“Cryptocurrency is everything someone doesn’t understand about technology mixed with everything someone doesn’t understand about finance”
John Oliver in Last Week Tonight
This is a quote that resonates with a lot of us. We were gripping our heads around cryptocurrencies and along came NFTs. Most of us just know that NFTs are Non Fungible Tokens and nothing more than that, just so we can answer if put on the spot.
The basics and a bit of nostalgia
NFTs have always been around us
Fret not, we are here to hold your hand through the miraculous and confusing world of NFT’s. Breaking the term down, non-fungible is essentially something that is unique, distinctive and one-of-a-kind. To give you an example, let’s assume Cheetos, decided to circulate 100 tazos with different pictures of cartoons as a one-time offer. Then those 100 different tazos are non-fungible items because they are unique and there exists only one single tazo of that particular kind. Okay, let’s get a bit serious. Take for instance (wait for it) Bitcoin, IS FUNGIBLE, if you trade a bitcoin for another bitcoin, you’ll end up having the exact same thing. Whereas for one-of-a-kind items, if you exchange it, you will have something completely different.
FUNGIBLE: money, company shares, oil, electricity
NON FUNGIBLE: family heirlooms, diamonds, people(?), snowflakes(?), a unique sneaker in a limited time collection, signatures
“If I give you a dollar and you give me a different dollar, we both still have $1 worth of spending power” says Ian Kane of Unbanked. That is how fungible tokens work but non-fungible tokens cannot be exchanged with something of equal value meaning that they are absolutely unique.
Technically saying
Just very, very, very briefly. NFTs form a part of the Ethereum Blockchain. A very popular cryptocurrency called Ethereum exists on the same Blockchain. NFTs have a bit more information about ownership, sales and network making them different from cryptocurrencies.
A future where we pay for memes?
Okay, we promise no more technical jargon. Coming to the contentious part. We live in a world surrounded with memes and those you see above are some of the most popular ones. But let me break it to you, those “original photos” that became memes have been sold and bought as NFTs. Meaning there exists one single ownership of those memes, and in the future, you might have to pay the owner royalty or charges to use those pictures as memes. Sad, we know.
But here comes another school of thought, which says, “Hey, why would I want to pay for something that I can just right-click and save.” Technically they are right, legally I don’t know. Just like torrent sites, where you can illegally download licensed original content, torrent sites for NFTs have started popping up, allowing you to (yes, you are right) pirate NFT’s.
Can anything be an NFT?
Well yes, if it fits the bill of it being unique. But will there be buyers for that NFT, is something that the quality of that NFT will decide.
A bubble waiting to burst?
NFTs have caught the eye of artists, buyers, collectors and people who think that this is the future of fine-art collecting and as a democratic playground of the rich. And that is a playground everybody wants to be a part of. This ‘pet-rock’ that you see below was sold for 15 crore rupees 🙂, now we’ll leave it up to you to decide if you think it is actually worth that much! Also nowhere asking you to right click and save this pet rock.
We hope that now when someone asks you what an NFT is, you can reply with something more than “A Non-Fungible Token”. Leaving you with a beautiful poem by Limericking
PS: If you plan on buying or selling NFTs, as per current laws in India, it’ll be considered as business income under PGBP. Also, if the turnover exceeds 20 Lakh rupees, you’ll be also attracting GST. There’s also an option wherein NFTs would be considered as capital asset and normal taxes of capital gains would be applicable like period of holding et al. How the government drafts laws regarding NFTs is going to be interesting as we move forward, but we’ll have you covered.
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