Kasfia Rashid - “Money Matters with Kash the Bookkeeper”
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Hello! Welcome to Money Matters, the accounting show with no numbers. This season we are going back to the basics of business…. Plot twist…. The basics have changed!
This week’s show title it “NFT’s?! WTF?!: Hahaha... This title says it all.. What.. the... Future ready is a NFT? Let's find out! It's easiest to answer the question metaphorically. Think of an NFT as a certificate of authenticity. But instead of a sheet of paper, it's a unique string of characters. That string is connected to a blockchain, the same concept that powers cryptocurrencies like Bitcoin. The main difference is that bitcoins are “fungible”, which means each bitcoin is essentially the same. NFTs are non-fungible — each one is unique.
Blockchains work by using groups of computers to create a shared digital ledger that no one computer can change. Instead, they must agree by performing complex calculations — a system that yields a secure and unchangeable document.
That makes blockchains perfect for creating systems in which unique digital identifiers can be easily and securely exchanged — hence the creation of NFTs or non-fungible tokens (aka: unique items). An economic law is supply and demand. If supply is low and demand stays the same, the price of the item will increase. With NFT’s the supply is “1” so.. Pretty limited…. Which may explain the prices some of these NFT’s sell for. Christie's auction house sold the first-ever NFT artwork — a collage of images by digital artist Beeple for a whopping $69.3 million back in March.
In the simplest terms, NFTs transform digital works of art and other collectibles into one-of-a-kind, verifiable assets that are easy to trade on the blockchain.
Show Objectives - The Why
NFTs are an attractive revenue stream for brands, as shown by all the brands jumping on the bandwagon of late. Taco Bell sold taco-themed GIFs and images (see one above) on one marketplace, and the haul of 25 sold out in just 30 minutes. Seriously. Each NFT held a $500 gift card, which the original owner could spend, which may explain their popularity initially. But these TacoCards are now selling on the secondary market, with the most expensive card selling for $3,500. And just to be clear, that doesn't include the gift card. The payoff has been huge for many artists, musicians, influencers and the like, with investors spending top dollar to own NFT versions of digital images. For example, Jack Dorsey's first tweet is now bidding for $2.5 million, a video clip of a LeBron James slam dunk sold for over $200,000 and a decade-old "Nyan Cat" GIF went for $600,000.
Meanwhile, pretty much all of us have had some experience with virtual assets. Think video games, digital artwork, logos, photos, animation, music and video clips. Data, including spreadsheets, counts as such an asset, too — anything in a digital form that comes with the legal right to use that asset. Even coupons get the digital treatment nowadays.
Of course, it can be pretty easy to pirate such digital stuff. Taking a screen-grab of a copyrighted photo is as simple as pushing two or three keyboard buttons at the same time. Copyrighted music is routinely used in unapproved music videos. Artists can, and do, seek damages if someone uses a copyrighted work without permission, but the process can be time-consuming and expensive.
Enter the NFT, or the NFT token. The basic concept of the non-fungible token: Marry the world of digital assets with the security of cryptocurrency. It's a digital asset plus certificate of authenticity plus legal rights all rolled into one. Buying an NFT means purchasing a hacker-resistant, public proof of ownership over a specific digital asset.
Could someone still painstakingly copy that digital asset? Sure. But they can't so easily pirate its provenance, and that, theoretically, is what gives an NFT its value.
What You Need to Know - The What
How do you make an NFT?
Log on to one of the NFT marketplaces and upload a file. This process is called "minting" an NFT. You'll usually be asked if it's a one of a kind, if there are multiple copies or if it's part of a collection. (A quick glance at an NFT marketplace shows just how easy the process is — maybe too easy. Some people are trying to sell tweets and even colors as NFTs.) Once you're done, collectors can start bidding.
Digital artists can build a royalty into their NFTs, even for future sales, which is why many artists see promise in NFTs: It can cut out the middleman and open up a new way to make money.
If you're not interested in buying or selling them, why should you care?
As tens of millions of dollars in transactions pour in for NFTs, enthusiasts say, NFTs will soon expand beyond trading art, music, video clips and memes. One startup lets people use their NFTs as collateral for loans.
Silicon Valley investors say the moneymaking possibilities in the NFT world are limitless. "At the time the iPhone was created, nobody would've thought that one of the killer apps was going to be hailing a ride," said Haun of Andreessen Horowitz.
What are the risks?
There's always a chance that a tech frenzy is a passing fad or is stoking a speculative bubble. If you spend a pretty penny on an NFT and then enthusiasm and values suddenly plummet, you could be in for a big loss. But NFT backers say the system's built-in scarcity should keep values up, as long as the surge of interest persists.
Be cautious about works that appear to be created by famous artists. NFTs resembling pieces by the artist Banksy have netted $900,000, but they have turned out to be fakes.
Then there is the environmental impact of NFTs, which has attracted real scrutiny. The computing power required to operate the underlying blockchain system of NFTs is immense. By some estimates, one crypto transaction could gobble up more power than the average U.S. household uses in a single day. One artist estimated that generating six NFT pieces consumed more electricity than his entire physical studio did in two years.
"The energy production infrastructure is out of our sight," wrote Brussels-based artist Joanie Lemercier."And we often have the feeling that electricity is abundant, limitless and we disregard its impact."
What You Need to Do - The How
How do you buy or sell an NFT?
It takes some steps.
First, you usually have to buy a cryptocurrency, like Ethereum. That's a process in and of itself. But once you do, you can go to an NFT marketplace. Some of the popular ones include KnownOrigin, Rarible and OpenSea.
There, you can bid on an NFT and wait for the auction to end. If no one outbids you, you get the bragging rights.
Still. What exactly do you get when you buy an NFT?
This question unleashes a fury of debate among NFT enthusiasts. The answer is not simple.
Are you buying what amounts to an Internet trophy? Clout? A feeling? A digital collector's item?
Perhaps, but you are also purchasing a kind of bar code, almost a certificate of authenticity that serves as proof that a certain version of something is uniquely yours.
"The underlying thing that you're buying is code that manifests as images," said Donna Redel, who teaches courses on crypto-digital assets at Fordham Law School. "You're buying a different format of art."
But note that when you buy an NFT, you're usually not getting the copyright or trademark to the item. And just because you own an NFT doesn't mean there aren't endless other versions of that thing on the Internet. There will be. It's the Internet.
Still, NFT enthusiasts say owning a piece of code in a blockchain has shown itself to be an incredibly valuable thing.
"You're not buying the picture," said Jake Brukhman, founder of cryptocurrency investment company CoinFund. "You're buying the property rights to the picture."
Previous: How to create your own Crypto Currency!
Next: No more Cash?? - With Portia Niles of Kronos Digital!
Written by Kash the bookkeeper
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