NFT’s sound complicated, right? They are! But we want to give amazing parents like you some basics.
First, NFT stands for “non-fungible token,” which means that it cannot be replaced or duplicated, it’s one of a kind.
How do NFTs Work?
NFTs are most often associated with digital works of art. You can think of them as a digital deed attached to a piece of digital art that cannot be falsified. This digital deed is incorruptible, unfalsifiable, and indestructible.
Therefore, NFTs have value, which is derived from the digital file (in this case, art) it references.
NFTs rely on blockchain to retain their verifiability. What is blockchain, you ask?
- Blockchain technology – a decentralized, distributed ledger that records the actions of a digital asset. Think of it like a digital checkbook that continuously “writes down” the transactions associated with a digital asset.
Here’s a scenario. Someone creates an amazing piece of digital art – a colorful guy with a mohawk (like the image used at the top of this blog!) – and they want to sell it. An NFT gets attached to the piece of digital art. A value of $100 is attached to it, which someone pays with cryptocurrency (a different, somewhat confusing thing – crypto also uses blockchain, but unlike our US dollars, isn’t backed by gold, banks, or governments – this makes it volatile!)
In other words, when you purchase an NFT online with cryptocurrency, blockchain ensures that your purchase is indelibly linked with that digital asset. It’s verifiably yours!
What’s “Special” About Owning an NFT?
Why NFTs? There are bragging rights about “owning” something. Think about status and swag. It became a billion-dollar industry almost overnight, but much of that value has been erased recently due to the cryptocurrency crash of 2022.
The most expensive piece of digital art sold for $69M! There are entire communities that revolve around owning certain types of NFTs, like The Bored Ape Club, who all own digital art of the now famous Bored Ape. Yes, you can legally copy and paste the same image for free. The difference is that you can’t copy the verified and protected information. So, when you buy NFT artwork, you are buying the ownership of the image more than the image itself.
Should Parents be Concerned about NFTs?
Just a few areas for parents to keep an eye on:
- These are sophisticated individuals.
- Crypto currency is variable – a bit like playing an ultra-volatile market.
This Verge YouTube explainer video is also useful!
We hope this post gives you enough to sound SUPER smart! Go impress your kids.
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