Explore the phenomenon: NFTs and crypto currencies

NFT, Non-Fungible Token, is one of the latest internet trends To understand what NFT means, you first need to figure out what ‘non-fungible’ refers to.

If an asset is non-fungible, it is unique and therefore not interchangeable. Money is fungible, interchangeable since a 20-euro note can be exchanged for another 20-euro note or two 10-euro notes. However, art is unique and non-fungible since a piece of art cannot be exchanged for another one.

There is also a big difference between owning an original work or its copy, and fakes can often be recognised. It is easy to make accurate replicas of digital works. An image, a video or an audio file can be downloaded onto a computer, at which point the piece of work exists as a copy on the computer. This is why other means, such as NFTs, are required for the verification of the ownership of original digital works.

NFT is a code that is used as the unique ownership certification of a non-fungible asset. NFTs can be linked to physical products, but usually they are used to verify the ownership of digital art, music, images, videos and computer game items that only exist in a digital format. Probably the most widely known use case is the use of NFTs in digital art sales (e.g. NyanCat on the OpenSea platform).

NFTs are bought and sold in crypto currency. Crypto currency is a virtual payment method which has no official issuer and which has no connection with any individual state. The value of the currency rises and falls depending on the price people are willing to pay for it at a given time. Generally speaking, however, the value has mostly risen in recent years.

Most NFTs and crypto currencies are based on block chain technology. In a nutshell, the technology works by logging all the transactions related to a particular object in a digital chain in a vast network of computers. The data is not in the possession of one or more organisations but decentralised so that they can be managed and updated everywhere simultaneously. Once a new link is created in the chain, it can no longer be removed or broken. In other words, when it comes to NFTs, block chains make it possible to trace the buyers and sellers of a particular piece of digital art. The spreading of copies does not affect the block chain or the ownership of the art work.

Although both crypto currency and NFTs are based on block chain technology, there is one important difference between them. Like normal currency, crypto currency is interchangeable. To put it differently, NFTs are unique and non-fungible and cannot therefore be exchanged for other NFTs. Their price is determined by the laws of supply and demand, just like all other property. Some NFTs are sold at incredibly high prices. For example, an NFT depicting a cat drawn by Paris Hilton was sold for approximately 17,000 dollars. The first tweet was sold for 2.9 million dollars in March 2021. Thus far, the most expensive NFT has been a digital piece of art that was sold for 69 million dollars.

Most of us would probably not buy one of these pieces of art, but NFTs are used to sell cheaper works as well. Highly popular NFTs also include digital collectibles, such as CryptoPunks, CryptoKitties or Bored Ape Yacht Club. In addition, anyone can sell digital art pieces or photographs as NFTs. To start, you need a crypto wallet, in addition to which you will need to pay a so-called gas fee for your purchases since the technology consumes a lot of energy. You should also be aware of the fact that trendy phenomena and fast development always include risks since they attract dishonest and fraudulent actors.

Text: Linda Mannila

Image: Siru Tirronen

The media landscape of children and young people keeps changing, with new phenomena following each other back-to-back. Providing pupils with tools for understanding and processing these phenomena is important. This learning package is part of Pathways to New Media Phenomena – Information and Exercise Materials Series. The series includes information and exercises for the teacher and the pupils. You can explore new phenomena in a meaningful way with the help of the How to discuss new media literacy phenomena through pedagogical means method. 

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