What’s an NFT?

Michelle Ricker By Michelle Ricker April 16, 2021

Summary: An NFT is a non-fungible token, and it’s the latest thing in the cryptocurrency world. NFTs are different from other cryptocurrencies, like Bitcoin, because they are each unique (this is the non-fungible part) and represent a specific item. This could mean big things for the art world, but is cryptocurrency secure?

 

If you feel confused when it comes to understanding cryptocurrencies, you’re not alone. Between blockchain and Bitcoin, there’s a lot to keep up with.

The latest? Non-fungible tokens, often referred to as NFTs, which can represent a unique digital item or file (such as art, music, or videos), and are not interchangeable. In other words, if two people swap their NFTs — even if purchased for the same price — they’ll end up owning two distinct items. It’s similar to buying an original piece of memorabilia or physical art, except it only exists digitally. Just like a Picasso can’t be swapped with a Monet, two NFTs cannot be equally interchanged. And, while it gives one person ownership of a file, digital copies can be made or viewed across the web.

High-speed internet also comes into play if a user wants to dabble in blockchain technology, but we’ll explain more on that later. Security is also a consideration when dealing in cryptocurrencies, as it is when dealing with many online purchases. But before we get into data safety around NFTs, we’ll explain what exactly cryptocurrency is and how NFTs came to be.

What is Cryptocurrency?

Cryptocurrency is a type of payment that can be exchanged online. Some companies have their own specific cryptocurrencies, but you can think of it like arcade tokens — they’re a form of payment, but they only work in a specific place. Just like you can’t pay for lunch at the cafeteria with arcade tickets, you wouldn’t use cryptocurrencies in most of your day-to-day life.

While there are more than 3,000 types of cryptocurrency being used today, Bitcoin is probably the most well-known. Cryptocurrencies are digital transactions and don’t rely on banks. While paper money has historically been backed by gold, there’s typically no physical component to cryptocurrency. They’re also not tied to traditional money (even if you use digital payment apps like Venmo or Zelle, that’s not a cryptocurrency because they’re tied to a card or bank account backed by a central authority like the Federal Reserve System). This is what can make cryptocurrency more susceptible to market fluctuations and changes in value. And boy, have they fluctuated over time: from $121 in 2013 to $13,000 in December 2017 to $3,900 in February 2019 to more than $50,000 in 2021.

How Much Internet Speed Do You Need to Mine Cryptocurrency?

Cryptocurrency also requires high-speed internet to mine. If you’re picturing the California Gold Rush, you’re not entirely off-base. Bitcoin miners verify transactions, ultimately adding another block to the blockchain.

Once a designated amount of blocks have been added, miners have to conduct a mathematical computation to provide a 64 hexadecimal number (there are trillions of possibilities for this). The first one to provide that number is credited for verifying the transaction, and ultimately is rewarded with Bitcoin.

Intrigued? While hard hats and pickaxes aren’t necessary for this kind of mining, other equipment is. First, a reliable high-speed internet connection. An internet connection is required for data syncing and speeds particularly matter when solving the hexadecimal number.

What is an NFT infographic

Bitcoin.org recommends at least 350 GB of disk space, 150GB in uploads each month, 15GB in downloads per month, and at least 1GB on RAM memory, and the most recent operating system for a device. It’s important to note that uploading is more important when mining than downloading. This is different from typical high-data internet activities — such as streaming — which require higher amounts of data to be downloaded.

Most internet service providers have asymmetrical speeds, meaning download speeds are faster than upload speeds. Fiber internet is the best option for symmetrical speeds, which will make uploading data to the blockchain easier when mining cryptocurrency.

With the basic understanding of general cryptocurrency, let’s move on to NFTs.

What’s an NFT?

An NFT is a specific type of cryptocurrency. Most types of money — including both traditional paper bills and cryptocurrency like Bitcoin — can be substituted or exchanged for any similar item (any $5 bill can be swapped with another $5). Non-fungible tokens are the opposite. Each NFT is unique and represents one-of-a-kind items. For example, the first-ever published tweet was sold as an NFT by Twitter CEO Jack Dorsey for $2.9 million. This makes it possible for one person to own the original version of a digital item — something that was previously next to impossible.

Now, digital goods can have a marker or authenticity and permanent record of ownership. So, while you can still view that original tweet by Jack Dorsey at any time, or even take a screenshot, only one person can own the real thing. It’s comparable to owning an original Picasso (the NFT) vs. a print of a Picasso (the screenshot).

Glossary of Cryptocurrency Terms

Keeping all the terms straight can be confusing. We’re here to help spell out the basics.

Bitcoin: The most well-known cryptocurrency. Bitcoin is fungible and can be issued In fractional denominations.

Blockchain: A ledger that stores records of transactions made in cryptocurrencies across several computers linked in a peer-to-peer network. This the decentralized system.

Centralized: When currency is centralized, it’s backed or controlled by one group. In the U.S., the banks are backed by the Federal Reserve System.

Cryptocurrency: A decentralized electronic form of currency that can be exchanged online.

Fungible: Freely exchangeable or replaceable for an item of the same type (such as dollar bills).

Hash: Converts an input of letters and numbers into an encrypted 64-digit, hexadecimal number. This is essential to managing the blockchain.

Mining: A way to earn cryptocurrency without spending money on it. Miners can earn money by verifying a block of transactions and being the first to solve a complex hashing puzzle.

NFT: Non-fungible token. A type of cryptocurrency that denotes ownership over a digital file, such as a piece of art or a post

How Secure Is Cryptocurrency?

Most cryptocurrencies keep the ledger of transactions on a blockchain. That means that every transaction is recorded on a shared, public ledger that uses sophisticated encryption and coding to ensure authenticity. Some investors prefer blockchain because it’s decentralized, meaning the transactions are stored across many networks, not just one. This helps to make hacking attempts more difficult.

In addition, transactions require two-factor authentication. For example, on top of entering a username and password, buyers input an authentication code sent via text or email, or answer a predetermined security question. Two-factor authentication is an additional measure to keep the account safe, and buyers can set it up for just about any account.

Even with all of this, cryptocurrencies aren’t impossible to hack. There are additional security measures any buyer should consider if they choose to shop or input personal information online — whether it’s for cryptocurrencies or not.

  1. Use a virtual private network (or VPN). A VPN encrypts the information sent and received online, making users more anonymous on the internet from hackers, and even from their internet service provider.
  2. Create strong passwords. This one may seem obvious, but the importance really can’t be overstated. Create a password using combinations of capital and lowercase letters, numbers, and symbols, avoiding obvious clues like a birthday.
  3. Only make transactions from secure WiFi. Even if you remember about that gift you need to buy while you’re out running other errands, avoid entering credit card or bank information on public WiFi — ever. Save online shopping for a private, secure network.
  4. Choose an internet service provider who doesn’t sell your information. Your ISP knows a lot about you, from the sites you visit to your payment information and address. Make sure they’re committed to privacy and security.

Now that you know what a non-fungible token is — and the basics of how cryptocurrencies work — you can consider if it’s an investment you want to make. Whatever you choose, make sure you’re keeping personal data secure any time you’re online. Not sure where to start? We have a hassle-free suite of products made for keeping you and your kids secure online. And, if it’s time to upgrade your high-speed internet, we’ve got you covered.

Michelle Ricker

Michelle Ricker

Michelle Ricker is a Copywriter for EarthLink. She recently graduated from the University of Cincinnati with an M.A. in Communication and has more than 5 years of writing experience. She thrives on storytelling and well-placed punctuation. She currently lives and works in Atlanta.

See all posts from Michelle Ricker.

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