, or trademark to Punk owners) the creator still owns the assets’ intellectual property and can program the royalties so that they can receive a percentage of sales whenever their art is resold to a new owner!
Cool, isn’t it?
The process of setting up these royalties is called Smart Contract.
Which brings us to our next question, what is a smart contract?
Smart contracts can be likened to the traditional way of signing a contract, only that this time around, there are no third parties.
A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code when predetermined conditions are met and verified.
The creator can also transfer the intellectual property using smart contracts.
So you see, NFT is one of the best things for artists or creators, who no longer have to fear that someone can easily steal their work and make money out of it.
Sadly, the answer is yes! But on one condition, if your wallet is compromised by a third party using your seed phrase.
When you sign up for a crypto wallet, a series of words known as seed or recovery phrases are generated by the crypto wallet, and private keys are created in the wallet.
The recovery or seed phrase is the master password that gives access to all crypto associated with your wallet and allows you to send or receive assets.
This access remains even if you delete or lose your wallet.
Aside from your heir or next of kin, no other person should have your seed phrase; if not, your crypto wallet, which serves as your password manager, could be compromised.
How can I determine whether a person is the owner of an NFT if their account was hacked?
No, there is no way a person can know the owner of a wallet that was hacked because the transfer process after their account was hacked was verified. All blockchain transactions are anonymous and generally irreversible, making it difficult to determine who the criminal is.
A person’s art can also be downloaded or screenshotted and sold to another person but
NFTs have a digital fingerprint attached to them from the moment they are uploaded to the internet and minted. Every time the NFT is sold to someone else or posted on another website, it is usually tracked.
To protect their users, secondary marketplaces like OpenSea and Rariable advise users to set up a 2-factor authentication and back up their NFT artwork. Backing up your artwork can save your artwork if deleted or modified
All blockchain transactions are anonymous and, generally, irreversible. Unfortunately, if you don’t take steps to protect yourself, there is a real chance that your artwork can be stolen.
Coming soon: Is NFT a good Investment?