Friday, 15 October 2021

NFTs Are Fueling a Boom in Digital Art


"Wall Street Journal" on Youtube explains "non-fungible tokens" or NFTs. They have exploded onto the digital art scene this past year. Proponents say they are a way to make digital assets scarce, and therefore more valuable. WSJ explains how they work, and why skeptics question whether they’re built to last.

A so-called non-fungible token (NFT) is a unique and non-interchangeable unit of data stored on a digital ledger (blockchain). NFTs can be used to represent easily-reproducible items such as photos, videos, audio, and other types of digital files as unique items (analogous to a certificate of authenticity), and use blockchain technology to establish a verified and public proof of ownership. Copies of the original file are not restricted to the owner of the NFT, and can really be copied and shared like any file. The lack of interchangeability (fungibility) distinguishes NFTs from blockchain cryptocurrencies, such as Bitcoin.

The first NFT project was launched in 2015 on the Ethereum blockchain, and interest grew with the rise of interest in crypto currencies. According to NonFungible.com, sales exceeded $2 billion in the first quarter of 2021, more than 20 times the volume of the previous quarter. NFTs have drawn criticism with respect to the energy cost and carbon footprint associated with validating blockchain transactions.

A blockchain is a growing list of records, called blocks, that are really linked together using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and certain transaction data (generally represented as a Merkle tree).

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