What is NFT?

What is NFT?
NFT stands for Non-Fungible Token. Non-fungible means that they cannot be replaced with something identical. Thus, non-fungible tokens are digital files that users cannot copy.

NFTs are most often associated with digital works of art, as is the case with Bored Ape Yacht Club. However, NFTs can take the form of anything other than digital art, including music, photos, avatars, and even video game assets.

NFTs on social media are popular for buying and selling. Users may come across videos and posts promoting new NFTs for purchase, or they may chat on platforms like Reddit.

What is cryptocurrency?
Cryptocurrency or cryptocurrency is a type of currency that exists only on the Internet. Blockchain technology tracks and stores records of cryptocurrency (and NFTs). It remains decentralized, meaning that there is no single authority or financial institution that controls the cryptocurrency.

The idea of cryptocurrency works similarly to the stock market. There are various brokerage apps that help users invest in any cryptocurrency. To get started, users usually have to purchase cryptocurrency with real money using credit cards or other forms of payment.

In addition, users can mine cryptocurrency. However, this also requires investment in the right mining hardware and software, as well as increased electricity consumption. No matter how someone starts, it usually doesn’t come cheap.

What are the popular cryptocurrencies?
Cryptocurrency first became truly popular with Bitcoin in 2009. Since then, many other forms of cryptocurrency have been created. Below are some of the most popular.

Bitcoin (BTC): 1 Bitcoin is worth thousands of pounds. This is the most widely used form of cryptography.
MetaMask (ETH): 1 Ethereum costs just over £1,000. Users believe that Ethereum will eventually overtake Bitcoin.
Tether (USDT): 1 Tether is worth approximately 1 GBP. Its accessibility makes it more accessible than other cryptocurrencies.
There are only 3 of them, but there are thousands of other cryptocurrencies that young people can invest in online.

What is an alternative cryptocurrency?
Altcoins or “alternative coins” are types of cryptocurrency other than the more popular types. This generally applies to coins other than Bitcoin and, in some cases, Ethereum. Altcoins can be used differently than standard crypto coins. Some of these goals may include:

utility: to provide certain services, such as redemption of rewards. Unlike Bitcoin or other cryptocurrencies, utility tokens are not as popular for trading or storage.
Memes: Inspired by an online joke or parody of other coins. A popular example is Dogecoin, inspired by the Doge meme
governance: gives holders the right to vote on changes to the blockchain
There are other uses including payments such as Bitcoin and Ethereum. However, it can sometimes be difficult to determine its use. Users are also at greater risk of fraud or loss of interest.

Popular platforms such as Discord, Reddit. and Telegram will see weekly altcoin launches, which could encourage young people to invest earlier.

How do NFTs and cryptocurrency work together?
Both NFTs and cryptocurrency will be part of the proposed Web3 and make up a large part of the metaverse. Unlike cryptocurrency, users cannot trade one NFT for another. However, users interacting with one of them may also use the other.

To purchase non-fungible tokens, the user must have a crypto wallet typically used for cryptocurrencies. This is also where platforms store NFT keys as proof of ownership of the NFT collection. As with an offline wallet, users ensure the security and privacy of their cryptocurrency wallets. While many NFTs are only sold for cryptocurrency, there are often options for those who want to purchase in local currency and using credit cards.

Users can promote investments or sales of cryptocurrency and NFTs in their social media settings. This method of marketing means that these messages can reach any social feed, including children and teenagers.

Therefore, it is important to talk to your child about their online money management to help them make the right financial choices.

 

Influencer promotion
Influencers can tell their followers which non-fungible tokens, altcoins or other cryptocurrencies to buy due to sponsorship. This can lead to young people misunderstanding the source of the influencer’s wealth, which could result in them losing their own money. In fact, some influencers have paid thousands to support cryptocurrency projects.

Low financial benefit
Some young people may get into this form of investing with the idea of earning large amounts of money. Unfortunately, this is not the case for many.

While young people may see content from influencers selling NFTs on social media or promoting cryptocurrency highlighting the investment’s growth potential, they may not understand the reasons for this. For example, an influencer might be selling a course from which they make most of their money. Or they may have a sponsorship with a platform to promote them. In that sense, they don’t make a lot of money from NFTs or cryptocurrencies.

Misunderstanding of Non-Fungible Tokens and Cryptocurrency
In Ofcom’s 2022 Children’s Media Live report, teenagers reported seeing content on social media promoting NFTs or cryptocurrency. Since they can watch the entire video, the algorithm suggests relevant content to them. So they see more people talking about it but potentially not explaining it. This could lead to children searching for answers or investing in one thing or another with only a basic understanding of the NFT market.

Lose money
Investing in NFTs and especially cryptocurrency involves high risk. Just like the stock market, buying and selling rates fluctuate regularly. This means that a teenager could invest a large amount of money in cryptocurrency and end up losing all or most of it.

Likewise, someone may buy an NFT with the intention of selling, but prices and values change quickly. They may end up with something relatively useless.

In the case of altcoins, which are started based on community interests, the user may be investing in something that will never launch. This may be due to fraud or loss of investors.

It’s not regulated
Both non-fungible tokens and cryptocurrency are legal in the UK. However, they are not governed by the same laws that affect a physical object such as a work of art or finance. Unfortunately, this means that asset theft or fraud is more likely and not necessarily punishable.

Additionally, users risk investing in NFTs that are counterfeit or copied from original digital artists. They are unlikely to get their money back if this happens. The popularity of NFTs on social media means that young people are often exposed to this content without a clear understanding of the potential risks involved. This way they may buy something they are not familiar with.