Firstly, I was confused too, probably the best place to start with is what does NFT stand for? Answer: Non-fungible token.
Still confused? I was too, so let’s explore a little further together.
Over the past few months you may or may not have noticed conversations pop up on social media – or even overheard your children talking about NFTs.
So what does it mean?
NF = Non-fungible. Meaning that it is irreplaceable or unique.
T = Token. Referring to a piece e of data.
An example of something non-fungible in the physical world could be a piece of art. The Mona Lisa springs to mind. It’s unique – there is only one of them.
The thing about NFTs in the digital world is that they can be GIFs,MP3s, memes or other, more diverse forms of digital content.
Now hands up if you remember Pokemon cards? Or collecting sports cards? In today’s digital world NFs serve the same purpose when it comes to selling or trading.
Now you’ve probably heard of cryptocurrency – like bitcoin? Well, bitcoin are fungible – meaning if you trade one bitcoin for another you will have exactly the same thing. If a digital asset for example is one of a kind – this is classed as non-fungible.
Most NFTs run on the cryptocurrency Ethereum’s blockchain meaning that if you purchase an NFT your purchase is backed up on the blockchain, ie it’s checked by other computers on the network so it has some legitimacy.
So..as a Parent or Carer – do I really need to know about NFTs?
Yup, NFTs are not just about one-off collectable digital assets. They have become part of gaming and are used by gamers. Children are already carrying out microtransactions on platforms such as Fortnite when purchasing skins – NFTs are an extension of these transactions.
A Wells Fargo survey showed that 45% of teens think they know more about crypto than their parents.
Popular YouTuber Logan Paul revealed that he sold his first NFT for 200 Eth ($765k) making him a profit of $535K!
What do they cost?
The cost when it comes to buying NFTs can vary, depending on what is being sold. For example a cat gif, yes cat gif – sold for $600,000. A Tweet sold for nearly 3 million dollars. Really? Yup how we value things is shifting because of technology.
When a NFT is put up for sale, the asking price is displayed and interested buyers will bid in an auction-style format.
What are the Risks?
Valuation
A number of areas of concern exist when it comes to the risks associated with NFTs. Similar to cryptocurrencies, the value of NFTs can fluctuate up or down over a short period of time. If the Cryptocurrency itself used to purchase the NFT, takes a hit, this will impact the value of the NFT.
Scams
It is relatively easy now for a scammer to spin up fake NFT websites. The first thing to keep in mind, as highlighted by the guys over at Trend Micro is ‘there are no legitimate NFTs on scam sites, so if you purchase one, you are just throwing your money away’. Good advice – but as we know, it can sometimes be difficult for people to tell the difference between a fake website and a genuine website.
Always be sure the website is genuine before you enter any personal information as scammers can record any information you enter, indeed set the sites up to get that information.
It’s important for Parents and Carers to be aware of the risks as young people themselves may not fully understand that they’ve been scammed via a fake website or via fake marketplaces, online adverts, or giveaways. These are all common ways in which people get caught out by scammers.
Fake NFT projects are also on the rise. An example is with ‘Squid’, a digital token based on the Nexflix series Squid Games. Once the price reached it peak at over $2,856, the monetary value collapsed. This is commonly called a “rug pull” by crypto investors.
Keep in mind
As digital technologies and spaces continue to develop and evolve so too will risks and dangers. Having regular conversations when it comes to these spaces and the technology which children and young people are using, remains key.
With the popularity of NFTs no doubt increasing, they are still relatively new and as with anything new its always a good idea to learn a little more about them and exercise caution.
Take care online
Wayne
Remember to share it with your family & friends.
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