NFTs - What are they and why are they in the news this week?

If you aren't familiar with cryptocurrency, blockchains and NFTs - don't worry, you're not alone!

In a nutshell cryptocurrencies are digital currencies, the most mainstream being Bitcoin and Ethereum, that move up and down in price much the same way stocks and shares do depending on the volume of trades.

So you might buy some bitcoin today to find it worth five or 10 times the amount you paid for it in a year's time, or find it's worth exactly the same or even less.

Some say cryptocurrencies are the future of currency and that regular (fiat) currency, such as the pound and dollar, will be phased out in the not-too-distant future.

Are NFTs here to stay or simply the latest fad?

Others disagree.

Blockchains are the space these currencies reside. A ledger across thousands of computers. They are a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system.

Bitcoin is 'mined' by sophisticated computer programs, that solve near-impossible mathematical equations and in reward 'earn' crypto - which can then be sold to buyers.

Mining goes on every second of every minute of every day, 365 days a year.

Miners range from small-change nerds in their bedroom using their personal (but powerful) mining machines, to warehouses full of super computers pulling in millions of dollars worth of crypto on a daily basis.

If you want to get into buying and selling crypto, you need to create an account on an exchange or set up a digital wallet.

Having done so myself, I can attest to the complexity of the crypto world when you first get started. Gas fees, memecoins, defi and a host of other new words and phrases have all been added to my vocabulary in recent months.

People who got into crypto early have made millions from small investments over the last decade. Whether you could get in now and make the same returns in another decade remains to be seen.

So what have NFTs got to do with this and what exactly are they?

NFTs are non-fungible tokens ... digital assets if you will that are created, bought and sold on digital platforms such as Opensea.

Non-fungible more or less means that it's unique and can't be replaced with something else. Oh and it's not something you can ever actually touch, it's purely digital, or virtual.

It's digital art that can be created by anyone (as long as it's unique) and often sold for vast sums of money.

For instance Lionel Messi might jump on his computer, upload a picture of himself, fiddle about with it a bit to make it look a bit more digital and sell it for a million dollars.

But once it's out there, I hear you ask, what's to stop someone simply right-clicking on it, downloading it and claiming it as there own?

Ah, well - this is where it gets interesting.

The value isn't actually in the artwork/scribble/doodle/audio, it's in the contract. So a thousand people might download a version, but none of them - only the buyer - will own the digital contract stored on the blockchain.

Weird, right?

So why are NFTs in the news at the moment?

Well this week HMRC have confirmed their first-ever seizure of a non-fungible token (three to be precise) following a probe into an alleged £1.4million VAT fraud.

Three suspects have been arrested on suspicion of attempting to defraud the taxman.

HMRC said it had secured a court order to seize the three NFTs, which have not been valued, while its investigation continues.

Nick Sharp, deputy director economic crime, said the first seizure of an NFT "serves as a warning to anyone who thinks they can use crypto assets to hide money from HMRC".

If you want to know more about NFTs click here.

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