3 Common Misconceptions About NFTs That Need to Be Dispelled
NFTs are having a moment right now, thanks to their recent rise, causing a blockchain revolution. Have you fully grasped NFTs and all of their features? Let’s look at three prevalent misconceptions concerning NFTs.
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According to the Non-Fungible Tokens 2020 Yearly Report from NonFungible and L’Atelier, NFT transactions tripled in 2020, reaching more than $250 million. In 2021, they show no signs of slowing down. However, the large sums of money being thrown around for single pieces have led to widespread misunderstandings regarding the pricing and value of NFTs and their status in the market.
Here are 3 Misconceptions About NFTs That Need to Be Dispelled.
1. NFTs are a type of digital currency.
NFTs are sometimes misunderstood as a type of cryptocurrency. Cryptocurrencies and NFTs have a lot in common because they both use blockchain technology. The crucial distinction between both notions, however, is fungibility. A fungible item can be swapped with an identical item of the same value, such as one ETH for another ETH. A non-fungible thing, on the other hand, has a unique value that another item of equal value cannot substitute.
2. In NFT, there can only be one copy of the underlying asset.
Non-fungible tokens, or NFTs, are a sort of digital asset that leverages blockchain technology to generate a one-of-a-kind unit of data that represents an irreplaceable thing. Music, artwork, basketball cards, or even a tweet can all be considered NFTs.
Even though the NFT is not fungible, there may be several tokens for digital artwork. For example, 100 identical baseball cards could be created, each with a unique ID, and the restricted quantity makes it collectible.
3. NFTs are harmful to the environment.
It has sparked a heated argument about whether digital NFT artworks should be taxed because many NFT transactions on the Ethereum blockchain consume more energy. However, this assumption is not entirely correct.
The number of NFTs produced has no bearing on how much energy the computer network consumes. The problem that needs to be handled is the energy consumption involved with proof-of-work mining, which is being addressed with various methods, including the Proof of Stake mechanism.
Furthermore, not all NFTs are built on Ethereum; some are based on other blockchains such as Polkadot, EOS, and others less environmentally friendly.
I hope you found this article useful in your quest to learn more about NFTs.