(WBBM NEWSRADIO) — The latest financial craze is the Non-Fungible Token, or NFT, and collectors are starting to shell out big bucks for them.
But what the heck is an NFT, and what is its relationship to crypto currency? Shelly Palmer, a media analyst and co-host of the podcast Think About This, joined the Noon Business Hour on Monday to lay out the basics.
Here are some edited highlights of Palmer’s primer on this new form of digital commerce.
WHAT IS AN NFT AND HOW DOES IT WORK?
It literally is the exact opposite of crypto-currency. Where all crypto currency technically is fungible, just like dollars are fungible — meaning that one dollar is exactly like another dollar. So, if I give you a dollar, it’s the same for you, it’s the same for me.
Non-fungible tokens, or NFTs, they are unique and they represent unique stuff. For example: artwork or a video file or a text file or a JPEG or pretty much any digital thing that’s non-fungible.
HOW DO YOU CREATE AN NFT AND TRADE ONE?
It’s super easy. The first thing you need to do is set up a ‘wallet,’ like a crypto wallet. You can do it at Ethereum. There are so many of them. … You need a wallet, put a hundred bucks in there, and you will get some crypto for it. You connect your wallet to a marketplace, and there are a bunch of those out there. These are marketplaces (where) basically you trade and can go auction your NFTs.
You upload your file and you price it. It’s going to ask you, ‘Is this one of one, or is this part of a collection?’ You’ll say, ‘No, this is my unique piece of awesome art,’ and you price it in ether. And then you wait for bids.
WHAT’S THE ENVIRONMENTAL IMPACT OF NFTs?
This is really a controversial issue because because it does take an immense amount of energy from pure electricity. The reason, of course, is that every time you make an NFT a lot of servers are involved. Maybe 130 kilowatt hours to mint one. When you create it, it’s called ‘minting.’ And then every time it gets traded you might use up 300 to 400 kilowatt hours. In New York, it would maybe be $27 worth of electricity at the current rate of 21 cents a kilowatt hour to make one. Then every time it’s transacted it’s burning maybe $70 to $80 of electricity.
These are crazy expensive to move around the world. People are saying it will have a meaningful environmental effect on carbon emissions and climate change. Whether this is true or not is hotly debated. There’s some who say no, there’s some who say yes. It’s worth having a look to be sure.
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